Idaho Building & Construction Trades Council, AFL-CIO v. Inland Pacific Chapter of Associated Builders & Contractors, Inc.

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IDAHO BUILDING AND No. 11-35985
CONSTRUCTION TRADES COUNCIL,
AFL-CIO; SOUTHWEST IDAHO D.C. No.
BUILDINGS AND CONSTRUCTION 1:11-cv-00253-
TRADES COUNCIL, AFL-CIO, BLW
Plaintiffs-Appellees,
v.
INLAND PACIFIC CHAPTER OF
ASSOCIATED BUILDERS AND
CONTRACTORS, INC.,
Applicant-in-Intervention–
Appellant,
v.
LAWRENCE G. WASDEN, in his
official capacity as Attorney General
of the State of Idaho; TIM MASON, in
his official capacity as Administrator
of the Division of Public Works,
Defendants-Appellees.
2 IDAHO BLD. & CONSTR. TRADES COUNCIL V.
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IDAHO BUILDING AND No. 12-35051
CONSTRUCTION TRADES COUNCIL,
AFL-CIO; SOUTHWEST IDAHO D.C. No.
BUILDINGS AND CONSTRUCTION 1:11-cv-00253-
TRADES COUNCIL, AFL-CIO, BLW
Plaintiffs-Appellees,
v. OPINION
LAWRENCE G. WASDEN, in his
official capacity as Attorney General
of the State of Idaho; TIM MASON, in
his official capacity as Administrator
of the Division of Public Works,
Defendants-Appellants.
Appeal from the United States District Court
for the District of Idaho
B. Lynn Winmill, Chief District Judge, Presiding
Argued May 6, 2013
Submitted September 16, 2015
Portland, Oregon
Filed September 16, 2015
Before: Stephen Reinhardt, Marsha S. Berzon,
and Andrew D. Hurwitz, Circuit Judges.
Opinion by Judge Berzon;
Concurrence by Judge Berzon
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SUMMARY*
Labor Law
Affirming in part and vacating in part the district court’s
summary judgment, the panel held that Idaho’s “Fairness in
Contracting Act” was preempted by the National Labor
Relations Act.
The Idaho Act banned “job targeting” or “market
recovery” programs under which construction unions collect
funds from workers they represent and use those funds to
subsidize bids by union contractors. Deferring to the
interpretation of the National Labor Relations Board, the
panel concluded that it was well settled that most of the
conduct prohibited by the Act was protected by the NLRA,
and thus that Garmon preemption applied. The panel held
that the Act’s prohibition against the use of job targeting
funds derived in part from wages earned on federal projects
governed by the Davis-Bacon Act was likely preempted by
Davis-Bacon itself. In addition, decisions of the NLRB made
clear that the distribution of funds derived in part from Davis-
Bacon wages was at least arguably protected by the NLRA,
and so preempted under Garmon.
Concurring, Judge Berzon wrote that, as explained in the
main opinion, the Idaho Act was not saved from NLRA
preemption by the line of precedent holding that collection of
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
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Davis-Bacon wages for job targeting programs violates the
Davis-Bacon Act. Judge Berzon wrote that those cases, and
in particular Int’l Bhd. of Elec. Workers, Local 357, AFL-CIO
v. Brock, 68 F.3d 1194 (9th Cir. 1995), were, in her view,
wrongly decided.
COUNSEL
Judd H. Lees (argued), Williams, Kastner & Gibbs PLLC,
Seattle, Washington, for Applicant-in-Intervention–
Appellant.
James M. Piotrowski (argued), Alan Herzfled, and Marty
Durand, Herzfeld & Piotrowski LLP, Boise, Idaho; Terry R.
Yelling, Victoria L. Bor, and Esmerelda Aguilar, Sherman,
Dunn, Cohen, Leifer & Yellig, P.C., Washington, D.C., for
Plaintiffs-Appellees.
Clay R. Smith, Deputy Attorney General (argued), Steven L.
Olsen, Chief of Civil Litigation, Brian P. Kane, Assistant
Chief Deputy Attorney General, and Lawrence G. Wasden,
Attorney General, Boise, Idaho, for Defendants-
Appellants/Defendants-Appellees.
Judd H. Lees (argued), Williams, Kastner & Gibbs PLLC,
Seattle, Washington; Maurice Baskin, Venable LLP,
Washington, D.C., for Amici Curiae Associated Builders and
Contractors, Inc. and Inland Pacific Chapter of the Associated
Builders and Contractors, Inc.
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William L. Messenger, National Right to Work Legal
Defense Foundation, Springfield, Virginia, for Amicus Curiae
National Right to Work Legal Defense Foundation.
OPINION
BERZON, Circuit Judge:
Idaho has banned “job targeting” or “market recovery”
programs. Construction unions have developed such
programs to increase their members’ access to work and stem
the long-term decline in the percentage of construction
workers represented by unions. Under such programs, a
union collects funds from workers it represents and then uses
those funds to subsidize bids by union contractors, allowing
the contractors to lower their labor costs and so more
effectively compete with non-union contractors. The
plaintiffs, two Idaho unions, brought suit to enjoin the statute
as preempted by the National Labor Relations Act (“NLRA”),
29 U.S.C. § 151 et seq. The district court preliminarily
enjoined Idaho’s statute and then granted summary judgment
to the unions.
It is well settled that most of the conduct prohibited by
Idaho’s statute is protected by the NLRA. As to the balance
of the prohibited conduct — namely, the use of job targeting
funds derived in part from wages earned on federal projects
governed by the Davis-Bacon Act, 40 U.S.C. § 3141 et seq.
— Idaho’s proposed enforcement of federal rules governing
wages on federal projects, including criminal penalties more
onerous than the federal statute’s own civil and
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administrative enforcement provisions, is likely preempted by
Davis-Bacon itself. In any event, the decisions of the
National Labor Relations Board (the “NLRB” or “Board”)
make clear that the distribution of funds derived in part from
Davis-Bacon wages is at least arguably protected by the
NLRA, and so preempted under one strain of NLRA
preemption law. We therefore affirm in relevant part.
I.
The Idaho “Fairness in Contracting Act” (“the Act”)
provides in relevant part that:
(2) No contractor or subcontractor may
directly or indirectly receive a wage subsidy,
bid supplement or rebate on behalf of its
employees, or provide the same to its
employees, the source of which is wages, dues
or assessments collected by or on behalf of
any labor organization(s), whether or not
labeled as dues or assessments.
(3) No labor organization may directly or
indirectly pay a wage subsidy or wage rebate
to its members in order to directly or
indirectly subsidize a contractor or
subcontractor, the source of which is wages,
dues or assessments collected by or on behalf
of its members, whether or not labeled as dues
or assessments.
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(4) It is illegal to use any fund financed by
wages collected by or on behalf of any labor
organization(s), whether or not labeled as
dues or assessments, to subsidize a contractor
or subcontractor doing business in the state of
Idaho.
Idaho Code § 44-2012(2)–(4). A violation of the Act is a
misdemeanor punishable by a fine of up to $10,000 for a first
violation, $25,000 for a second violation, and $100,000 for
each additional violation. Id. § 44-2012(5). The Act also
establishes a private cause of action available to a range of
parties, including any interested taxpayer, to civilly enforce
the Act. Id. § 44-2012(6).
