Keystone Chapter, Associated Builders & Contractors, Inc. v. Foley ( 1994 )

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
9-22-1994
Keystone Chptr, Associated Bldrs. & Contrs., Inc. v.
Foley
Precedential or Non-Precedential:
Docket 93-7548
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_________________
No. 93-7547 & 93-7573
_________________
KEYSTONE CHAPTER, ASSOCIATED BUILDERS AND CONTRACTORS, INC.,
in representation of its members
v.
THOMAS P. FOLEY, in his official capacity
as the Secretary of Labor and Industry
for the Commonwealth of Pennsylvania
PENNSYLVANIA STATE BUILDING AND CONSTRUCTION TRADES COUNCIL
(Amicus in District Court)
Thomas P. Foley,
Appellant in No. 93-7547
Keystone Chapter, Associated Builders
and Contractors, Inc., in representation
of its members,
Appellant in No. 93-7573
_______________
No. 93-7548
_______________
BELL TELEPHONE COMPANY OF PENNSYLVANIA;
COMMUNICATIONS WORKERS OF AMERICA, AFL-CIO, DISTRICT 13
v.
THOMAS P. FOLEY; in his official capacity
as Secretary of Labor and Industry
for the Commonwealth of Pennsylvania;
JAMES R. DAVIS; FRAYDA KAMBER;
RICHARD W. MARTZ; JOHN H. MICKENS
PENNSYLVANIA STATE BUILDING AND
CONSTRUCTION TRADES COUNCIL, AFL-CIO
(Amicus in District Court)
Thomas P. Foley; James R. Davis;
Frayda Kamber; Richard W. Martz;
John H. Mickens,
Appellants
_______________________________________________
On Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. Civil Action Nos. 92-00459 & 92-01105)
___________________
Argued April 13, 1994
Before: BECKER, MANSMANN and SCIRICA, Circuit Judges
(Filed September 22, 1994)
SUSAN J. FORNEY, ESQUIRE (Argued)
Office of Attorney General of Pennsylvania
Department of Justice
Strawberry Square, 15th Floor
Harrisburg, Pennsylvania 17120
Attorney for Appellant/Cross-Appellee, Thomas P. Foley,
and Appellants, Thomas P. Foley, James R. Davis,
Frayda Kamber, Richard W. Martz and John H. Mickens
THOMAS R. DAVIES, ESQUIRE (Argued)
Harmon & Davies
2306 Columbia Avenue
Lancaster, Pennsylvania 17603
Attorney for Appellee/Cross-Appellant,
Keystone Chapter, Associated Builders and
Contractors, Inc., in representation of its members, and
Amicus Curiae Appellee/Cross-Appellant,
Pennsylvania Utility Contractors Association
MARY M. McKENZIE, ESQUIRE (Argued)
Bell Atlantic Network Services, Inc.
1717 Arch Street
Philadelphia, Pennsylvania 19103
MARIE L. MARTINO, ESQUIRE
Dechert, Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attorneys for Appellee,
The Bell Telephone Company of Pennsylvania
RICHARD H. MARKOWITZ, ESQUIRE
Markowitz & Richman
121 South Broad Street, Suite 1100
Philadelphia, Pennsylvania 19107
Attorney for Appellee,
Communications Workers of America, AFL-CIO, District 13
IRWIN W. ARONSON, ESQUIRE (Argued)
Handler, Gerber, Johnston & Aronson
150 Corporate Center Drive, Suite 100
P.O. Box 98
Camp Hill, Pennsylvania 17001-0098
Attorney for Amicus Curiae Appellant/Cross-Appellee,
Pennsylvania State Building and Construction Trades Council
JOHN H. WIDMAN, ESQUIRE
McAleese, McGoldrick & Susanin
Suite 240 - Executive Terrace
455 South Gulph Road
King of Prussia, Pennsylvania 19406
Attorney for Amicus Curiae Appellants,
The Roofing Contractors Association Industry Fund,
Contractors Association of Eastern Pennsylvania,
Mechanical Contractors Association of Eastern Pennsylvania,
Mechanical Contractors of Western Pennsylvania,
Laurel Mechanical Contractors, Inc.,
Plumbing & Heating Contractors Association
of Philadelphia & Vicinity, Inc.,
Pen-Jer-Del Chapter of the National
Electrical Contractors Association,
Delaware Valley Insulation and Abatement
Contractors Association, Inc.
THOMAS A. BECKLEY, ESQUIRE
Beckley & Madden
212 North Third Street
P.O. Box 11998
Harrisburg, Pennsylvania 17108
Attorney for Amicus Curiae Appellants,
SMACNA of Pennsylvania,
Sheet Metal Contractors Association
of Central Pennsylvania,
Sheet Metal Contractors Association
of Philadelphia and Vicinity,
SMACNA of Western Pennsylvania,
National Electrical Contractors Association, Inc.,
Western Pennsylvania Chapter,
Laurel Mechanical Contractors Association, Inc.,
Mechanical Contractors of Northwest Pennsylvania,
Painting and Decorating Contractors of America,
Harrisburg Chapter,
Masonry Contractors Association of Central Pennsylvania
RICHARD B. SIGMOND, ESQUIRE
RICHARD C. McNEILL, JR., ESQUIRE
Sagot, Jennings & Sigmond
1172 Public Ledger Building
Independence Square West
Philadelphia, Pennsylvania 19106
Attorneys for Amicus Curiae Appellant,
Steamfitters Local Union No. 420, United Association of
Journeymen and Apprentices of the Plumbing and Pipefitting
Industry
DEBORAH J. NATHAN, ESQUIRE
Cleckner & Fearen
Willow Grove Plaza, Suite 2000
102 York Road
Willow Grove, Pennsylvania 19090
Attorney for Amicus Curiae Appellee/Cross-Appellant,
Pennsylvania School Boards Association, Inc.
MAURICE BASKIN, ESQUIRE
Venable, Baetjer, Howard & Civiletti
1201 New York Avenue, N.W., Suite 1000
Washington, D.C. 20005
Attorney for Amicus Curiae Appellee/Cross-Appellant,
Central Pennsylvania Chapter, Lehigh Valley Chapter,
Southeast Pennsylvania Chapter, and Western Pennsylvania
Chapter of Associated Builders and Contractors, Inc.
and Associated Builders and Contractors, Inc.
LOUDON L. CAMPBELL, ESQUIRE
Calkins & Campbell
223 North Front Street
P.O. Box 1188
Harrisburg, Pennsylvania 17108
Attorney for Amicus Curiae Appellee,
Pennsylvania Builders Association
ROBIN S. CONRAD, ESQUIRE
National Chamber Litigation Center, Inc.
1615 H Street, N.W.
Washington, D.C. 20062
Attorney for Amicus Curiae Appellee,
Chamber of Commerce of the United States of America
__________________
OPINION OF THE COURT
__________________
SCIRICA, Circuit Judge.
In this appeal, we must decide whether the Employee
Retirement Income Security Act of 1974 (ERISA)1 preempts a
1
. Pub. L. No. 93-406, 88 Stat. 829, (codified as amended in
scattered sections of 5, 18, 26, 29, 31, & 42 U.S.C.).
Pennsylvania minimum wage law applying to public works projects.
We hold that such a law may not refer to ERISA plans or accord
them special treatment, but may set minimum wages and give
employers the option of satisfying a portion of the wage through
contributions for employee benefits.
An employer, an employers' association, and a labor
union2 sued Pennsylvania's Secretary of Labor and Industry and
the members of the state Prevailing Wage Appeals Board
(collectively, the Secretary) in federal district court, claiming
Pennsylvania's Prevailing Wage Act (the Act),3 its accompanying
regulations, and an administrative Declaratory Order interpreting
the Act are preempted by ERISA. The district court agreed and
overturned the Act, regulations, and order. The Secretary of
Labor and Industry appeals, and the employers' association cross-
appeals.
