Ferguson Elec Co Inc v. Foley , 115 F.3d 237 ( 1997 )

Opinions of the United
1997 Decisions States Court of Appeals
for the Third Circuit
6-10-1997
Ferguson Elec Co Inc v. Foley
Precedential or Non-Precedential:
Docket 95-7454,95-7464
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Recommended Citation
"Ferguson Elec Co Inc v. Foley" (1997). 1997 Decisions. Paper 126.
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Filed June 10, 1997
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 95-7454 and 95-7464
FERGUSON ELECTRIC CO., INC.,
A Connecticut Corporation
v.
THOMAS P. FOLEY, in his Official Capacity as the
Secretary of Labor and Industry for the Commonwealth of
Pennsylvania; ROGER C. BITZEL, in his Official Capacity
as the Director of the Prevailing Wage Division,
Department of Labor and Industry for the Commonwealth
of Pennsylvania; ROBERT S. BARNETT, in his Individual
and Official Capacity as the Secretary of Labor and
Industry for the Commonwealth of Pennsylvania; JOHNNY
J. BUTLER, Secretary of Labor and Industry; ROBERT
RISALITI, Acting Director of the Prevailing Wage Division
Thomas P. Foley; Roger C. Bitzel;
Robert S. Barnett; Johnny J. Butler;
Robert Risaliti; *Robert Moore,
Appellants at No. 95-7454
Ferguson Electric Co., Inc.,
Appellant at No. 95-7464
On Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. Civil Action No. 93-cv-01977)
_________________________________________________________________
*[Pursuant to F.R.A.P. Rule 12(a)]
Argued May 2, 1996
Before: SCIRICA, ROTH and GODBOLD,** Circuit Judges
(Filed June 10, 1997)
SUSAN J. FORNEY, ESQUIRE
(ARGUED)
Office of Attorney General
of Pennsylvania
Department of Justice
Strawberry Square, 15th Floor
Harrisburg, Pennsylvania 17120
Attorney for Appellants/
Cross-Appellees, Thomas P. Foley,
Roger C. Bitzel, Robert S. Barnett,
Johnny J. Butler, Robert Risaliti,
and Robert Moore
DAVID A. FLORES, ESQUIRE
(ARGUED)
Harmon & Davies
2306 Columbia Avenue
Lancaster, Pennsylvania 17603
Attorney for Appellee/
Cross-Appellant,
Ferguson Electric Co., Inc.
_________________________________________________________________
**The Honorable John C. Godbold, United States Circuit Judge for the
Eleventh Judicial Circuit, sitting by designation.
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IRWIN W. ARONSON, ESQUIRE
(ARGUED)
Handler, Gerber, Johnston &
Aronson
150 Corporate Center Drive
P.O. Box 98
Camp Hill, Pennsylvania 17001-0098
Attorney for Amicus Curiae
Appellant/Cross-Appellee,
Pennsylvania State Building and
Construction Trades Council
OPINION OF THE COURT
SCIRICA, Circuit Judge.
The issue on appeal is whether certain Pennsylvania
prevailing wage and apprenticeship requirements are
preempted by the Employee Retirement Income Security Act
of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461. Since oral
argument, the same issue was addressed by the United
States Supreme Court in California Div. of Labor Standards
Enforcement v. Dillingham Construction, N.A., Inc., 117 S.
Ct. 832 (1997). Accordingly, we hold ERISA does not
preempt Pennsylvania's prevailing wage and apprenticeship
requirements insofar as they restrict the payment of
apprentice wages to apprentices registered in approved
programs. We will reverse.
I.
A.
In 1961, Pennsylvania adopted the Prevailing Wage Act,
which provides that "[n]ot less than the prevailing
minimum wages . . . shall be paid to all workmen employed
on public work." 43 Pa. Cons. Stat. § 165-5. The purpose of
the Act was "to protect workers employed on public projects
from substandard wages by insuring that they receive the
prevailing minimum wage." Keystone Chapter, Associated
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Builders and Contractors, Inc. v. Foley, 37 F.3d 945, 950
(3d Cir. 1994)(quoting Lycoming County Nursing Home
Assoc., Inc. v. Pennsylvania, 627 A.2d 238, 242 (Pa.