The Act prohibits “job targeting” programs, also known
as “market recovery” programs. Unions have developed such
programs in the face of the dwindling share of the
construction market held by union contractors and the
associated decline in union membership in the construction
industry. The programs’ goal is to increase their members’
access to employment and spread the benefits of collectively-
bargained wages. See generally, Herbert R. Northrup &
Augustus T. White, Subsidizing Contractors to Gain
Employment: Construction Union “Job Targeting”,
17 Berkeley J. Emp. & Lab. L. 62 (1996).
The essentials of such job targeting programs are
straightforward. A union collects funds from workers,
generally a percentage of their wages, and then uses that
money to subsidize a union contractor’s payment of wages at
the collectively bargained rate on a project which the union
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has “targeted.” So, for example, a union might agree that a
union-affiliated contractor may submit a bid based on a
$15/hour pay rate to compete successfully against non-union
contractors on that particular project. If the contractor’s bid
is accepted, then the union will pay the difference between
the agreed-on rate and the normal union wage; in this
example, if the normal wage is $20/hour, the union would pay
$5/hour out of its job targeting fund. The result is that the
union-affiliated contractor is able to bid successfully on a
project that would otherwise go to a non-union contractor;
union members accordingly have access to the jobs on that
project, which would otherwise go to employees of non-union
companies; and the members working on those jobs are paid
the ordinary union rate, rather than the lower wage on which
the contractor based his bid.
The mechanics of job targeting programs vary, both in
how the funds are collected and how they are distributed.
Funds are typically collected by the contractor through a
mandatory or voluntary deduction from workers’ wages and
then deposited into a special job targeting fund controlled by
the union. See J.A. Croson Co., 359 N.L.R.B. No. 2,
2012 WL 5246914 (2012); Int’l Bhd. of Elec. Workers, Local
48, 332 N.L.R.B. 1492 (2000), modified 333 N.L.R.B. No.
122, enforced, 345 F.3d 1049 (9th Cir. 2003) (“Kingston
Constructors”). In some cases, however, workers pay the
funds directly to the union. See Int’l Bhd. of Elec. Workers,
Local 357 v. Brock, 68 F.3d 1194, 1201–02 (9th Cir. 1995).
As to distribution, the subsidy may be paid to the contractor,
with the contractor paying the worker the full union wage; or
the subsidy may be paid directly to the worker, with the
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contractor paying less than the ordinary union wage, and the
union’s payment making up the balance.1
II.
Before the Act went into effect, The Idaho Building and
Construction Trades Council, AFL-CIO, and Southwest Idaho
Building and Construction Trades Council, AFL-CIO
(collectively, the “Trades Councils”), brought this facial
challenge against the Attorney General of Idaho to enjoin its
enforcement.2 The district court granted a preliminary
injunction against the enforcement of the Act. The parties
then filed cross-motions for summary judgment.
The Inland Pacific Chapter of the Associated Builders and
Contractors, Inc. (“ABC”), which supported the Act’s
1
The latter practice was initially popular, but “made the union
responsible for fringe benefits, workers’ compensation, and other
supplements associated with wages and benefits, plus ‘an enormous
amount of paperwork for the union, as it had to keep track of each hour
worked by each member on a targeted job and then issue checks to each
as the work proceeded.’” White, supra at 71 (quoting Jack Metzgar,
“Buying the Job” Target Programs and the Elgin Plan, 1 Lab. Res. Rev.
51, 53 (1988)). “Now on targeted jobs, the common approach is for the
union to make a grant directly to the contractor who wins the job.” Id.
2
The Trades Councils also sought to enjoin another statute, the “Open
Access to Work Act,” Idaho Code § 44-2013. In the memorandum
disposition filed concurrently with this opinion, we hold that the unions
did not establish standing to challenge § 44-2013, vacate the district
court’s grant of summary judgment as to § 44-2013, and remand with
instructions to dismiss the portion of the Trades Councils’ complaint
challenging § 44-2013.
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passage in the legislature, sought to intervene as a defendant
in the summary judgment proceedings. The court denied the
motion to intervene but permitted ABC to appear as an
amicus curiae.
The district court granted summary judgment to the
Trades Councils and denied it to the Attorney General,
concluding that the Act was preempted by the NLRA. The
Attorney General timely appealed.3 After a limited remand
and supplemental briefing on jurisdictional issues not
pertinent to this portion of the appeal, the case was
resubmitted for disposition on the merits as to the Act.
III.
“Although the NLRA itself contains no express
pre-emption provision,” the Supreme Court has held that
“Congress implicitly mandated two types of pre-emption as
necessary to implement federal labor policy.” Chamber of
Commerce of U.S. v. Brown, 554 U.S. 60, 65 (2008). With
regard to the Act, the Trades Councils urge only one of those
two preemption strands: the theory articulated in San Diego
Building Trades Council, Millmen’s Union, Local 2020 v.
Garmon, 359 U.S. 236 (1959).4
3
ABC also timely appealed the court’s denial of its motion to intervene,
and the two appeals were consolidated. In the memorandum disposition
filed concurrently with this opinion, we affirm the district court’s decision
on the intervention issue.
4
The other major NLRA preemption theory is “known as Machinists
pre-emption” and “forbids both the . . . NLRB and States to regulate
conduct that Congress intended ‘be unregulated because left to be
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“Garmon pre-emption ‘is intended to preclude state
interference with the National Labor Relations Board’s
interpretation and active enforcement of the integrated
scheme of regulation established by the NLRA.’” Brown,
554 U.S. at 65 (quoting Golden State Transit Corp. v. City of
Los Angeles, 475 U.S. 608, 613 (1986)) (some internal
quotation marks omitted). “To this end, Garmon pre-emption
forbids States to ‘regulate activity that the NLRA protects,
prohibits, or arguably protects or prohibits.’” Id. (quoting
Wisc. Dep’t of Indus. v. Gould Inc., 475 U.S. 282, 286
(1986)).
To eliminate the “danger of conflict” and the “potential
frustration of national purposes,” Garmon provides that,
“[w]hen it is clear or may fairly be assumed that the activities
which a State purports to regulate are protected by § 7 of the
[NLRA], or constitute an unfair labor practice under § 8, due
regard for the federal enactment requires that state
jurisdiction must yield.” 359 U.S. at 244.5 The doctrine,
controlled by the free play of economic forces.’” Brown, 554 U.S. at 65
(quoting Lodge 76, Int’l Ass’n of Machinists v. Wisc. Emp’t Relations
Comm’n, 427 U.S. 132, 140 (1976)) (some internal quotation marks
omitted).
5
Section 7 of the NLRA provides, in relevant part, that “[e]mployees
shall have the right to self-organization, to form, join, or assist labor
organizations, to bargain collectively through representatives of their own
choosing, and to engage in other concerted activities for the purpose of
collective bargaining or other mutual aid or protection.” 29 U.S.C. § 157.
Section 8 defines as a prohibited “unfair labor practice,” inter alia, an
employer’s actions “to interfere with, restrain, or coerce employees in the
exercise of the rights guaranteed in section 157 of this title.” 29 U.S.C.
§ 158(a)(1).
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“based predominantly on the primary jurisdiction” of the
NLRB, was devised in light of “experience . . . that [various
alternative] methods sacrificed important federal interests in
a uniform law of labor relations centrally administered by an
expert agency without yielding anything in return by way of
predictability or ease of judicial application.” Lodge 76, Int’l
Ass’n of Machinists v. Wisc. Emp’t Relations Comm’n,
427 U.S. 132, 138–39 (1976) (quoting Amalgamated Ass’n of
Street, Elec. Ry. & Motor Coach Emps. v. Lockridge,
403 U.S. 274, 290–91 (1971)); see also Retail Prop. Tr. v.
United Bhd. of Carpenters & Joiners, 768 F.3d 938, 951 (9th
Cir. 2014).