We agree the Declaratory Order implements the Act in a
manner preempted by ERISA. But we find the Act and its
regulations are not preempted because they confer broad authority
that may be implemented in a manner consistent with ERISA.
Therefore we will affirm the judgment of the district court
striking the Declaratory Order, but reverse its judgment striking
the Act and accompanying regulations.
2
. These were, respectively, the Bell Telephone Company of
Pennsylvania, Keystone Chapter, Associated Builders and
Contractors, Inc., and the Communications Workers of America,
AFL-CIO, District 13..
3
. P.L. 987 (1961) (codified at 43 P.S.A. § 165).
I.
A. The Prevailing Wage Act
The purpose of the Prevailing Wage Act "is to protect
workers employed on public projects from substandard wages by
insuring that they receive the prevailing minimum wage."
Lycoming County Nursing Home v. Pennsylvania, 627 A.2d 238, 242
(Pa. Commw. Ct. 1993). The statute provides, "Not less than the
prevailing minimum wages as determined hereunder shall be paid to
all workmen on public work," 43 P.S.A. § 165-5, and sets forth
general rules for determining prevailing minimum wages. Before
public contracts are put out to bid, the Secretary of Labor and
Industry, in consultation with an Advisory Board, determines the
prevailing minimum wage for each locality and for each "craft or
classification" of worker to be employed. 43 P.S.A. § 165-7. In
making this determination, "employer and employe contributions
for employe benefits pursuant to a bona fide collective
bargaining agreement shall be considered an integral part of the
wage rate." Id. The statute does not define "prevailing minimum
wage rate," nor specify how contributions for benefits are to be
integrated into the wage rate.4
The seven-member Prevailing Wage Appeals Board hears
"any grievance or appeal arising out of the administration of
4
. Pennsylvania's Commonwealth Court has held that despite the
lack of definition the terms "prevailing minimum wage rate" and
"craft or classification" are "adequate primary standards to
guide the Secretary in the exercise of his duties under [§ 165-
7]," so that the statute does not assign the Secretary
"unacceptably excessive discretion." Pennsylvania v. Altemose
Construction Co., 368 A.2d 875, 881 (Commw. Ct. Pa. 1977).
this act" "[p]romulgate[s] rules and regulations necessary to
carry out [its] duties." 43 P.S.A. § 165-2.2(e). Contractors
and subcontractors must "keep an accurate record showing the
name, craft and the actual hourly rate of wage paid to each
workman employed by him in connection with public work" for two
years following payment, subject to inspection by the Secretary
and the public body awarding the contract. Id. § 165-6.
B. The Accompanying Regulations
The Pennsylvania Code, Title 34 §§ 9.101-9.112,
provides additional rules for calculating and enforcing the
prevailing minimum wage in public works contracts. The
regulations make clear that a prevailing minimum wage will state
a cash wage and a level of benefits contributions as separate
components. Contractors and subcontractors must pay "[n]ot less
than the general prevailing minimum wage rates determined by the
Secretary." If a contract does not provide for employee benefits
contributions "which the Secretary has determined to be included
in the general prevailing minimum wage rate," the employer may
pay "the monetary equivalent thereof." Id. § 9.106.
Contributions for employee benefits are defined as
"`[f]ringe benefits' paid or to be paid, including payment made
whether directly or indirectly, to the workmen for sick,
disability, death, other than Workmen's Compensation, medical,
surgical, hospital, vacation, travel expense, retirement and
pension benefits." Id. § 9.102. Contractors may pay their
workers above the prevailing rate. Id.
To determine the prevailing minimum wages and benefits
in a locality, the Secretary considers local collective
bargaining agreements between established bargaining
representatives and employers and other information. Id. §
9.105. The regulations specify additional records and reporting
requirements for employers. Id. §§ 9.109, 9.110. The Secretary
may investigate and hold hearings on allegations of underpayment,
and may bar public contracts with a violating firm and request
the Attorney General to recover penalties. Id. § 9.111.
C. The April 13, 1992 Declaratory Order
Although the Act and regulations specify the prevailing
minimum wage will have separate cash and benefits components,
they do not state whether the benefits component should merely
state the total level of benefits contributions an employer must
make (through benefits contributions or their cash equivalent),
or whether it should specify which types and levels of benefits
must be given. That issue has been resolved by the Secretary and
Board in different ways at different times.
For several years prior to April 13, 1992, the
Secretary used a "line-item" approach in determining compliance
with a prevailing wage's benefits component.5 The Secretary made
5
. The Department apparently officially adopted the line-item
approach in 1988. In its brief to the Prevailing Wage Appeals
Board, the Prevailing Wage Division of the Department of Labor
and Industry cites as its earliest authority for the line-item
approach a 1988 decision of the Secretary, In re: Francesco
Scrivofilo, t/d/b/a Franco Elec. Co., Determination of the
Secretary (Dec. 1, 1988). Bell and the Communications Workers of
America claim their wage and benefits packages were not reviewed
for line-item compliance for a number of years, presumably prior
to 1988.
a "predetermination" of the prevailing wage for each category of
worker in a given locality, specifying the prevailing levels of
benefits in a number of categories, such as "health-and-welfare,"
"pension," and "apprenticeship-and-training". An employer had to
meet the prevailing level of each category of benefit, or pay the
shortfall in cash to the worker. An employer was not given
credit toward the benefits component for benefits provided in a
given category in excess of that required in the
predetermination, nor for any benefits paid in a category not
included in the predetermination. Thus, in addition to paying
the prevailing cash wage, an employer was required either to make
benefits contributions in the specified categories and amounts or
to pay cash to the extent its benefits contributions fell short
in any specified category.6
On November 28, 1990, counsel for Keystone Chapter,
Associated Builders and Contractors, Inc., a construction
industry employers' association wrote to the Secretary,
6
. For example, a prevailing minimum wage predetermination for a
particular classification of worker on a public works project
might be $7 cash, $2 pension, and $1 health-and-welfare, per
hour. An employer could pay as specified in the predetermination
-- $7 per hour cash, $2 pension, and $1 health-and-welfare -- or
substitute cash for some or all of the prevailing benefits -- for
example, $8 cash, $1 pension, and $1 health-and-welfare, or $10
cash and no benefits. However, an employer paying $7 cash, $2
pension, and $1 for apprenticeship-and-training would not satisfy
the minimum, because it had neither contributed $1 for health-
and-welfare nor replaced it with $1 cash. Similarly, an employer
paying $7 cash and $3 pension would not be in compliance --
notwithstanding the extra dollar in the pension category; it too
would be required either to pay $1 health-and-welfare or replace
that contribution with $1 cash.
complaining about the line-item approach. The complaint was
referred to the Prevailing Wage Appeals Board, which treated it
as a "Petition for Declaratory Order" and heard oral argument.
Bell Telephone Co., an employer that performs public work, also
participated in the proceeding. The petitioners argued that the
line-item approach was not the best interpretation of the
Prevailing Wage Act, that it was unfair to non-union and non-
local contractors, and that it was preempted by ERISA. The
Prevailing Wage Division of the Department of Labor and Industry
(the Division) conceded that the Prevailing Wage Act did not
require line-item specification of fringe benefits, but stated
that as remedial legislation it should be interpreted broadly in
favor of the protected class.7
On April 13, 1992, apparently in response to the
petitioners' ERISA preemption arguments, the Prevailing Wage
Appeals Board issued a Declaratory Order modifying the
implementation of the Prevailing Wage Act. The Board stated it
"should interpret state law so that it comports with
constitutional and federal law," Keystone App. at 71, and
established a special bona fide status for contributions for
ERISA benefits. It ordered:
2. That the [Prevailing Wage] Division
must determine, in the first instance,
whether or not a contribution for employee
benefits is bona fide;
7
. John T. Kupchinsky, attorney for the Division, stated, "If
you're going to fudge things, you fudge things to get more people
covered by the act . . . ." Transcript of Oral Argument before
Prevailing Wage Appeals Board, Nov. 12, 1991 at 35, Keystone App.
at 180.
