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Grace v. The Walt Disney Company (CA4/3 G061004 7/13/23) Anaheim Living Wage Ordinance 

By July 13, 2023July 15th, 2023Local Wage Ordinance, Wages & Overtime Law

In 2018, Anaheim voters approved a Living Wage Ordinance (LWO).  (Anaheim Mun. Code, § 6.99 et seq.) The LWO applies to hospitality employers in the City of Anaheim or Disneyland Resort areas that benefit from a “City Subsidy.”  (§ 6.99.060.)

In 2019, Kathleen Grace and other plaintiffs (“the Employees”) filed a class action complaint against the Walt Disney Company, Walt Disney Parks and Resorts, U.S., Inc. (“Disney”) and Sodexo, Inc., and Sodexomagic, LLC (“Sodexo”) alleging a violation of the LWO.  Sodexo operates restaurants in Disney’s theme parks.  Disney filed a motion for summary judgment and Sodexo joined (its liability is derivative).

It is undisputed the Employees were not being paid the required minimum hourly wage under the LWO.  However, Disney argued it was not covered under the LWO as a matter of law because it is not benefitting from a “City Subsidy.”  (See § 6.99.060.)  The trial court granted the motion for summary judgment.  We disagree.

“A ‘City Subsidy’ is any agreement with the city pursuant to which a person other than the city has a right to receive a rebate of transient occupancy tax, sales tax, entertainment tax, property tax or other taxes, presently or in the future, matured or unmatured.”  (§ 6.99.030, italics added.)

Generally, a “rebate” means “a return of a part of a payment.”  (Webster’s 11th New Collegiate Dict. (2003) p. 1037.)  A transient occupancy tax is paid by a transient (a hotel guest) and collected by an operator (the hotel).  (See § 2.12.120.)  A sales tax is paid by a consumer and collected by the retailer.  (See § 2.04.040.)  And a property tax is paid by a property owner and collected by the county government.  (See § 2.08.)  The City of Anaheim (“the City”) imposes no entertainment tax.

In 1996, Disney and the City signed an Infrastructure and Parking Finance Agreement (the “Finance Agreement”).  The City agreed to issue about $400 million in municipal bonds.  The money was to be used to revitalize the Anaheim and Disneyland resort districts, to pay for infrastructure improvements, and to expand the Anaheim Convention Center.  The bondholders were to be repaid based on anticipated incremental increases in the City’s transient occupancy taxes (paid by hotel guests), sales taxes (paid by consumers), and property taxes (paid by Disney).

The parties also signed a Disney Credit Enhancement Agreement (the “Enhancement Agreement”) and a Reimbursement Agreement.  Under the Enhancement Agreement, Disney agreed that if there was any year in which the City’s incremental tax revenues failed to meet its bond obligations, Disney would make up the shortfall.  And under the Reimbursement Agreement, the parties agreed Disney would be reimbursed for its shortfall payments in those years when the City’s incremental tax revenues rebounded and were sufficient to meet its bond obligations.

We find the Reimbursement Agreement gives Disney the right to receive a rebate—or a return—of transient occupancy taxes (paid by hotel guests), sales taxes (paid by consumers), and property taxes (paid by Disney), in any rebound years when the City’s tax revenues are sufficient to meet its bond obligations.  Consequently, Disney receives a “City Subsidy” within the meaning of the LWO and it is therefore obligated to pay its employees the designated minimum wages.  Thus, we reverse the trial court’s order granting Disney and Sodexo’s motion for summary judgment.