With one notable exception addressed to the facial nature
of this challenge, the Attorney General does not contest that
the Act is Garmon preempted. With good reason. The
NLRB has repeatedly held that job targeting programs are
actually protected under § 7 of the NLRA. See J.A. Croson
Co., 2012 WL 5246914 at *5; Kingston Constructors,
332 N.L.R.B. at 1496–97; Assoc’d Builders & Contractors,
Inc., 331 N.L.R.B. 132, 137 (2000), modified as to remedy,
333 N.L.R.B. 955 (2001); Manno Elec., Inc., 321 N.L.R.B.
278, 298 (1996). Most recently, the Board reaffirmed its
earlier cases by explaining that “the objectives of job
targeting programs fall squarely within the ambit of Section
7 of the Act,” which “protects concerted employee activities
engaged in ‘for the purpose of collective bargaining or other
mutual aid or protection.’” J.A. Croson Co., 2012 WL
5246914 at *6 (quoting Eastex, Inc. v. NLRB, 437 U.S. 556,
565–66 (1978)).
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We “defer to the NLRB’s interpretation of the NLRA”
where, as here, “its interpretation is rational and consistent
with the statute.” SEIU, United Healthcare Workers-W. v.
NLRB, 574 F.3d 1213, 1214 (9th Cir. 2009) (internal
quotation marks omitted) (quoting UFCW, Local 1036 v.
NLRB, 307 F.3d 760, 766 (9th Cir. 2002)). The Board’s
interpretation of the NLRA on this score is eminently rational
and consistent with the statute. “It is settled that [§ 7’s]
protections encompass employee attempts ‘to improve terms
and conditions of employment’ with their employer as well
as attempts to otherwise ‘improve their lot . . . through
channels outside the immediate employee-employer
relationship.’” J.A. Croson Co., 2012 WL 5246914 at *6
(quoting Eastex, Inc., 437 U.S. at 565–66). As the Board has
explained:
The job targeting program is effectively a
union’s agreement with an employer to accept
a pay cut in order to avoid layoffs or expand
job opportunities for represented employees
— a bargain that surely lies at the heart of
activity protected by Section 7 of the Act. But
in the construction industry, an employer
often cannot guarantee that it can comply with
its end of such a bargain because it must
ordinarily bid for work through a competitive
process. A union might agree to a pay cut on
some jobs in order to secure its members
employment on others only to have the
employer fail to obtain the work. The job
targeting program solves that unique problem
by allowing the union to hold the wages
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donated by employees specifically for this
purpose until the employer secures the
additional work. The strategy of job targeting
to preserve and expand employment
opportunities for represented employees thus
plainly seeks to further legitimate goals under
Section 7.
Id. We agree with the Board that, as a general matter, job
targeting programs are a form of collective action aimed at
increasing opportunities for union members and so fall within
the scope of § 7.
While the Attorney General declines to offer a wholesale
defense of the Act, amici contend that the Act, in all its
applications, escapes preemption notwithstanding the
protections accorded by § 7 of the NLRA. We address, and
reject, these broad arguments before turning to the Attorney
General’s more limited contention.
ABC argues that the Act is saved from preemption by
§14(b) of the NLRA, 29 U.S.C. § 164(b). Section 14(b)
provides that,“Nothing in this subchapter shall be construed
as authorizing the execution or application of agreements
requiring membership in a labor organization as a condition
of employment in any State or Territory in which such
execution or application is prohibited by State or Territorial
law.” Id. Section 14(b) thus allows states to enact bans on
certain agreements between unions and employers — ones
requiring membership in labor organizations as a condition of
employment. See Oil, Chem. & Atomic Workers Int’l Union
v. Mobil Oil Corp., 426 U.S. 407, 409 & nn.1 & 2, 416–17
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(1976). Idaho has enacted such a law. Idaho Code § 44-
2003(2).
Idaho codified the Fairness in Contracting Act under the
heading “Right to Work,” see Idaho Code §§ 44-2001 et seq.,
alongside § 44-2003(2), a provision that bans precisely the
types of agreements covered by §14(b). Consequently, ABC
contends, the Act is blessed by § 14(b) and freed from
preemption.
ABC overreads the scope of § 14(b), which “does not
protect a state statute which is so broadly stated or
construed.” NLRB v. Tom Joyce Floors, Inc., 353 F.2d 768,
770 (9th Cir. 1965). Section 14(b) refers only to certain
labor-management agreements — those requiring
membership in a labor organization. As the Supreme Court
has made clear, § 14(b) does not allow states to ban
agreements other than those described in the statute: “There
is nothing in either § 14(b)’s language or legislative history
to suggest that there may be applications of right-to-work
laws which are not encompassed under § 14(b) but which are
nonetheless permissible.” Oil, Chem. & Atomic Workers,
426 U.S. at 413 n.7. Because no agreement of the sort
specifically covered by § 14(b) is at issue in this case, and
because Ҥ 14(b) should not be read as granting states . . .
general power to supplant federal labor law,” NLRB v. Pueblo
of San Juan, 276 F.3d 1186, 1200 (10th Cir. 2002), we
conclude that § 14(b) has no bearing on this case.
We likewise reject the argument of a second amicus, the
National Right to Work Legal Defense Foundation (“RTW”),
that the Act escapes preemption because it is simply a
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regulation of the “monies and substantive benefits that may
be exchanged between employers and employees.”
For one thing, RTW’s argument is not responsive to the
kind of preemption at issue in this case, namely Garmon
preemption. Under a Machinists analysis, see supra note 4,
the NLRA does not ordinarily preempt state laws of general
applicability governing the “particular substantive terms” that
might be the subject of collective bargaining. Metro. Life Ins.
Co. v. Massachusetts, 471 U.S. 724, 753 (1985). Thus, for
example, the Court has upheld state statutes of general
applicability establishing minimum labor standards. See id.
at 755; Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 19–23
& n.15 (1987); see also Assoc. Builders & Contractors of S.
Cal., Inc. v. Nunn, 356 F.3d 979, 989 (9th Cir.) (noting that
“state minimum benefit protections have repeatedly survived
Machinists preemption challenges”) (quoting Nat’l Broad.
Co. v. Bradshaw, 70 F.3d 69, 71 (9th Cir. 1995) (internal
quotation marks omitted))), amended by, 2004 WL 292128
(9th Cir. 2004). Garmon preemption is an entirely distinct
doctrine, however, focused mainly on protecting the NLRB’s
primary jurisdiction. If in particular circumstances the
application of such general labor standards would be actually
or arguably protected or prohibited, the Metropolitan Life line
of cases does not preclude Garmon preemption.
Moreover, the Act is completely unlike the even-handed
requirements permitted in the cases upon which RTW relies.
It does not establish a rule regarding substantive protections
for employees generally, union and nonunion. Instead, it
facially singles out unions, seeking to ban a particular
strategy they employ “to avoid layoffs or expand job
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opportunities for represented employees.” J.A. Croson Co.,
2012 WL 5246914 at *6. That the unions’ strategy for
effectuating their “legitimate goals under Section 7” of the
NLRA, id., happens to involve, in some instances, providing
higher wages and benefits to employees than would otherwise
be the case, is of no import. Because “the objectives of job
targeting programs fall squarely within the ambit of Section
7,” id., the Act cannot escape preemption as a purportedly
even-handed wage regulation.