3. That a contribution is bona fide if
that contribution: (a) is made to an
"employee benefit plan" or fund or program
subject to the [ERISA]; (b) has been
determined to be bona fide by the Division;
and (c) is not required by federal, state or
local law;
. . . .
Keystone App. at 73-74.
The next part of the order, paragraph 4, appears to
abolish the line-item system, although it is not clear if this
applies only to the ERISA benefit contributions discussed in
paragraph 3, or to all benefits. It provides:
4. That credit for contributions for
employee benefits, up to the maximum
established by the predetermination, shall be
given as follows:
. . .
c) Credit shall be given for contributions
in each predetermined category up to the
predetermined rate for each category;
d) Contributions which exceed the
predetermined rate in any employee benefit
category shall be credited in any other
predetermined benefit category (or
categories) for which the predetermined rate
has not been satisfied;
e) Credit shall be given for contributions
for employee benefits not included in the
predetermined benefit categories;
f) The maximum credit for contributions for
employee benefits shall not exceed the total
amount of contributions for employee benefits
established by predetermination;
. . . .
Keystone App. at 74-75.
As interpreted by the Prevailing Wage Division, the
Declaratory Order establishes that any contribution to an ERISA
plan is per se bona fide, while other benefits contributions must
be certified by the Division as such. Furthermore, ERISA
benefits contributions are counted toward the benefits minimum no
matter what category they fall in, while the line-item approach
is maintained for non-ERISA benefits contributions. Letter from
Susan J. Forney, Senior Deputy Attorney General, to the Court,
(April 18, 1994).8 We accept this reading of the Declaratory
Order as a reasonable interpretation.9
D. Litigation
Keystone filed a complaint in United States District
Court for the Middle District of Pennsylvania seeking injunctive
relief against the Secretary. Keystone claimed the Prevailing
Wage Act was preempted by ERISA because it prevented employers
from setting the terms of their benefits plans. Bell Telephone
8
. A May 29, 1992 memo from Field Inspection Supervisor A.
Robert Risaliti to the Field Inspectors, who enforce the
Prevailing Wage Act, confirms that the Declaratory Order has been
thus implemented. It states that neither the Division nor the
inspector is authorized to object to the presumed bona fide
status of ERISA contributions, whether or not the contributions
match the categories in the predetermination. The memo also
indicates the line-item approach is still applied to non-ERISA
benefits.
Ms. Forney's letter came as a correction to the
Secretary's position at oral argument, that pursuant to the April
13 Order the line-item approach was abandoned for all benefits,
and that any non-ERISA benefit contributions are credited against
the benefit contribution rate if they were judged by the Division
to be bona fide. See Brief for Appellants at 10-11.
9
. The Appellees differ in their interpretation of the order.
Keystone essentially agrees with the Secretary's interpretation.
Bell and the CWA contend that only contributions to ERISA benefit
plans now count towards the fringe benefit component; other
benefits, they say, will not be credited at all. Although the
order is somewhat unclear, we find it implausible that the Board
would disqualify all non-ERISA benefits contributions from
counting toward the prevailing minimum, as this would be a major
departure from past practice without grounding in the Act.
and its employees' union, the Communications Workers of America
(CWA), brought a suit against the Secretary and the members of
the Prevailing Wage Appeals Board seeking a declaratory judgment
that the Prevailing Wage Act was preempted by ERISA or by the
NLRA.10 They claimed their participation in public works
projects was impeded because their collective bargaining
agreements, which include centrally administered benefits plans
for workers in several states, would not qualify as meeting the
prevailing wage. Some of these contracts included non-ERISA
benefit contributions that they believed would not be credited
toward the benefits component, and some contracts gave benefits
in excess of the prevailing benefits minimum that would not be
credited against the cash wage component. Keystone, Bell, the
CWA, and the defendants moved for summary judgment.
On July 30, 1993, the district court declared the
Prevailing Wage Act, its accompanying regulations, and the
Declaratory Order preempted by § 514(a) of ERISA, 29 U.S.C. §
1144(a) (1988), which preempts state law relating to ERISA plans.
The court found (1) the Declaratory Order specifically referred
to ERISA plans, (2) the Prevailing Wage Act could affect the
level of benefits paid to employees by discouraging benefits in
excess of the prevailing rate, and (3) the Act imposed
administrative burdens on ERISA plans by requiring employers to
keep records of wages and benefits. The court declined the
Secretary's request to sever the portion of the Act covering
10
. The latter claim was dismissed and is not raised on appeal.
fringe benefits and leave standing a requirement that government
contractors simply meet the prevailing cash wage because it
believed such a system would be contrary to legislative intent.
On appeal, the Secretary argues the district court
erred in finding the Prevailing Wage Act, its regulations, and
the Declaratory Order preempted. Alternatively, he requests that
if the Act's integration of benefits into the prevailing wage
violates ERISA, we sever that portion and allow the Act to stand
to the extent it regulates cash wages. Keystone and Bell ask us
to affirm the district court. Keystone also cross-appeals,
requesting that if we do not affirm the district court, we enjoin
the Secretary from specifying line-item requirements for ERISA
benefit contributions. The CWA requests that only the
Declaratory Order be invalidated, claiming the law itself can be
interpreted in a manner that is not preempted.
The district court had jurisdiction of these ERISA
preemption claims under 28 U.S.C. § 1331 (1988). "A plaintiff
who seeks injunctive relief from state regulation, on the ground
that such regulation is pre-empted by a federal statute which, by
virtue of the Supremacy Clause of the Constitution, must prevail,
thus presents a federal question which the federal courts have
jurisdiction under 28 U.S.C. § 1331 to resolve." Shaw v. Delta
Air Lines, Inc., 463 U.S. 85, 96 n.14.11
11
. Steamfitters Local Union No. 420, in its amicus brief,
argues that New Jersey State AFL-CIO v. New Jersey, 747 F.2d 891
(3d Cir. 1984), bars federal question jurisdiction. While we
held there that a district court lacked jurisdiction of a labor
union's action for declaratory judgment that ERISA preempted four
New Jersey statutes, our holding simply rejected the union's
We have appellate jurisdiction under 28 U.S.C. § 1291,
and our review of a summary judgment is plenary, Public Interest
Research v. Powell Duffryn Terminals, Inc., 913 F.2d 64 (3d Cir.
1990), cert. denied, 498 U.S. 1109 (1991). "[T]he appellate
court is required to apply the same test the district court
should have utilized initially. Inferences to be drawn from the
underlying facts contained in the evidential sources submitted to
the trial court must be viewed in the light most favorable to the
party opposing the motion." Goodman v. Mead Johnson & Co., 534
F.2d 566, 573 (3d Cir. 1976), cert. denied, 429 U.S. 1038 (1977).
The district court's conclusions of law are subject to plenary
review. Gregoire v. Centennial Sch. Dist., 907 F.2d 1366, 1370
(3d Cir.), cert. denied, 498 U.S. 899 (1990).
II.
A. ERISA
ERISA provides uniform federal regulation of employee
benefit plans. It is a comprehensive statute that protects the
interests of employees and their beneficiaries in employee
benefit plans, and promotes administrative efficiency through
exclusive federal regulation of such plans. ERISA subjects
(..continued)
attempt to sue under ERISA's jurisdictional provision, 29 U.S.C.