Commw. Ct. 1993)), cert. denied, 115 S. Ct. 1393 (1995).
The prevailing minimum wage is determined by the
Secretary of Labor and Industry,1 who also investigates
charges of wage act violations. 43 Pa. Cons. Stat. §§ 165-7,
165-11. An intentional violation of the wage act results in
the contractor's bar from public contracts for three years.
43 Pa. Cons. Stat. § 165-11(e). The contractor may also be
liable to the Commonwealth for damages for underpayment
of wages due under the contract. 43 Pa. Cons. Stat. § 165-
11(f).
Pennsylvania law permits an exception to the mandatory
prevailing wage rate for apprentices in approved
apprenticeship programs. The Pennsylvania Apprenticeship
and Training Act permits the payment of "apprentice wage
rates" which may be lower than the prevailing rate
minimums. 34 Pa. Code § 83.5(b)(5)(i) ("The progressively
increasing schedule of apprentice wage rates shall be
expressed in terms of percentages of the journeyperson
hourly rate.").2 To prevent abuses of the apprenticeship
system, the Pennsylvania Apprenticeship and Training Act
created a State Apprenticeship and Training Council to set
standards for apprenticeship programs.3 43 Pa. Cons. Stat.
§§ 90.3, 90.4.
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1. The prevailing minimum wage varies depending on the "locality in
which the public work is to be performed" and the "craft or classification
of all workmen needed to perform public work contracts." 43 Pa. Cons.
Stat. § 165-7.
2. The regulations accompanying the Prevailing Wage Act specifically
allow for the hiring of apprentices on public works projects. 34 Pa. Code
§ 9.103(9) ("[A]pprentices shall be limited to numbers in accordance with
a bona fide apprenticeship program registered with and approved by The
Pennsylvania Apprenticeship and Training Council . .. .").
3. The Apprenticeship and Training Council is a State Apprenticeship
Agency empowered to regulate apprenticeship programs under federal
law. See 29 C.F.R. § 29.3(a) (1996). The Council approves only those
apprenticeship programs which are "organized, written plan[s]" providing
for the "employment and training of the apprentice in a skilled trade,"
"instruction in technical subjects related to the trade," and a
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B.
Ferguson Electric Company contracted with the
Schuylkill County Redevelopment Authority to provide
electrical work for a public works project. Ferguson used
nonunion labor and enrolled its apprentices in an
apprenticeship program sponsored by the Keystone Chapter
of the Associated Builders and Contractors, an employer's
association. Ferguson is a member of the Associated
Builders and Contractors, and its apprenticeship program
had been approved by the Apprenticeship and Training
Council. After Ferguson submitted apprenticeship
agreements to the Council for approval in June 1992, its
apprentices started working for apprentice wages. But the
Council did not approve the agreements until January
1993.
Because Ferguson started paying apprentice wages prior
to receiving Council approval, the Pennsylvania Department
of Labor and Industry asked the Schuylkill County
Redevelopment Authority to withhold its invoice payments.
Then, in April 1993, the Department initiated an
administrative proceeding against Ferguson under the
Prevailing Wage Act for: (1) paying apprentice wages to
employees before receiving Council approval; and (2)
employing too many apprentices in violation of a state job-
site apprentice-to-journeyman ratio rule. The Department
sought monetary penalties and a ban on Ferguson's
participation in public works projects for three years.
Denying any violation, Ferguson brought this federal
action alleging the state officials colluded with the
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"progressively increasing schedule" of wages. 34 Pa. Code § 83.5(a),(b)(1),
(b)(4),(b)(5). Apprenticeship programs must limit the "ratio of apprentices
to journeymen [to] be consistent with proper supervision, training, and
continuity of employment." 34 Pa. Code § 83.5(b)(7).
Apprentices must be individually registered with the Council. Such
registration is effected by submitting apprenticeship agreements to the
Council for approval. 34 Pa. Code § 83.3(b). An "apprenticeship
agreement" is the agreement between the apprentice and his employer
which contains the terms and conditions of the employment and training
of the apprentice. 34 Pa. Code § 83.2.