IV.
We arrive at the crux of this case. The Attorney General
contends that this facial challenge must fail, even though the
Act is largely preempted, because it is not entirely so. There
are some legitimate applications of the Act, he contends,
because the NLRA does not actually or arguably protect job
targeting programs funded through wages paid on jobs
subject to the requirements of the Davis-Bacon Act,
40 U.S.C. § 3141 et seq.6 Because, he argues, the Trades
Councils cannot establish “that no set of circumstances exists
under which the Act would be valid,” United States v.
Salerno, 481 U.S. 739, 745 (1987), the Act is facially valid.
The parties agree that we should apply the Salerno
standard.7 Applying it, without deciding whether it is the
6
Davis-Bacon was previously codified at 40 U.S.C. § 276a et seq.
7
See Sprint Telephony PCS, L.P. v. Cnty. of San Diego, 543 F.3d 571,
579 & n.3 (9th Cir. 2008) (en banc); but see United States v. Arizona,
641 F.3d 339, 345 n.3 (9th Cir. 2011), aff’d in part, rev’d in part, 132 S.
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proper standard, we conclude that the Act is facially invalid
because it is preempted by the NLRA.
A.
The Davis-Bacon Act requires that the bid specifications
for certain federal public-works projects provide that workers
be paid at least the “prevailing wage,” as determined by the
Secretary of Labor, for similar work in the relevant state.
40 U.S.C. § 3142(a)–(b). The Act further provides that:
the contractor or subcontractor shall pay all
mechanics and laborers employed directly on
the site of the work, unconditionally and at
least once a week, and without subsequent
deduction or rebate on any account, the full
amounts accrued at time of payment,
computed at wage rates not less than those
stated in the advertised specifications,
regardless of any contractual relationship
which may be alleged to exist between the
contractor or subcontractor and the laborers
and mechanics.
Id. § 3142(c)(1). “The Davis-Bacon Act was intended as a
general prohibition or command to a federal agency to require
minimum wage stipulations for federal government work
contracts.” Operating Eng’rs Health & Welfare Trust Fund
v. JWJ Contracting Co., 135 F.3d 671, 676 (9th Cir. 1998)
Ct. 2492 (2012); see also City of Los Angeles v. Patel, 135 S. Ct. 2443,
2451 (2015).
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(internal quotation marks omitted); see also Univs. Research
Ass’n, Inc. v. Coutu, 450 U.S. 754, 771–72 (1981). The
Department of Labor (“DOL”) regulations promulgated to
effectuate Davis-Bacon provide that some deductions from
the wages due the employees, such as those made for
purposes of income tax withholding or as contributions to a
retirement account, are permissible. 29 C.F.R. § 3.5.8
Deductions not specifically permitted are prohibited.
29 C.F.R. § 3.9.
Several cases have held that collecting funds for job
targeting programs from wages earned on Davis-Bacon jobs
violates the Davis-Bacon Act. See Brock, 68 F.3d at 1201; In
re Bldg. & Constr. Trades Unions Job Targeting Programs,
Case No. 90-02, 1991 WL 494718 (Wage App. Bd. June 13,
1991) (“Building Trades”), aff’d sub nom. Bldg. & Const.
Trades Dep’t v. Reich, 40 F.3d 1275, 1277 (D.C. Cir. 1994).9
The Attorney General leans on this line of authority,
arguing that it establishes that job targeting programs are
8
The regulations also allow certain deductions with the permission of
the Secretary of Labor. 29 C.F.R. § 3.6.
9
Building Trades was decided by the Wage Appeal Board, which DOL
replaced with the Administrative Review Board in 1996. Establishment
of the Administrative Review Board, 61 Fed. Reg. 19982-01, 19982 (May
3, 1996). Under current regulations, the Secretary of Labor has delegated
to the Administrative Review Board the authority “to hear and decide in
its discretion appeals concerning questions of law and fact” regarding,
among other things, “[w]age determinations issued under the Davis-Bacon
Act.” 29 C.F.R. § 7.1(b). We refer to both boards, and the department
itself, as “DOL.”
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generally illegal under Davis-Bacon and therefore are not
arguably protected under § 7 of the NLRA. We disagree for
two reasons. First, the only applications of the statute which
the Attorney General defends are those that amount, in
essence, to state enforcement, with criminal sanctions, of
Davis-Bacon; any such enforcement would most likely be
preempted by Davis-Bacon itself, and so cannot qualify as a
“set of circumstances . . . under which the Act would be
valid.” Salerno, 481 U.S. at 745. Second, in any event, the
NLRB’s precedents regarding job targeting programs and
Davis-Bacon establish that the conduct at issue is at least
arguably protected by the NLRA.
B.
Davis-Bacon governs wages on federal public works
contracts. The application of Idaho’s statute to situations in
which Davis-Bacon wages are involved, because the use of
Davis-Bacon wages for such programs is purportedly in
violation of the Davis-Bacon Act, would amount to the
enforcement of the federal Davis-Bacon Act by the State of
Idaho. Idaho can, however, point to no legitimate state
interest in enforcing the federal government’s wage rules with
regard to federal projects and contracts.
Rather, it is for the federal government (and, at least in
some situations, the affected workers) to decide if, when, and
how to enforce the provisions of Davis-Bacon. To that end,
the Davis-Bacon Act provides for civil and administrative
remedies against contractors that violate the its provisions.
So, for example, each contract governed by Davis-Bacon
must provide that, upon discovering a Davis-Bacon wage
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violation, “the Federal Government . . . may terminate the
contractor’s right to proceed with the work or the part of the
work as to which there has been a failure to pay the required
wages,” and the contractor and its sureties are liable for extra
costs the government thereby incurs. 40 U.S.C. § 3143.
Likewise, the Davis-Bacon Act establishes a list of persons
who have “disregarded their obligations to employees and
subcontractors,” and are therefore barred from receiving
federal contracts for three years. Id. § 3144(b). DOL’s
regulations also provide for administrative enforcement of the
Davis-Bacon Act. See, e.g., 29 C.F.R. §§ 5.6, 5.7, 5.9, 5.11,
5.12.
Federal law does not establish criminal penalties for
violations of Davis-Bacon. See United States v. Clark,
787 F.3d 451, 458 (7th Cir. 2015) (noting, in case involving
charges of making false statements, that “Davis-Bacon Act
violations are not themselves criminal”). The Copeland Act,
18 U.S.C. § 874, provides criminal penalties for conduct
related to Davis-Bacon — but only for “forcing employees to
‘kickback’ wages to their employer.” Brock, 68 F.3d at 1198
(emphasis added); see also Reich, 40 F.3d at 1279. Davis-
Bacon, by contrast, prohibits “a broader array of practices[,]
including but not limited to kickbacks.” Brock, 68 F.3d at
1199. There is no criminal penalty for violations of that
broader range of conduct proscribed by Davis-Bacon.
The Attorney General’s proposed application of the Act
would amount to state enforcement of a federal statute
governing the federal government’s proprietary affairs. In
other words, the Act “adds a state-law penalty for conduct
proscribed by federal law.” Arizona v. United States, 132 S.