§ 1132(a)(1)(B) & (e)(1), which grants federal jurisdiction of
civil actions only by participants and beneficiaries. New Jersey
State AFL-CIO, 747 F.2d at 892-93. As we explained in Northeast
Dept. ILGWU Health & Welfare Fund v. Teamsters Local Union No.
229 Welfare Fund, 764 F.2d 147, 153 n.3 (3d Cir. 1985), "[t]he
matter of federal question jurisdiction was not raised by the
parties in AFL-CIO, nor was it considered by the panel." Shaw,
as quoted above, makes clear that there is federal question
jurisdiction where a party claims it will be subject to state
regulation preempted by ERISA.
employee benefit plans to participation, funding, and vesting
requirements, and to uniform standards on matters like reporting,
disclosure, and fiduciary responsibility. Shaw, 463 U.S. at 90-
91.
Section 514(a) of ERISA promotes uniform regulation of
employee benefits plans, by preempting, with limited exceptions
not applicable here, "any and all State laws insofar as they may
now or hereafter relate to any employee benefit plan" covered by
ERISA. 29 U.S.C. § 1144(a). ERISA covers pension benefit plans
and plans for welfare benefits such as medical benefits, training
programs, and daycare centers.12 29 U.S.C. § 1002(3) (1988).
Typically, these plans create a need for "an ongoing
administrative program for processing claims and paying
benefits." Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 12
(1987).
12
. The statute defines "employee benefit plan" as an "employee
welfare benefit plan or an employee pension benefit plan or a
plan which is both." 29 U.S.C. § 1002(3). An employee welfare
benefit plan is any "plan, fund, or program . . . established or
maintained by an employer or by an employee organization, or by
both" to provide "(A) medical, surgical, or hospital care or
benefits, or benefits in the event of sickness, accident,
disability, death or unemployment, or vacation benefits,
apprenticeship or other training programs, or day care centers,
scholarship funds, or prepaid legal services, or (B) any benefit
described in section 186(c) of this title (other than pensions on
retirement or death, and insurance to provide such pensions)."
Id. § 1002(1). 29 U.S.C. § 186(c) involves union welfare funds
for benefits such as vacation benefits, scholarships, and housing
assistance. An employee pension benefit plan is "any plan, fund,
or program . . . established or maintained by an employer or by
an employee organization, or by both . . . [that] (i) provides
retirement income to employees, or (ii) results in a deferral of
income by employees for periods extending to the termination of
covered employment or beyond . . . ." Id. § 1002(2)(a).
 In determining the scope of § 514(a), "as in any pre-
emption analysis, `[t]he purpose of Congress is the ultimate
touchstone.'" Metropolitan Life Ins. Co. v. Massachusetts, 471
U.S. 724, 747 (1985) (quoting Malone v. White Motor Corp., 435
U.S. 497, 504 (1978)) (alteration in original) (internal
quotation marks and citation omitted). Recognizing the complex
administrative task faced by employers maintaining employee
benefit plans, Congress enacted § 514(a) to ensure that plan
administration is subject to a single set of regulations rather
than a "patchwork scheme." Fort Halifax, 482 U.S. at 11.
We summarized the standards for ERISA preemption in
United Wire v. Morristown Memorial Hosp., 995 F.2d 1179 (3d
Cir.), cert. denied, 114 S. Ct. 382, 383 (1993):
The preemption clause of ERISA is
notable for its breadth, and manifests
Congress's intention to establish pension
plan regulation as an exclusively federal
concern. Alessi v. Raybestos-Manhattan,
Inc., 451 U.S. 504, 101 S. Ct. 1895, 68
L. Ed. 2d 402 (1981). The Supreme Court has
noted that a state law "relates to" an ERISA
governed plan, within the meaning of §
514(a)'s preemptive reach, "if it has a
connection with or reference to such a plan."
Shaw v. Delta Air Lines, 463 U.S. 85, 97, 103
S. Ct. 2890, 2900, 77 L. Ed. 2d 490 (1983). The
Court in Shaw noted, however, that "[s]ome
state actions may affect employee benefit
plans in too tenuous, remote, or peripheral a
manner to warrant a finding that the law
`relates to' the plan." 463 U.S. at 100, n.
21, 103 S. Ct. at 2901 n. 21.
Id. at 1191. We then set out guidelines for determining if a law
related, directly or indirectly, to ERISA plans:
A rule of law relates to an ERISA plan
if it is specifically designed to affect
employee benefit plans, if it singles out
such plans for special treatment, or if the
rights or restrictions it creates are
predicated on the existence of such a plan.
. . .
This does not end our inquiry, however.
A state rule of law may be preempted even
though it has no such direct nexus with ERISA
plans if its effect is to dictate or restrict
the choices of ERISA plans with regard to
their benefits, structure, reporting and
administration, or if allowing states to have
such rules would impair the ability of a plan
to function simultaneously in a number of
states.
Id. at 1192-93 (footnotes omitted). We will apply this analytic
framework to the Declaratory Order, the Prevailing Wage Act, and
its accompanying regulations.
B. The Declaratory Order
The District Court correctly held that ERISA preempts
the Declaratory Order, because it "singles out [ERISA] plans for
special treatment."13 United Wire, 995 F.2d at 1192. Under the
Order, the Prevailing Wage Division treats contributions for
ERISA benefits as per se bona fide, but must approve other
contributions. Further, any ERISA benefits contributions count
toward the benefits minimum, while non-ERISA benefits only count
if they are in one of the benefit categories listed in the
predetermination.
13
. The Declaratory Order is "State law" subject to ERISA
preemption under § 514, for "State law" includes not only
statutes, but "all laws, decisions, rules, regulations, or other
State action having the effect of law, of any State." 29 U.S.C.
§ 1144(c)(1). See National Elevator Indus., Inc. v. Calhoon, 957
F.2d 1555 (10th Cir.) (invalidating ruling of Commissioner of
Oklahoma Department of Labor under state's prevailing wage act as
preempted by ERISA), cert. denied, 113 S. Ct. 406 (1992).
Such special treatment for ERISA plans is grounds for
preemption. In Mackey v. Lanier Collection Agency & Serv., 486
U.S. 825 (1988), the Supreme Court struck down a provision of a
Georgia statute that barred garnishment of ERISA plan funds.
Because the provision expressly referred to ERISA benefit plans
and accorded them special treatment, the Court found it "related
to" such plans within the meaning of § 514(a). Id. at 829-30.
Though the law might have been enacted to further ERISA's
purposes, the Court said, "[l]egislative `good intentions' do not
save a state law within the broad pre-emptive scope of § 541(a)."
Id. at 830. See also McCoy v. Massachusetts Inst. of Tech., 950
F.2d 13, 19-20 (1st Cir. 1991) (§ 514(a) preempts mechanics' lien
law expressly inuring lien to advantage of various types of ERISA
plans), cert. denied, 112 S. Ct. 1939 (1992).
Here, too, there may have been "good intentions" behind
the special treatment given to ERISA plans. The Prevailing Wage
Appeals Board was responding to a claim that the Prevailing Wage
Act was preempted by ERISA, and stated its intention to
"interpret state law so that it comports with constitutional and
federal law." Declaratory Order at 2. Despite this effort, the
Board interpreted the Prevailing Wage Act in a way that is
preempted by ERISA.14
14
. Amicus Curiae, the Roofing Contractors Association, argues
that preemption should not apply to state actions where the state
is acting as a proprietor. Because we find the Prevailing Wage
Act and its accompanying regulations not preempted on other
grounds, this argument could only affect our decision regarding
the Declaratory Order. The Association relies on Building &
Constr. Trades Council v. Associated Bldrs. and Contractors, 113
S. Ct. 1190 (1993), in which the Supreme Court held a bid
C. The Act and its accompanying regulations
Although the Declaratory Order implemented the
Prevailing Wage Act in a manner preempted by ERISA, we hold that
neither the Prevailing Wage Act nor its accompanying regulations
are preempted. Under at least one reasonable interpretation of
the Act and regulations, an interpretation the Agency is free to
adopt, the Act and regulations merely require that the Secretary
set a prevailing wage that consists of a cash component and may
include a benefits component. Employers must pay the cash
(..continued)
specification by a Massachusetts state authority, requiring
bidders to abide by a particular labor agreement, was not
preempted by the National Labor Relations Act, despite the
argument that the bid specification was a state intrusion into
labor-management relations, a regulatory realm preempted by the
federal government under the NLRA.
