DIV. Of Labor Standards Enf. v. Dillingham Constr., 519 U.S. 316 (1997)

California Division of Labor Standards Enforcement v.

Dillingham Construction, N.A.
No. 95-789

Argued November 5, 1996
Decided February 18, 1997
519 U.S. 316

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Syllabus

California requires a public works project contractor to pay its workers the prevailing wage in the project’s locale, but allows payment of a lower wage to participants in a state-approved apprenticeship program. After respondent Dillingham Construction subcontracted some of the work on its state contract to respondent Arceo, doing business as Sound Systems Media, the latter entered a collective bargaining agreement that included an apprenticeship wage scale and provided for affiliation with an apprenticeship committee that ran an unapproved program. Sound Systems Media thereafter relied on that committee for its apprentices, to whom it paid the apprentice wage. Petitioner California Division of Apprenticeship Standards issued a notice of noncompliance to both Dillingham and Sound Systems Media, charging that paying the apprentice wage, rather than the prevailing journeyman wage, to apprentices from an unapproved program violated the state prevailing wage law. Respondents sued to prevent petitioners from interfering with payment under the subcontract, alleging, inter alia, that § 514(a) of the Employee Retirement Income Security Act of 1974 (ERISA) preempted enforcement of the state law. The District Court granted petitioners summary judgment, but the Ninth Circuit reversed, holding that the apprenticeship program was an "employee welfare benefit plan" under ERISA § 3(1), and that the state law "relate[d] to" the plan, and was therefore superseded under § 514(a).

Held: California’s prevailing wage law does not "relate to" employee benefit plans, and thus is not preempted by ERISA. Pp. 323-324.

(a) A state law "relate[s] to" a covered employee benefit plan for § 514(a) purposes if it (1) has a "connection with" or (2) "reference to" such a plan. E.g., District of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125, 129. A law has the forbidden reference where it acts immediately and exclusively upon ERISA plans, as in Mackey v. Lanier Collection Agency & Service, Inc., 486 U.S. 825, or where the existence of such plans is essential to its operation, as in, e.g., Greater Washington Bd. of Trade, supra, and Ingersoll-Rand Co. v. McClendon, 498 U.S. 133. To determine whether a state law has a connection with ERISA plans, this Court looks both to ERISA’s objectives as a guide to the scope of the state law that Congress understood would survive, New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656, and to the nature of the law’s effect on ERISA plans, id. at 658-659. Where federal law is said to preempt state action in fields of traditional state regulation, this Court assumes that the States’ historic police powers are not superseded unless that was Congress’ clear and manifest purpose. E.g., id. at 655. Pp. 323-325.

(b) Because it appears that approved apprenticeship programs need not be ERISA plans, the California law does not make "reference to" such plans. On its face, the law seems to allow the lower apprentice wage only to a contractor who acquires apprentices through a "joint apprenticeship committee" -- an apprenticeship program sponsored by the collective efforts of management and organized labor. To comport with federal law, the expenses of such a committee must be defrayed out of monies placed into a separate fund, the existence of which triggers ERISA coverage. However, applicable regulations make clear that the class of apprenticeship program sponsors who may provide approved apprentices under California law is broad enough to include a single employer who defrays the costs of its program out of general assets. An employee benefit program so funded, and not paid for through a separate fund, is not an ERISA plan. See, e.g., Massachusetts v. Morash, 490 U.S. 107, 115. The California law is indifferent to the funding, and, thus, to the ERISA coverage, of apprenticeship programs; accordingly, it makes no "reference to" ERISA plans. Pp. 325-328.

(c) Nor does the California law have a "connection with" ERISA plans. In every relevant respect, that law is indistinguishable from the New York statute upheld in Travelers, supra. As with the New York statute, the Court discerns no congressional intent to preempt the areas of traditional state regulation with which the California law is concerned. 514 U.S. at 661. And, like the New York statute, the California prevailing wage law does not bind ERISA plans -- legally or as a practical matter -- to anything. It merely provides some measure of economic incentive to apprenticeship programs to comport with the State’s apprenticeship standards by authorizing lower wage payments to workers enrolled in approved apprenticeship programs. Cf. id. at 668. This Court could not hold the California law superseded based on so tenuous a relation without doing grave violence to the presumption that Congress does not intend the preemption of state laws in traditionally state-regulated areas. Pp. 328-334.

57 F.3d 712, reversed and remanded.

THOMAS, J., delivered the opinion for a unanimous Court. SCALIA, J., filed a concurring opinion, in which GINSBURG, J., joined, post, p. 334.