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Ct. 2492, 2501 (2012). Further, the penalty Idaho seeks to
impose — a misdemeanor criminal conviction resulting in
fines of up to $100,000 per violation, Idaho Code § 44-
2012(5) — goes far beyond the civil and administrative
responses provided by federal law. Not only does the state of
Idaho propose to enforce a statute which it has no business
enforcing, but it seeks to do so with criminal penalties far
more severe than the non-criminal remedies of federal law.
In this respect, the Attorney General’s proposed
application of the Act is reminiscent of the state criminal
penalty for failure to register as a noncitizen held preempted
by the Supreme Court in Arizona. Here, as in Arizona, “[t]he
federal statutory directives provide a full set of standards . . . ,
including the punishment for noncompliance,” such that
“even complementary state regulation is impermissible.”
132 S. Ct. at 2502. “If [the Act] were valid, every State could
give itself independent authority to prosecute federal [Davis-
Bacon] violations, ‘diminish[ing] the [Federal Government]’s
control over enforcement’ and ‘detract[ing] from the
integrated scheme of regulation created by Congress.’” Id.
(some alterations in original) (quoting Gould, 475 U.S. at
288–89) (some internal quotation marks omitted) .
Indeed, “[w]ere [the Act] to come into force, the State
would have the power to bring criminal charges against
individuals for violating a federal law even in circumstances
where federal officials in charge of the comprehensive
scheme determine that [enforcement] would frustrate federal
policies.” Id. at 2503. DOL certainly has discretion to
determine which Davis-Bacon violations it pursues for
enforcement, and has specifically indicated that it “would not
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take exception” to certain job targeting programs. Brock,
68 F.3d at 1202 n.6 (quoting a letter from the Administrator
of DOL Wage and Hour Division) (internal quotation marks
omitted). The Act, however, would prohibit and penalize the
very programs as to which DOL has decided not to pursue
enforcement. Moreover, “[e]ven where federal authorities
believe [enforcement] is appropriate, there is an inconsistency
between [the Act] and federal law with respect to penalties,”
as the former provides for large criminal fines while the latter
does not. Arizona, 132 S. Ct. at 2503.
We need not decide any precise contours regarding the
scope of Davis-Bacon preemption. Suffice it to say that the
applications of the Act on which the Attorney General relies
would most likely be preempted by Davis-Bacon. We
therefore cannot agree that they amount to a “set of
circumstances . . . under which the Act would be valid.”
Salerno, 481 U.S. at 745.
C.
Moreover, even restricting our inquiry to the NLRA itself,
we conclude that the Act is wholly preempted. The question
presented by the Attorney General’s argument is whether “the
NLRA . . . arguably protects” the job targeting programs
banned by the Act if those programs are funded in part from
wages earned on Davis-Bacon jobs. Brown, 554 U.S. at 65
(internal quotation marks omitted). If such programs are
arguably protected, then Idaho “must defer to the exclusive
competence of the [NLRB] if the danger of state interference
with national policy is to be averted.” Garmon, 359 U.S. at
245. To prevail, “a party asserting pre-emption” under
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Garmon’s “arguably” standard need only “advance an
interpretation of the Act that is not plainly contrary to its
language and that has not been ‘authoritatively rejected’ by
the courts or the Board.” Int’l Longshoremen’s Ass’n v.
Davis, 476 U.S. 380, 395 (1986) (quoting Marine Eng’rs v.
Interlake S.S. Co., 370 U.S. 173, 184 (1962)).10
Because Garmon preemption turns on what the NLRA
actually or arguably requires (or prohibits), we do not look,
in the first instance, to authority interpreting Davis-Bacon,
such as that cited by the Attorney General. Instead, we look
principally to the decisions of the NLRB to decide whether
Garmon preemption applies.
Job training programs involve two components: funds are
collected, in a variety of ways, from workers’ wages, and
funds are then distributed, also in various ways, to subsidize
union wages on targeted projects. The NLRB has held that,
because “requiring the payment of [job targeting] dues as a
condition of employment on Davis-Bacon projects” violates
Davis-Bacon, such collection of funds “is inimical to public
policy.” Kingston Constructors, 332 N.L.R.B. at 1500.11
10
In cases, unlike this one, involving the potential application of the Act
to specific factual situations, the party asserting preemption “must then put
forth enough evidence to enable the court to find that the Board reasonably
could uphold a claim based on such an interpretation.” Davis, 476 U.S.
at 395.
11
The Supreme Court has observed that the NLRB must, at times,
accommodate federal statutes beyond the NLRA. “Frequently the entire
scope of Congressional purpose calls for careful accommodation of one
statutory scheme to another, and it is not too much to demand of an
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Therefore, Kingston Constructors concluded, the union at
issue in that case could not lawfully require its members to
pay the challenged job targeting dues.
But the Idaho Act at issue in this case does not address
itself to a union’s collection of funds. Rather, the Act
prohibits contractors from “receiv[ing] a wage subsidy, bid
supplement or rebate”; prohibits unions from “pay[ing] a
wage subsidy or wage rebate”; and prohibits, generally, the
“use” of funds collected by or on behalf of a union “to
subsidize a contractor or subcontractor.” Idaho Code
§ 44-2012(2)–(4) (emphasis added). The Act stipulates that
all such actions are prohibited only with regard to funds “the
source of which is wages, dues or assessments collected by or
on behalf of any labor organization(s).” Idaho Code
§ 44-2012(2). Still, the actions prohibited by the Act are the
distribution of funds, not their collection.
No NLRB case has held collective action by employees
to subsidize wages on non-Davis-Bacon jobs by distributing
funds to the workers or employers on those jobs is not
protected concerted activity under § 7 because of the source
of those funds. As to distribution of funds derived from
Davis-Bacon wages, the NLRB, far from holding that the use
of funds collected from Davis-Bacon wages is unprotected
under § 7 of the NLRA once held that use protected in some
administrative body that it undertake this accommodation without
excessive emphasis upon its immediate task.” S. S.S. Co. v. NLRB,
316 U.S. 31, 47 (1942); see also Hoffman Plastic Compounds, Inc. v.
NLRB, 535 U.S. 137, 142–44 (2002).
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circumstances and, more recently, has specifically reserved
the question.
In Re Can-Am Plumbing, Inc., 335 N.L.R.B. 1217, 1217
(2001) (“Can-Am I”), petition granted, 321 F.3d 145 (D.C.
Cir. 2003) (“Can-Am II”), held that “prosecut[ing] a state
court lawsuit against [a] competitor employer . . . for
accepting job targeting program funds” from a union was an
unfair labor practice under § 8, because the program itself
was protected under § 7. That was so despite “[t]he Board’s
recent holding in Kingston Constructors that unions may not
lawfully exact dues from employees working on Davis-Bacon
projects to support job targeting programs.” Id. (citation
omitted). Can-Am I went on to explain that the targeted job
was not a Davis-Bacon project and that the challenged
contractor had never worked on a Davis-Bacon project. Id.
Furthermore, the NLRB noted, only 2–3% of the union’s job
targeting funds came from federal or state prevailing-wage
jobs. Id. In sum, Can-Am I held the distribution of those
funds actually protected under the NLRA, despite the fact that
some small portion of them was apparently derived from
Davis-Bacon wages.