The Supreme Court rejected the preemption claim because
the state was acting "as a market participant with no interest in
setting policy," rather than in "a role that is
characteristically governmental." Id. at 1197. The Court
explained that when a state acts in the market place as an owner
and manager of property, it "is not subject to pre-emption by the
NLRA, because pre-emption doctrines apply only to state
regulation." Id. at 1196.
Were we to reach the merits of this novel argument, we
would have to begin by considering the differences between
preemption under the NLRA, which has no explicit preemption
provision, and preemption under ERISA, whose preemption clause is
expansive. We need not pursue the inquiry, however, because the
theory could not apply here in any event. In applying the
Prevailing Wage Act, Pennsylvania is clearly acting with an
"interest in setting policy," not as a proprietor. Id. at 1197.
The Prevailing Wage Act aims to ensure that workers receive
adequate wages, a governmental objective. Throughout its brief,
the state justifies its action in terms of its "right to
establish labor standards," which it calls a "traditional police
power." Brief for the Appellants at 14-15. It would be
difficult for the state to claim it is acting as a private market
participant when it is making rules that raise the cost of its
contracts.
component of the wage in cash, but they may pay the benefits
component either in benefits or cash. Any benefits they provide,
regardless of type, would count toward the benefits component.15
Under this interpretation, the Prevailing Wage Act and the
regulations do not control benefits, but rather require certain
wages to be paid.
The Act and regulations thus fall into the field
of state regulation of wages, which is one of those "areas of
traditional state regulation" that we "must presume that
Congress did not intend to pre-empt." Metropolitan Life Ins. Co.
v. Massachusetts, 471 U.S. 724, 740 (1985). That presumption is
rebuttable, however, for "to avoid being preempted, a state law
in addition to being an exercise of traditional police powers
must also affect the plan `in too tenuous, remote or peripheral a
manner to warrant a finding that the law "relates to" the plan.'"
Gilbert v. Burlington Indus., Inc., 765 F.2d 320, 327 (2d Cir.
1985) (quoting Shaw, 463 U.S. at 100 n.21), aff'd, 477 U.S. 901
15
. We read the Prevailing Wage Act as a statute that may
properly be implemented in a number of ways, so that in
overturning the Declaratory Order we need not invalidate the
Prevailing Wage Act itself or its regulations. We see nothing in
the Act or the regulations requiring that the benefits component
specify particular types of benefits and the amounts to be
contributed in each. The variety of official interpretations
given the Prevailing Wage Act at different times shows that the
Secretary and the Prevailing Wage Appeals Board also believe
line-item specification of benefits is but one of the approaches
at their disposal under the Act. See supra, note Error! Bookmark
not defined..
There may be other interpretations of the statute that
are not preempted. Because there is one such reasonable
interpretation, the Act and regulations themselves are not
preempted.
(1986). Nevertheless, the state law at issue here avoids
preemption because it does not impede the goals of ERISA and has
only incidental and insignificant relations to ERISA plans.
1. Direct relation
The Prevailing Wage Act and regulations lack any of the
three types of direct relations to ERISA plans described in
United Wire. See supra at 20. The Act and regulations are not
"specifically designed to affect employee benefit plans." United
Wire, 995 F.2d at 1192. The Act aims to protect workers on
public projects from substandard pay by requiring a minimum cash
wage that may be supplemented by either prevailing benefits or
their cash equivalent. Neither the Act nor its regulations
require that certain benefits plans be established, that certain
benefits be given, or that ERISA plans be administered in a
certain way.
The Act and regulations do not "single[] out [ERISA]
plans for special treatment," or even refer to such plans.
United Wire, 995 F.2d at 1192. Rather, they merely refer to
employee benefits, with no distinction between ERISA and non-
ERISA benefits. The Supreme Court has rejected the argument
"that ERISA forecloses virtually all state legislation regarding
employee benefits," and instead directs us to inquire whether the
state law "relates to" ERISA benefit plans. Fort Halifax, 482
U.S. at 7. While some of the benefits the Secretary is permitted
to count in calculating the prevailing wage will come from ERISA
plans,16 we do not believe ERISA requires a state to ignore the
existence of ERISA benefits when considering overall remuneration
to workers. The Court has allowed the inclusion or implication
of ERISA plans in generally valid state legislation. See, e.g.,
Mackey, 486 U.S. at 830-841 (approving garnishment law that would
apply to ERISA plan benefits as well as other assets of debtors);
Shaw, 463 U.S. at 106-08 (approving disability benefits
requirements that could be satisfied through ERISA plans).
Indeed, Mackey suggests that a law would be preempted if it
counted all remuneration to workers except benefits from ERISA
plans, for this would be special treatment.
Finally, although ERISA plans are within the scope of
the regulator's consideration under the Prevailing Wage Act, the
Act does not create a legislative scheme in which an ERISA plan
is so central that "the rights or restrictions [the law] creates
are predicated on the existence of such a plan." United Wire,
995 F.2d at 1192. An example of a law predicated on ERISA plans
16
. Indeed, one regulation gives examples of employee benefits
that include benefits which would come from ERISA plans, such as
"retirement and pension benefits." 34 Pa. Code § 9.102. While
the Supreme Court has held a statute's reference to ERISA plans
grounds for preemption, District of Columbia v. Greater
Washington Bd. of Trade, 113 S. Ct. 580 (1992), as discussed
below, that statute referred only to the ERISA plan as the basis
for the rights it accorded. But the listing of an ERISA plan
benefit as an example of the factors to be calculated into a
broader determination, such as a prevailing wage, is in and of
itself inconsequential. We have held that "[w]here, as here, a
reference to an ERISA plan can be excised without altering the
legal effect of a statute in any way, we believe the reference
should be regarded as without legal consequence for § 514(a)
purposes." United Wire, 995 F.2d at 1192 n.6.
was the statute in Greater Washington Bd. of Trade, 113 S. Ct. at
584, which required health coverage for injured employees on
workers' compensation to be equivalent to regular employees'
"existing health insurance coverage." Such coverage was, in
turn, "a welfare benefit plan under ERISA," so that injured
employees' rights were premised on the existence of ERISA plans.
Id. Similarly, in Ingersoll-Rand Co. v. McClendon, 498 U.S. 133,
139-140 (1990), the Court held ERISA preempted a state cause of
action in favor of an employee who alleged his employer
terminated him to avoid contributing to his pension plan, where
"the existence of a pension plan [was] a critical factor in
establishing liability."
In United Wire we set out a test to distinguish between
laws predicated on ERISA plans and laws that implicated such
plans in a nonessential manner. A New Jersey statute set
hospital rates for all payors, and included a surcharge to
compensate hospitals for their losses in providing care to
Medicare patients. While the dissent argued that New Jersey's
system for funding underreimbursed care would not be viable
without the participation of ERISA plans, United Wire, 995 F.2d
at 1199-1200 (Nygaard, J., dissenting), we stated:
[I]t is of no legal consequence if removing
ERISA plans from the scene would diminish the
likelihood that the statute would meet its
social goals. Rather, the test for
preemption in this regard is whether the
existence of ERISA plans is necessary for the
statute to be meaningfully applied.