5
International Brotherhood of Electrical Workers and the
Foundation for Fair Contracting to prosecute it and other
non-union contractors while ignoring the wage act
violations of union contractors, thereby violating Ferguson's
due process rights. Ferguson also claimed the Prevailing
Wage Act was preempted by ERISA. Ferguson sought
damages and injunctive relief that would have prohibited
defendants from prosecuting their administrative action
against it or interfering with its attempt to bid on public
works contracts.
Both parties moved for summary judgment. Abstaining
on all but the ERISA preemption issue,4 the district court
held the state prevailing wage and apprenticeship laws were
preempted insofar as they require a minimum journeyman-
to-apprentice ratio and may forbid the retroactive approval
of apprentices. Both sides appealed.5
II.
The district court had jurisdiction under 28 U.S.C.
§§ 1331 and 1343. See Keystone Chapter, Associated
Builders and Contractors, Inc, 37 F.3d at 953. We have
jurisdiction under 28 U.S.C. §§ 1291 and 1292(a)(1).
We review summary judgment decisions under a plenary
standard. See Waldron v. SL Indus., Inc., 56 F.3d 491, 496
(3d Cir. 1995). We must apply the same test as the district
court and therefore must view the evidence in the light
most favorable to the nonmovant and affirm only if"there
is no genuine issue as to any material fact and . . . the
moving party is entitled to a judgment as a matter of law."
Fed. R. Civ. P. 56(c); see also Waldron, 56 F.3d at 496.
_________________________________________________________________
4. The district court abstained under Younger v. Harris, 401 U.S. 37(1971).
5. On appeal, defendants challenge the district court's decision to not
abstain from deciding Ferguson's ERISA preemption claim as well as the
judgment of preemption. Ferguson challenges the district court's failure
to hold the Prevailing Wage Act is entirely preempted by ERISA insofar
as it applies to apprenticeship programs.
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III.
After oral argument, we took the case under advisement
awaiting the Supreme Court decision in California Division
of Labor Standards Enforcement v. Dillingham Construction,
N.A., Inc., 117 S. Ct. 832 (1997). Dillingham Construction
employed apprentices on a California public works contract.
The apprentices were enrolled in an apprenticeship
program which did not receive state approval until after
they started working. The Division of Apprenticeship
Standards of the California Department of Industrial
Relations issued a notice of noncompliance to Dillingham
for violating California's prevailing wage law, and the
county was ordered to withhold Dillingham's payments.
Dillingham filed suit to prevent the state from interfering
with its contract. It alleged ERISA preempted enforcement
of the prevailing wage law because the law related to the
apprenticeship program, which was an ERISA plan.
The Supreme Court granted certiorari in Dillingham on
the following issue:
Did Congress intend, in enacting ERISA, to pre-empt
states' traditional regulation of wages, apprenticeships,
and state-funded public works construction when
expressed in a state prevailing wage law that restricts
contractors' payment of lower apprentice specific wages
to apprentices duly registered in programs approved as
meeting federal standards?
Examining "the objectives of the ERISA statute," the Court
found no preemption. Id. at 838.
ERISA was enacted to provide uniform federal regulation
of employee benefit plans. See Keystone Chapter,
Associated Builders and Contractors, Inc., 37 F.3d at 954.
To further this goal, ERISA preempts "any and all State
laws insofar as they may now or hereafter relate to any
employee benefit plan . . . ." 29 U.S.C. § 1144(a). Ferguson
contends Pennsylvania's apprenticeship scheme is
preempted by ERISA because it "relates to" the Associated
Builders and Contractors apprenticeship program, which is
an "employee benefit plan" under ERISA. 6 A "law `relate[s]
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6. The term "employee benefit plan" includes "any plan, fund, or program
which was heretofore or is hereafter established or maintained by an
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to' a covered employee benefit plan . . . `if it [1] has a
connection with or [2] reference to such a plan.' "
Dillingham, 117 S. Ct. at 837 (quoting District of Columbia
v. Greater Washington Bd. of Trade, 506 U.S. 125, 129
(1992)).