The D.C. Circuit granted a petition for review of Can-Am
and remanded the matter back to the NLRB. Can-Am II,
321 F.3d at 147. Can-Am had offered essentially the same
argument urged by the Attorney General in this case,
“contend[ing] that because the [NLRA] does not protect [job
targeting programs] that offend public policy, and the
Union’s [program] is contrary to both federal and state
Davis-Bacon laws, Can-Am’s lawsuit is not preempted under
Garmon.” Id. at 151. After examining at length the cases
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regarding the collection of funds on Davis-Bacon jobs,
Can-Am II held that “[t]he Board’s conclusory findings that
these moneys did not taint the job targeting program are
inadequate to support its determination that the operation of
the program as a whole was protected conduct under section
7.” Id. at 147. The court noted, specifically, that the NLRB
did not “explain why the Davis-Bacon moneys did not affect
the [job targeting program’s] legality or why the Union’s
conduct in that regard was excusable,” and went on to
observe that “[n]o court or administrative decision of the
Board has yet defined precisely how much Davis-Bacon
money may flow into a [job targeting program] before the
program violates public policy.” Id. at 153. Can-Am II
therefore remanded the matter for further consideration,
noting that, after accepting additional evidence, “the Board on
remand may yet determine that the [job targeting program] is
protected under section 7.” Id. at 154.
On remand, the NLRB determined that Can-Am had
waived the remanded issue by not previously contending that
the inclusion of monies derived from Davis-Bacon wages
rendered the program unprotected. Can-Am Plumbing, Inc.,
350 N.L.R.B. 947, 949 (2007) (“Can-Am III”). In the
process, the Board provided an important gloss on its earlier
decision:
Of course, [the Board’s prior discussion of the
inclusion of a small amount of Davis-Bacon
wages in the job targeting program at issue in
that case] should not be interpreted to mean
that the inclusion of contributions from wages
earned on Davis-Bacon projects would be
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unlawful. The Board has not ruled on that
question and it is not raised here.
Id. (emphasis added). The Board quite pointedly, then, left
the issue presented in this case open.
The NLRB has not revisited the matter since the Can-Am
Plumbing litigation. The closest it has come was J.A. Croson
Co., 2012 WL 5246914. Contrary to the Attorney General’s
suggestion, that case did nothing to undermine the arguable
protection of the conduct regulated by the Act, and indeed
underscored it.12
Croson, a non-union contractor, sued J.A. Guy, Inc., a
union contractor, in Ohio state court, alleging that Guy’s
deduction of a job targeting assessment from its employees’
wages violated Ohio’s statutes and regulations requiring
prevailing wages on public works projects, a type of law
12
The Supreme Court has held that two of the four Board members who
decided J.A. Croson Co., Members Griffin and Block, were not validly
appointed by the President. NLRB v. Noel Canning, 134 S. Ct. 2550,
2557, 2578 (2014). Although J.A. Croson Co. was extensively discussed
in the parties’ briefing, no party in this case has raised the precedential
viability of J.A. Croson Co. in light of Noel Canning. In any event, the
principal significance of J.A. Croson Co. to this case is the light it sheds
on whether the conduct proscribed by the Act is arguably protected.
Whether J.A. Croson Co. remains good law, or is only a non-authoritative
statement from two Board members and two putative Board members,
does not much matter for the purposes of deciding whether distribution of
job targeting funds derived in part from Davis-Bacon wages — a matter
that, as we shall explain, was not at issue in J.A. Croson Co. — is
arguably protected. With this caveat, we refer to the decision in J.A.
Croson Co. as the opinion of the NLRB.
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known as a “Little Davis-Bacon.” Id. at *2. The Ohio
Supreme Court held the lawsuit preempted by the NLRA.
J.A. Croson Co. v. J.A. Guy, Inc., 691 N.E.2d 655, 665 (Ohio
1998). Guy then filed a charge with the NLRB, alleging that
Croson’s maintenance of the suit was prohibited by § 8
because the job targeting program was protected by § 7. J.A.
Croson Co., 2012 WL 5246914 at *4. The NLRB held that,
despite a determination from the Ohio Department of
Industrial Relations that Guy had violated the Little Davis-
Bacon statute, the job targeting program was actually
protected and so the suit was an unfair labor practice. Id. at
*5, 6.
The Board took pains to emphasize that no federal Davis-
Bacon issue was presented in J.A. Croson Co. See id. at *8;
see also id. at *7 n.20. But the Attorney General suggests
that, by seizing on the federal-state distinction in J.A. Croson
Co., the NLRB indicated that such programs are protected
when only state wages are involved and are not protected
when federal Davis-Bacon wages are used.
We do not read J.A. Croson Co. that way. In that case, as
in Kingston Constructors, the underlying conduct was the
collection of funds. See id. at *2, 7–8; see also id. at *18 n.7
(Member Hayes, dissenting). And, as we have already
explained, Kingston Constructors held, in deference to the
DOL and two circuit courts, that the collection of such funds
from federal Davis-Bacon wages was inimical to public
policy. It therefore makes sense that J.A. Croson Co. would
distinguish between federal and state funds in determining
whether the collection of monies for job targeting programs
is protected. J.A. Croson Co. did not decide the question
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reserved in Can-Am III, namely whether the distribution of
those funds is protected.
Moreover, J.A. Croson Co. suggests that, if the issue were
squarely presented, the NLRB might hold the payment of
funds derived from Davis-Bacon wages actually protected
under § 7. First, the NLRB notably took the “opportunity”
afforded by J.A. Croson Co. to reiterate yet again that job
targeting programs are generally protected by the NLRA, and
gave its most full-throated defense to date of the protected
nature of such programs in general. Id. at *6.
Second, J.A. Croson Co. emphasized the extent to which
Kingston Constructors was, with regard to Davis-Bacon,
based on deference to the DOL. See id. at *7.13 We read J.A.
13
It is doubtful that the DOL would have the authority directly to
regulate the distribution of funds derived from Davis-Bacon wages to
contractors not working on Davis-Bacon jobs. Cf. Reich, 40 F.3d at 1288
(Edwards, C.J., dissenting) (noting that “[e]ven the Labor Department’s
Wage and Hour Administrator admits that wage deductions on [non-
Davis-Bacon] projects are beyond the scope of the Department’s
authority”). Neither the Davis-Bacon Act nor the associated regulations
mention such distribution. Cf. Building Trades, 1991 WL 494718 at *5–6.
Some of the opinions we have discussed include broad language which
can be read to suggest that distribution of funds derived from Davis-Bacon
wages to non-Davis-Bacon contractors might be a violation of the Davis-
Bacon Act. See Brock, 68 F.3d at 1201; Reich, 40 F.3d at 1280; Building
Trades, 1991 WL 494718, at *6. As noted, however, the distribution of
funds was not the issue in any of those cases. Furthermore, insofar as
such broad statements indicate concern about the potential job targeting
programs have for warping future prevailing wage determinations, we note
that the method by which the DOL determines the prevailing wage is not
prescribed in the Davis-Bacon Act. Nothing in Davis-Bacon precludes
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Croson’s emphasis on the role of deference in Kingston
Constructors as an indication that, were the issue in this case
presented to the NLRB, it might well hold the distribution of
job targeting funds, even if some were derived from Davis-
Bacon wages, is protected as a form of employee concerted
activity not in violation of any public policy firmly
established by another statute.
In asserting Garmon preemption, the Trades Councils
bear the burden “to demonstrate that [this issue] is one that
the Board could legally decide in [their] favor.” Davis,
476 U.S. at 395. This is not a demanding standard; the
Trades Councils need not, for example, show that the Board
will or is even likely to ultimately agree with their position.