Id. at 1192 n.6. Because the New Jersey law set standard rates
and surcharges for all payors, we held it could be meaningfully
applied in the absence of ERISA plans. Id.
In the absence of ERISA plans, the Prevailing Wage Act
could be meaningfully applied. The Act requires the Secretary to
measure prevailing benefits contributions in a locality for a
given class of worker. The Secretary would do so even if all of
these were non-ERISA benefits -- that is, benefits "payable on a
regular basis from the general assets of the employer,"
Massachusetts v. Morash, 490 U.S. 107, 116 (1989), and that
"create[] no need for an ongoing administrative program for
processing claims and paying benefits," Fort Halifax, 482 U.S.
at 12. Similarly, the statute would be "meaningfully applied" in
the absence of ERISA plans if a public works contractor satisfied
the benefits component of a given prevailing wage by making
contributions for non-ERISA benefits, or by paying the equivalent
in cash. Thus, no element of the Prevailing Wage Act is premised
on the existence of an ERISA plan.
2. Indirect relation
We next determine whether there is an indirect relation
to ERISA plans requiring preemption. "ERISA pre-empts any state
law that refers to or has a connection with covered benefit plans
(and that does not fall within a § 514(b) exception) `even if the
law is not specifically designed to affect such plans, or the
effect is only indirect,' and even if the law is `consistent with
ERISA's substantive requirements.'" Greater Washington Bd. of
Trade, 113 S. Ct. at 583 (citations omitted). ERISA preempts
laws that "dictate or restrict the choices of ERISA plans with
regard to their benefits, structure, reporting and
administration," or "impair the ability of a plan to function
simultaneously in a number of states." United Wire, 995 F.2d at
1193. Here, however, the only connections between ERISA plans
and the Act are "too tenuous, remote, or peripheral . . . to
warrant a finding that the law `relates to' the plan." Shaw,
463 U.S. at 100, n. 21.
State laws are preempted because they dictate or
restrict ERISA plans when, for example, they eliminate a method
of calculating benefits in ERISA plans that is permitted by
federal law, FMC Corp. v. Holliday, 498 U.S. 52 (1990) (state law
prohibiting ERISA plans from requiring reimbursement of benefits
from beneficiaries who recover in tort for the same expenses
preempted by ERISA); Alessi v. Raybestos-Manhattan, Inc., 451
U.S. 504 (1981) (state law prohibiting offset of workers'
compensation awards against retirement benefits preempted by
ERISA). A state cannot require an employer to contribute to
certain ERISA plans, Local Union 598 v. J.A. Jones Constr. Co.,
846 F.2d 1213 (9th Cir.) (state prevailing wage statute requiring
contributions to apprenticeship program, an ERISA plan,
preempted), aff'd 488 U.S. 881 (1988), or to provide certain
benefits through an ERISA plan, Standard Oil Co. v. Agsalud, 633
F.2d 760 (9th Cir. 1980) (Hawaii law requiring comprehensive
health benefits for all workers preempted), aff'd, 454 U.S. 801
(1981). One court has held that favoring one ERISA plan over
another through financial incentives is barred. National
Elevator Industry, Inc., 957 F.2d at 1559 (Oklahoma prevailing
wage law allowing reduced trainee wages only for participants in
certain ERISA training programs preempted).
a. Cash component
The primary restriction imposed by the Prevailing Wage
Act is that employers on public contracts pay the predetermined
prevailing minimum wage which, as we have described, has a cash
component and a benefits component. We will consider each
component in turn. The cash component fixes a minimum cash wage
that must be paid, regardless of benefits contributions. This
does not dictate or restrict the choices of ERISA plans, directly
or indirectly. Employers must pay the cash minimum, regardless
of what benefits they provide.
Appellees argue that the Prevailing Wage Act restricts
their choice of plan benefits and structure because employers are
not given credit for benefits contributions beyond the prevailing
benefits minimum. This, they say, makes it difficult for a
single plan "to function simultaneously in a number of states."
United Wire, 995 F.2d at 1193. Bell explains that it negotiates
uniform contracts with its workers in several states that may
award lower wages and higher benefits than those called for in
the prevailing minimum wage for a particular public works
project. In this case, Bell says it would be forced to continue
the benefits contributions it had agreed to in its national
contract, but also raise its wages on the public works project.
Ironically, the Appellees here are objecting to an
aspect of the Prevailing Wage Act that does not relate enough to
employee benefits and benefit plans for their taste. They would
like the level of cash wages required to be tied to the level of
benefits paid by an employer, but the state has chosen to fix the
cash wage component independent of benefits contributions. A
state law does not dictate or restrict the choices of ERISA plans
by having nothing to do with employee benefits.
The flaw in Appellees' objection is that it could be
raised even against a prevailing hourly cash wage law with no
benefits component. Such a law would create the same
"disincentive" against awarding benefits, because employers would
have to pay the wage no matter what level of benefits they
provided. We do not believe ERISA preempts such basic state wage
regulation. "The States have traditionally regulated the payment
of wages," and the Supreme Court has not found "any indication
that Congress intended such far-reaching consequences" as the
preemption of this sphere of state authority. Massachusetts v.
Morash, 490 U.S. at 119. See also 29 C.F.R. § 2510.3-1(b) (1993)
("employee welfare benefit plan" does not include "[p]ayment by
an employer of compensation on account of work performed by an
employee."). ERISA does not preempt cash wage requirements
unrelated to employee benefits, nor does it require the state to
encourage benefits contributions by reducing the minimum cash
wage where an employer makes large benefits contributions.17
17
. Through the benefits component, the state has in fact
extended employers the option of paying part of the minimum wage
through cash or benefits. As discussed below, we find this
permissible under Shaw, 463 U.S. 85. See infra at II(C)(2)(b).
The state is, however, under no obligation to offer employers
Plainly, a minimum cash wage requirement will impose an
additional cost on a Pennsylvania public works contractor which
would otherwise pay less than the minimum, and this cost, like
any other imposed on an employer, could influence its choices
regarding ERISA benefits contributions. But this could be said
of any wage regulation. For example, the Supreme Court upheld a
Massachusetts statute that required employers to pay employees
for all unused vacation time upon discharge, because the law was
an instance of wage regulation and did not relate to employee
benefit plans. Morash, 490 U.S. 107. And the Maine statute
upheld in Fort Halifax required employers to give a severance
payment of one week's salary for every year an employee had
worked in the event of a plant closing. 482 U.S. at 3-4. The
severance payment represented "a one-time obligation . . .
creat[ing] no need for an ongoing administrative program for
processing claims and paying benefits," and hence did not relate
to an ERISA plan. Id. at 12. Both laws constrained employers'
choices regarding wages and non-ERISA benefits, and could
indirectly affect their decisions as to what ERISA benefits to
offer employees. However, wage laws are among the "many forms of
state regulation under the police power which result in increases
in the cost of doing business," United Wire, 995 F.2d at 1196,
and this incidental effect does not create a preemptible relation
(..continued)
this choice, and may require all or, as here, part of a minimum
wage to be paid in cash.
to ERISA plans.18 ERISA's preemption clause aims "to ensure
18
. While state regulations may affect the cost of doing
business in a state, they may not, consistent with ERISA, place
administrative burdens and costs on ERISA plans that make it
impractical for an employer to provide a nationwide plan. Thus,
the Fort Halifax Court stated, "Faced with the difficulty or
impossibility of structuring administrative practices according
to a set of uniform guidelines, an employer may decide to reduce
benefits or simply not to pay them at all."). 482 U.S. at 13.