A law has a "connection with" ERISA plans if it dictates
the choices faced by ERISA plans. It is not enough if the
law merely provides economic incentives to ERISA plans
but does not "bind [them] to anything." Dillingham, 117 S.
Ct. at 841. The apprenticeship scheme in Pennsylvania
does not bind ERISA plans to anything, but merely provides
economic incentives to encourage apprenticeship programs
to obtain state approval. In Pennsylvania, as in California,
"[i]f a contractor chooses to hire apprentices for a public
works project, it need not hire them from an approved
program (although if it does not, it must pay these
apprentices journeyman wages)." Id. Like California's
program, Pennsylvania's apprenticeship scheme does not
have a "connection with" ERISA. See id. at 842 ("We could
not hold preempted a state law in an area of traditional
state regulation based on so tenuous a relation without
doing grave violence to our presumption that Congress
intended nothing of the sort.").
Apprenticeship laws make "reference to" ERISA plans
where "approved apprenticeship programs need . . .
necessarily be ERISA plans." Id. at 838. Where
apprenticeship laws are "indifferent to the funding, and
attendant ERISA coverage, of apprenticeship programs,"
they do not make "reference to" ERISA plans. Id. at 839. In
Dillingham, the Court held California's prevailing wage law
and apprenticeship requirements did not make "reference
to" ERISA plans because apprenticeship programs need not
necessarily be ERISA plans; apprenticeship programs could
be maintained by a single employer and their costs could
_________________________________________________________________
employer or by an employee organization, or by both, to the extent that
such plan, fund, or program was established or is maintained for the
purpose of providing for its participants or their beneficiaries . . .
apprenticeship or other training programs . . . ." 29 U.S.C.
§ 1002(1),(3) (emphasis added). It is uncontested that the Associated
Builders and Contractors apprenticeship program is an ERISA plan.
8
be defrayed out of the employers' general assets."Benefits
paid out of an employer's general assets present[ ] risks
indistinguishable from `the danger of defeated expectations
of wages for services performed,' a hazard with which
ERISA is unconcerned." Id. (quoting Massachusetts v.
Morash, 490 U.S. 107, 115 (1989)).
Similarly, in Pennsylvania, an apprenticeship program
may be approved regardless of its funding source and
whether it is maintained by a single employer. See 34 Pa.
Code § 83.2 (allowing a "person, association, committee, or
organization" to "sponsor" an apprenticeship program);
§ 83.5 (setting standards for apprenticeship programs
without limiting the acceptable funding sources or
sponsors). Like California's prevailing wage law,
Pennsylvania's apprenticeship scheme does not make
"reference to" ERISA.7
IV. Conclusion
ERISA does not preempt Pennsylvania's prevailing wage
and apprenticeship requirements insofar as they restrict
the payment of apprentice wages to apprentices registered
in approved programs. It is immaterial that the
apprenticeship program in this case, the Associated
Builders and Contractors program, is an ERISA plan. The
apprenticeship program's choices were not dictated by
Pennsylvania law. For the foregoing reasons, we will reverse
the judgment of the district court and direct the district
court to enter judgment in favor of defendants.8
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7. Ferguson contends this case is distinguishable from Dillingham
because the latter "hinged on the fact that California's apprenticeship
standards were `substantially similar' to [federal apprenticeship
standards]." But the Court only mentioned the similarity in passing in a
footnote and declined to resolve the issue of whether "uniformity of
substantive standards" is even possible. Dillingham, 117 S. Ct. at 842
n.10. More importantly, the laws in California and Pennsylvania do not
materially differ in any way relevant to this issue. In both states, the
"apprenticeship standards are not mandatory." Id.
8. The district court reached Ferguson's preemption claim only after
denying defendants' motion to abstain. Defendants originally appealed
the abstention decision but did not brief the issue in their supplemental
briefs submitted after the Dillingham decision. As we are ruling in
defendants' favor, we see no reason to address the abstention issue.
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A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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