Rather, they need only “advance an interpretation of the
[NLRA] that is not plainly contrary to its language and that
has not been authoritatively rejected by the courts or the
Board.” Id. (internal quotation marks omitted).
The Trades Councils have met this burden. The NLRB’s
decisions in the Can-Am litigation, as well as its recent
discussion in J.A. Croson Co., convince us that the Trades
Councils’ interpretation of § 7, as protecting the distribution
of funds contributed to job targeting programs when some of
the contributions are traceable to wages employers earned on
Davis-Bacon covered projects, is, at the very least, arguable.
DOL from requiring disclosure of data on job targeting spending, to
ensure that future prevailing wage determinations are accurate.
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V.
The Attorney General and ABC contend that, even if the
use of funds derived from Davis-Bacon wages is arguably
protected, preemption is nonetheless inappropriate. Their
arguments are meritless.
ABC argues that the Act escapes preemption because
“there is a sufficiently deeply rooted state interest in
proscribing the collection and use of employee monies to
undermine free and fair competition,” as evidenced by
Idaho’s expansive right-to-work legislation. Garmon’s
exception for cases in which “the regulated conduct touche[s]
interests . . . deeply rooted in local feeling and
responsibility,” 359 U.S. at 244, does not, however, extend to
local interests in labor policy, except to the extent permitted
by § 14(b). On the contrary, the NLRA “replaced” local
labor policy with “an unequivocal national declaration of
policy establishing the legitimacy of labor unionization and
encouraging the practice of collective bargaining.” Sears,
Roebuck & Co. v. San Diego Cnty. Dist. Council of
Carpenters, 436 U.S. 180, 190 (1978). No matter how deeply
rooted in local feeling Idaho’s views on labor relations may
be, they do not for that reason escape preemption.
Moreover, the notably federal nature of the state’s
purported interest is also relevant with regard to ABC’s
argument. A purported state interest in banning job targeting
distributions because they include funds derived from Davis-
Bacon wages earned on federally funded projects, is not a
“significant state interest.” Id. at 196 (emphasis added).
Rather, as we have explained, such an interest would be
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purely federal, and therefore could not warrant an exception
to otherwise-applicable Garmon preemption.
We likewise are unpersuaded by the Attorney General’s
contention that the Trades Councils’ argument for § 7
protection as to programs which include funds derived from
Davis-Bacon wages is weak, and that therefore, even if that
protection is technically arguable, preemption is not
warranted under Sears. Sears noted that “the acceptability of
‘arguable protection’ as a justification for pre-emption in a
given class of cases is, at least in part, a function of the
strength of the argument that § 7 does in fact protect the
disputed conduct.” 436 U.S. at 203.
Initially, as we have explained, based on the NLRB’s
various decisions bearing on this case, the Trades Councils’
argument for § 7 protection has substance. It therefore does
not trigger the Sears exception relied upon. Moreover, while,
in arguing for a Sears exception, the Attorney General relies
only on his assessment of the strength of the § 7 argument,
we note that Sears was quite different from this case in
several other respects. First, unlike Sears, which involved
generally applicable trespass law, the Act is a “state law[]
regulating the relations between employees, their union, and
their employer,” a situation in which the Garmon reasoning
“has its greatest force.” Id. at 193; see also id. at 197 n.27.
Second, as we have explained, unlike the cause of action in
Sears, the Act as applied to funds derived from Davis-Bacon
projects does not regulate any “significant state interest”
“deeply rooted in local feeling and responsibility.” Id. at
195–96 (quoting Garmon, 359 U.S. at 244) (internal
quotation marks omitted). Third, unlike in Sears, it cannot be
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said that the Act would “entail[] little risk of inference with
the regulatory jurisdiction” of the NLRB. Id. at 196; see also
id. at 201. An Idaho court seeking to apply the Act to a case
involving funds derived from Davis-Bacon wages would have
to answer the “identical” question reserved in Can-Am III: Is
such a program protected by § 7? Fourth, and finally, we see
no reason to conclude that this case implicates the concerns
presented in Sears that preemption would create a
jurisdictional “no-man’s land.” Id. at 208 (Blackmun, J.,
concurring). Can-Am III declined to address the § 7
argument at issue here only because the respondent had
waived the issue. 350 N.L.R.B. at 949.
VI.
All of the conduct prohibited by the Act is either actually
or arguably protected under § 7, and no exception to
preemption applies. The Act is therefore facially preempted
under Garmon.
The Trades Councils sought a declaration and permanent
injunction, but the district court’s order did not explicitly
refer to any particular relief, stating only that the Acts were
preempted and so the Trades’ Councils’ motion for summary
judgment was granted. Confusingly, the court’s judgment
also stated that the case was “dismissed.” We remand for the
district court to award appropriate relief and enter an
appropriate judgment.
AFFIRMED IN PART, VACATED IN PART, AND
REMANDED.
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BERZON, Circuit Judge, concurring:
As the main opinion explains, the “Fairness in
Contracting Act,” Idaho Code § 44-2012, is not saved from
NLRA preemption by the line of precedent holding that
collection of Davis-Bacon wages for job targeting programs
violates the Davis-Bacon Act. See Int’l Bhd. of Elec.
Workers, Local 357, AFL-CIO v. Brock, 68 F.3d 1194,
1201–03 (9th Cir. 1995); In re Building & Constr. Trades
Unions Job Targeting Programs, Case No. 90–02, 1991 WL
494718 (Wage App. Bd. June 13, 1991) (“Building Trades”),
aff’d sub nom. Building & Const. Trades Dep’t, AFL-CIO v.
Reich, 40 F.3d 1275, 1277 (D.C. Cir. 1994). I write
separately to observe that these cases, and in particular our
decision in Brock, were, in my view, wrongly decided.
First, I see no basis to conclude that any aspect of job
targeting programs amounts to a violation of federal law. The
Davis-Bacon Act requires contractors on covered projects to
pay to workers “the full amounts accrued at time of
payment,” computed at rates not less than the advertised
rates. Those rates must be not less than prevailing wages,
“without subsequent deduction or rebate on any account.”
40 U.S.C. § 3142(c) (emphasis added). A rebate is “[a]
return of part of a payment” that has already been made.
Rebate, Black’s Law Dictionary (10th ed. 2014). A deduction
could refer to money taken out at the time the wages are paid,
but the statute specifically bans only “subsequent”
deductions. Thus, Congress was likewise referring only to
deductions made after the wages were paid, presumably from
later wage payments. We have previously examined
Congress’s concern, in amending Davis-Bacon to include the
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“subsequent deduction or rebate” language, with “the illegal
practices of exacting rebates or kickbacks.” Brock, 68 F.3d
at 1199 (quoting S.Rep. No. 1155, 74th Cong., 1st Sess. 2, at
3 (1935); H.R.Rep. No. 1756, 74th Cong., 1st Sess. 2, at 3
(1935)). Notably, both those practices involve returning
money to a contractor on the Davis-Bacon job after it was
initially paid.