Similarly, the Holliday Court stated, "To require plan providers
to design their programs in an environment of differing state
regulations would complicate the administration of nationwide
plans, producing inefficiencies that employers might offset with
decreased benefits." 498 U.S. at 60.
State regulation may also be preempted for imposing
costs directly on core functions of ERISA plans. For example, in
E-Systems, Inc. v. Pogue, 929 F.2d 1100 (5th Cir. 1991), cert.
denied, 112 S. Ct. 585 (1991), the court held ERISA preempted a
state tax on fees for services to ERISA plans and benefits paid
by ERISA plans. The Second Circuit went farther in Travelers
Ins. Co. v. Cuomo, 14 F.3d 708 (2d Cir. 1993) (criticizing
Rebaldo v. Cuomo, 749 F.2d 133 (2d Cir. 1984), cert. denied, 472
U.S. 1008 (1985)), where it overturned a New York law that added
various surcharges to hospital bills of patients covered by
commercial insurance carriers and health maintenance
organizations. Because the surcharges imposed "a significant
economic burden on commercial insurers and HMOs," the court found
they had "an impermissible impact on ERISA plan structure and
administration." Id. at 721.
It is not clear whether Travelers Ins. directly
conflicts with United Wire. See Travelers Ins., 14 F.3d at 721
n.3 (arguing United Wire interprets preemption clause too
narrowly). Unlike the statute in Travelers Ins., the New Jersey
law in United Wire imposed a surcharge on all payors, not just
commercial insurers and HMOs, and gave discounts only for
"quantifiable economic benefits rendered to the institution or to
the health care delivery system taken as a whole." United Wire,
995 F.2d at 1189 (citation omitted). Thus, the law might more
legitimately be regarded as one of general application rather
than one specifically affecting ERISA plans; it may also have had
a less significant economic effect on such plans. As we stated
in United Wire, general legislation under a state's police power
may raise the cost of doing business for ERISA plans without
triggering preemption. But in any event, the Prevailing Wage Act
has a far less direct economic impact on ERISA plans than either
of the hospital rate laws: because in essence the Act imposes
only a wage requirement, it changes employers' wage costs, not
ERISA plan costs.
benefit plans will be governed by only a single set of
regulations," FMC Corp. v. Holliday, 498 U.S. 52, 60 (1990), not
to bestow on employers a uniform regulatory and economic
environment for all their activities across the country. Because
states enact their own wage and non-ERISA benefits regulations,
Morash, 490 U.S. 107; Fort Halifax, 482 U.S. 1; Shaw 463 U.S. 85,
collection laws, Mackey, 486 U.S. 825, and controls on hospital
charges, United Wire, 995 F.2d 1179, employers must adjust their
operations according to locale. This administrative and
financial burden arises from the "patchwork scheme" of our
federal system, a system whose "separate spheres of governmental
authority," Alessi, 451 U.S. at 522, were not preempted by ERISA.
b. Benefits component
Unlike the cash component, the benefits component of
the prevailing minimum wage plainly has some connection to
employee benefits, and thus to benefits plans, but we find no
grounds for preemption here, either. Contracts for public works
must either provide benefits contributions at the level
determined in the prevailing wage or the monetary equivalent
thereof. 34 Pa. Code § 9.106. Appellees suggest this provision
creates a preemptible relation to ERISA plans merely by providing
the option of complying with part of the minimum wage through
benefits contributions. We disagree. The provision does not
require or encourage an employer to provide certain benefits, to
alter the manner in which it provides benefits, or even to
provide any benefits at all. The benefits component only relates
to ERISA plans when an employer decides to satisfy it through
contributions to ERISA plans instead of cash payments or
contributions to non-ERISA benefits. Where a legal requirement
may be easily satisfied through means unconnected to ERISA plans,
and only relates to ERISA plans at the election of an employer,
it "affect[s] employee benefit plans in too tenuous, remote, or
peripheral a manner to warrant a finding that the law `relates
to' the plan." Shaw, 463 U.S. at 100 n.21.
We are guided by Shaw, where the Court held ERISA did
not preempt a New York law requiring employers to pay sick-leave
benefits to employees unable to work because of pregnancy.
Section 4(b)(3) of ERISA exempts from the statute any plan
"maintained solely for the purpose of complying with applicable .
. . disability insurance laws," 29 U.S.C. § 1003(b)(3); such
plans may therefore be regulated by the state. The Court held §
4(b)(3) only saved from preemption plans solely devoted to
disability benefits and did not exempt a plan that included
provisions for benefits subject to ERISA along with provisions
intended to comply with state disability laws. Id. at 106-07.
However, the Court held that because § 4(b)(3) allowed New York
to require employers to provide certain benefits in a non-ERISA
plan -- one solely devoted to disability benefits -- it could
also offer them the option of providing those benefits along with
non-disability benefits in an ERISA plan. Thus,
while the State may not require an employer
to alter its ERISA plan, it may force the
employer to choose between providing
disability benefits in a separately
administered plan and including the state-
mandated benefits in its ERISA plan. If the
State is not satisfied that the ERISA plan
comports with the requirements of its
disability insurance law, it may compel the
employer to maintain a separate plan that
does comply.
Id. at 108. The benefits component of the prevailing minimum
wage extends to employers a similar choice. A state requirement
that an employer pay a minimum cash wage does not relate to ERISA
plans. The benefits component represents a sum of money an
employer may pay either through cash wages or through benefits
contributions, some of which may be toward ERISA plans. To
paraphrase Shaw, if the state is not satisfied that the amount of
benefits contributions satisfies the total wage requirement, it
compels the employer to pay greater cash wages.
Thus, when Appellees complain the Prevailing Wage Act
impermissibly subjects their ERISA plans to different regulations
in Pennsylvania than elsewhere, they are speaking of a law
requiring only that when their benefits contributions fall short
of the prevailing minimum, they may make up the difference with
cash.19 Like the New York law in Shaw, the Prevailing Wage Act
is not preempted, because an employer may comply without making
any adjustment in its ERISA plans. Unless the employer chooses
otherwise, the benefits component imposes a cash wage
requirement, and it is of no consequence that this requirement is
particular to Pennsylvania public works projects -- as discussed
above, ERISA does not preempt a state's power to set a minimum
cash wage. See supra at II(C)(2)(a).
19
. They also admit they could simply decline to participate in
public works contracts.
Some of Appellees' objections are levelled at the line-
item approach to the Prevailing Wage Act, which was in effect for
all benefits before the Declaratory Order was issued, and
continued for non-ERISA benefits thereafter. We acknowledge this
would be a different case if the Act required line-item
specification in the benefits component.20 We believe a state
can set a minimum cash wage, and allow an employer the option of
paying part of that in benefits. We doubt, however, a state
could also specify that only particular benefits could be given
in lieu of cash payments without relating to ERISA plans, since
that would favor certain benefits plans over others.21 Line-item
specification would effectively create a cash incentive to award
the predetermined benefits and not others, and to award certain
amounts of those benefits and no more. As the Court of Appeals
for the Tenth Circuit said:
We accept, as a general proposition, the
state's right to regulate wages. But a wage
law that provides an option favoring certain
ERISA plans and benefits . . . over other
ERISA plans and benefits . . . is not a law
of "general application" and may be used to
effect change in the administration,
structure and benefits of an ERISA plan.
20
. See supra note Error! Bookmark not defined..
21
. For example, a predetermination for Common Heavy & Highway
Laborers reproduced in the joint appendix gives hourly prevailing
minimums for health and welfare benefits, pension benefits, and
education, but nothing for the other eight categories, such as
apprenticeship and training, vacation, or legal services. Under
the line-item approach, the contractor hiring a Common Highway
Laborer would get a wage offset by paying him up to $2.62 an hour
in health benefits, but no offset for health benefits beyond
that, and no offset for payments for apprenticeship and training.
National Elevator Indus., 957 F.2d at 1561 (holding ERISA
preempted an Oklahoma law that reduced the minimum wage for
employees only in a specified apprenticeship program, which was
an ERISA plan). Pursuant to its power to set minimum level of
remuneration to workers, a state may allow part of a minimum wage
to be satisfied by benefits contributions. But the state asserts
an additional power, the power to determine what benefits workers
should receive, when it gives preferred status to some benefits
over others in a minimum wage scheme. This power is not left to
the states under ERISA.22
c. Administration
Finally, we must consider whether the Prevailing Wage
Act and the accompanying regulations "dictate or restrict the
choices of ERISA plans with regard to their . . . reporting and
administration." United Wire, 995 F.2d at 1193. Administrative
simplicity is one of the purposes of ERISA, and "Congress
22
. Other courts have found states may not favor one benefits
plan, or one type of benefits plan, over another. In General
Electric Co. v. New York State Dep't of Labor, 891 F.2d 25 (2d
Cir. 1989), cert. denied, 496 U.S. 912 (1990), the court ruled
ERISA preempted New York's prevailing wage law, which required
benefits contributions in particular categories and amounts or
their cash equivalents. The court found the law objectionable
for a number of reasons, including the fact that the law
effectively prescribed "the type and amount of an employer's
contributions to a plan," and "the nature and amount of benefits
thereunder." Id., 891 F.2d at 29. (The General Electric court
also objected to the administrative burden imposed on employers
by the New York law. Id. It is not clear whether the court
would have found the law acceptable if line-item compliance in
the benefits package had not been required.) See also Local
Union 598 v. J.A. Jones Constr. Co., 846 F.2d 1213 (9th Cir.),
aff'd 488 U.S. 881 (1988) (discussed supra at 29).
intended pre-emption to afford employers the advantages of a
uniform set of administrative procedures governed by a single set
of regulations." Fort Halifax, 482 U.S. at 11. But state laws
are not necessarily preempted because they impose some
administrative burden on ERISA plans. The Mackey Court was not
moved by petitioners' argument that subjecting ERISA plans to
state law garnishment by creditors of plan participants would
also create "substantial administrative burdens and costs" when
"plan trustees are served with a garnishment summons, become
parties to a suit, and must respond and deposit the demanded
funds due the beneficiary-debtor." Mackey, 486 U.S. at 831. We
think preemption is not required where a state law places
administrative requirements on ERISA plans so slight that the law
"creates no impediment to an employer's adoption of a uniform
benefit administration scheme." Fort Halifax, 482 U.S. at 14.
See also Aetna Life Ins. Co. v. Borges, 869 F.2d 142, 146-47 (2d
Cir.) ("What triggers ERISA preemption is not just any indirect
effect on administrative procedures but rather an effect on the
primary administrative functions of benefit plans, such as
determining an employee's eligibility for a benefit and the
amount of that benefit."), cert. denied, 493 U.S. 811 (1989).
Here, the bulk of administrative burdens placed on
employers by the Prevailing Wage Act do not relate to ERISA plans
at all. The law requires that each contractor and subcontractor
"shall keep an accurate record showing the name, craft and the
actual hourly rate of wage paid to each workman employed by him
in connection with public work," that the record be preserved for
two years from the date of payment, and that it be open for
inspection. 43 P.S.A. § 165-6. The regulations expand on this,
requiring recording of personal information regarding the worker,
specification of the hours worked each day, and the preservation
of time cards and indentures and approvals regarding
apprenticeships. 34 Pa. Code § 9.109. None of these records
relates to employee benefit plans; rather, they are general
employment data a state would require even if it were merely
regulating cash wages.
Two minor administrative requirements are placed on
ERISA plans. Under current implementation of the Act, the state
must certify benefits as bona fide for them to count against the
prevailing minimum benefits contribution. This apparently
requires simply that the contributions actually be made to fringe
benefit programs and be held for or attributed to the exclusive
benefit of employees. See Bitzel Declaration, Bell App. at 393.
The other requirement is that employers keep a record of their
benefits contributions, and certify weekly to the officer
disbursing public funds that they have paid wages in conformity
with the contract, or indicate what wages remain unpaid.23 34
P.S.A. §§ 9.109, 9.110. We do not agree with amicus Chamber of
Commerce of the United States that this entails complex, on-going
measurements for each employee. Brief for Chamber of Commerce at
16-17. The memo from Field Inspection Supervisor Risaliti
23
. Presumably, "wages in strict conformity with the contract,"
34 P.S.A. § 9.110(a), include contributions for benefits.
indicates the Secretary approved a simple method for estimating
hourly benefits contributions where premiums are paid monthly:
the premium is divided by 160. Keystone App. at 80. We presume
simple formulae are available for calculating the hourly and
weekly value of benefits paid in other ways as well.
These records and reporting requirements entail only a
slight burden. Calculating benefits paid out will not influence
"decisions regarding the internal design and structure of benefit
plans (e.g. who may collect, and how, and from whom)," United
Wire, 995 F.2d at 1194 n.8, so the ease and efficiency of
administering nationwide benefits plans will not be impeded.
See also Minnesota Chapter, Assoc'd Builders v. Minnesota Dep't
of Labor and Industry, Civ. No. 4-92-564, slip op. at 7, (D.
Minn. April 27 1993) (Under Minnesota prevailing wage law, "[t]he
requirement of calculating [the cost of benefits] falls on the
employer itself, but does not place any administrative burden on
the plan. The requirement of calculating costs and keeping
records may somewhat increase the cost of the benefits plans, but
this incidental impact on the plan need not lead to
preemption."). We see no potential that the ability of plans to
operate in several states will be impaired by the administrative
requirements of the Prevailing Wage Act.
d. Conclusion
We acknowledge that at some point, the quantity of a
law's indirect effects on ERISA plans may require preemption.
For example, as we have explained, under a line-item approach the
Prevailing Wage Act would create incentives favoring some types
of benefits over others, even though it would still allow
employers to substitute cash for benefits, and this would appear
to exceed the state's authority under ERISA. A significant,
though indirect, economic effect on ERISA plans could also be
grounds for preemption -- for example, though a state may set a
minimum cash wage, if that minimum were so high that employers
could not practically provide any benefits, the law might well be
found to restrict the choices of ERISA plans. As we interpret
the Prevailing Wage Act, however, it neither encourages nor
constrains any particular kind of conduct towards ERISA plans,
nor does it cross the line from wage regulation to benefit
regulation -- rather, while imposing a cost on employers, as any
wage regulation will, the Act leaves employers free to structure
benefit plans as they wish.
Furthermore, the Act and regulations represent
reasonable exercises of a state's traditional power to regulate
wages. ERISA, and particularly the preemption clause, were
designed to ensure fairness and consistency in employee benefit
plans. We see no indication, however, that in enacting ERISA,
Congress expected it would require uniformity of wage regulation
among the states or that its preemption provision would
eviscerate state power to regulate wages.
III.
The Prevailing Wage Act and its accompanying
regulations do not relate to employee benefit plans in more than
a tenuous, remote, and peripheral manner. They do not refer to
ERISA plans. Rather, they establish a system of wage regulation
that neither burdens nor influences the benefits or structure of
employee benefit plans, nor does it interfere with the uniform
administration of such plans. "If a State creates no prospect of
conflict with a federal statute, there is no warrant for
disabling it from attempting to address uniquely local social and
economic problems." Fort Halifax, 482 U.S. at 19.
For these reasons, we will reverse the district court's
judgment to the extent it held the Prevailing Wage Act and
regulations preempted. Because the Declaratory Order singles out
ERISA plans for special treatment, however, we will affirm the
judgment of the district court that ERISA preempts the
Declaratory Order.