How, then, did we end up concluding that job targeting
deductions made at the time a worker is paid contravene
Davis-Bacon? The Department of Labor has promulgated
regulations that bar all deductions from workers’ pay on
Davis-Bacon jobs unless those deductions are specifically
permitted by the DOL, either categorically or by individual
prior permission. 29 C.F.R. §§ 3.5, 3.6, 3.9. DOL’s decision
in Building Trades was principally an interpretation of these
regulations. See 1991 WL 494718 at *5–6. The NLRB, and
this court, subsequently deferred to DOL on the matter. See
Int’l Bhd. of Elec. Workers, Local 48, 332 N.L.R.B. 1492,
1500–01 (2000), order modified by 333 N.L.R.B. No. 122,
enforced, 345 F.3d 1049 (9th Cir. 2003); Brock, 68 F.3d at
1203. But no court has, to my knowledge, explained how the
regulations — which purport to ban, with specified
exceptions, all deductions, simultaneous or subsequent — are
anything but “inconsistent with the statute,” Barnhart v.
Sigmon Coal Co., 534 U.S. 438, 462 (2002), which bans only
subsequent deductions.
I do not mean to suggest that Congress would bless an
arrangement in which a contractor deducts a worker’s wages
as a way of sidestepping the prevailing wage requirement —
for example, a deduction for a fund to pay for the contractor’s
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summer home. Davis-Bacon is, to be sure, concerned with
ensuring that workers really received in the first place the
prevailing wages mandated by Davis-Bacon. Brock, 68 F.3d
at 1199. In other words, a worker must actually be paid the
prevailing wage; a scheme to make it look as though he had
been paid that wage, when in fact some portion of it returns
to the contractor paying him, is unacceptable.
A rule barring such reductions to effectuate this
Congressional purpose cannot, however, be grounded in the
statutory provision barring “subsequent deductions.” Such
arrangements involve “contemporaneous” deductions, not a
“subsequent deduction or rebate.” Rather, I would hold that
simultaneous deductions are impermissible when they amount
to a scheme to avoid paying a prevailing wage. And I would
apply a simple presumption to rule out many deductions that
are patently consistent with Davis-Bacon: When a deduction
is authorized by law, it is not a scheme to sidestep Davis-
Bacon. Thus, for example, there is no need for specific
authorization to deduct wages as income tax withholding; or
for retirement accounts authorized by the Internal Revenue
Code; or for the various purposes authorized by the Fair
Labor Standards Act. Cf. 29 C.F.R. § 3.5. As applied here,
it would not matter whether job targeting funds are
considered union dues or not, as both job targeting funds and
dues are authorized by § 7 of the NLRA, according to the
NLRB cases discussed in the majority opinion. Therefore, I
would hold, Davis-Bacon is simply not implicated by the
collection from Davis-Bacon wages of assessments for union-
authorized job-targeting programs, whether by way of
mandatory wage deductions or otherwise. As it stands, “the
Secretary’s interpretation perverts the purpose of the Davis-
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Bacon Act, transforming a statute designed to benefit laborers
into one that bars them from benefitting themselves.” Reich,
40 F.3d at 1283 (Edwards, C.J., dissenting).
Second, even assuming that DOL is right and that
deductions for job targeting funds amount to a violation of the
Davis-Bacon Act, Brock is sorely mistaken in holding that
even direct payments from a worker to his union, with no
involvement by the employing contractor, also constitute
Davis-Bacon violations.
Davis-Bacon bars schemes in which it would appear the
worker was paid a prevailing wage but in reality he was not.
Brock, 68 F.3d at 1199. But — apart from such schemes —
the worker is otherwise fully entitled to spend his wages as he
sees fit. This observation is so obvious that it should not be
necessary to make it. Yet our opinion in Brock is
fundamentally at odds with this common sense
understanding.
Brock held that a union local’s requirement that union
members pay an assessment to support a job targeting
program was a violation of Davis-Bacon. Id. at 1196. Unlike
the employer in Reich, the employing contractor in Brock had
no involvement with the job targeting program. Id. at 1201.
Not only did that contractor not receive job targeting funds —
and, according to the union in that case, the contractor never
could receive such funds — the contractor also made no
deductions for the job targeting program. Id. at 1199, 1201.
Instead, “union members pa[id] the two percent assessment
directly to the union.” Id. at 1200. The fact that there was no
deduction in Brock, only a required payment directly to the
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union, was immaterial, this court held, as in either event “the
local union serves as an intermediary that impermissibly
effectuates the reduction of employee’s wages for work
performed on government projects to the benefit of
contractors.” Id. (emphasis added). Indeed, the court held
the same would be true “[e]ven if the Workers voluntarily
paid the two percent gross wage assessments.” Id. at 1202.
This focus on “contractors” in general is all wrong.
Davis-Bacon prevents a worker from returning part of his
wages to the particular contractor who pays him, or to an
agent or subcontractor of that contractor; it is not about
preventing workers from giving part of their wages to
contractors in general. Cf. 40 U.S.C. § 3142(c)(3) (providing
that funds may be withheld from “the contractor” to pay “the
difference between the rates of wages required by the contract
to be paid laborers and mechanics on the work and the rates
of wages received by the laborers and mechanics and not
refunded to the contractor or subcontractors or their agents”)
(emphasis added); 29 C.F.R. § 3.5(d)(3) (permitting certain
deductions, with DOL’s approval, provided that “[n]o profit
or other benefit is otherwise obtained, directly or indirectly,
by the contractor or subcontractor or any affiliated person in
the form of commission, dividend, or otherwise”) (emphasis
added); but see Can-Am Plumbing, Inc. v. N.L.R.B., 321 F.3d
145, 152 (D.C. Cir. 2003) (concluding otherwise, based in
part on Brock). On this point, I emphatically agree with
Judge Edwards’s dissent in Reich. As Chief Judge Edwards
said, the plain language of Davis-Bacon, which refers to “the
‘contractor or his subcontractor’ in the singular, not
contractors or subcontractors in the plural[,] . . . focuses the
Act narrowly on deductions taken for use by the very
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contractor or subcontractor who signs the paycheck.” Reich,
40 F.3d at 1283 (Edwards, C.J., dissenting).
Otherwise, a contractor would violate Davis-Bacon
anytime a worker uses part of his Davis-Bacon wages to pay
the contractor who is putting a new roof on his house; or uses
the wages to buy stock shares in a contractor’s company (or
a company that itself awards contracts); or, perhaps, deposits
his wages in a bank that makes loans to contractors. All of
those scenarios involve the worker’s transfer, either directly
or indirectly, for his own purposes, of funds earned on a
Davis-Bacon job to some construction industry contractor in
a way that benefits the contractor. But Davis-Bacon does not
care that workers give money to a contractor; it merely seeks
to prevent the workers’ wages redounding to the contractor
who paid them in the first place, such that, in effect, the
worker was paid less than prevailing wage.
Unless Davis-Bacon purports to establish near-plenary
regulation over what workers may do with their money after
they have been paid — a goal that makes no sense at all, even
assuming it would be permissible — it must be limited to the
actual subject-matter of the statute, namely ensuring that
workers are actually paid a prevailing wage. What workers
do with their money at that point, either individually or
collectively through a union, is of no concern to Davis-
Bacon.
That being the case, Brock was wrongly decided. If a
union’s members pool their resources to fund a job targeting
program, that may be of concern under the NLRA (if
impermissible coercion is involved, for example, see
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29 U.S.C. § 158(b)(1)), but it is of no concern under the
Davis-Bacon Act. The workers were paid a prevailing wage,
and they collectively decided to use some of that wage to
subsidize other contractors for the workers’ collective
benefit. Even more clearly, if individual workers voluntarily
pay into a job targeting fund, Davis-Bacon can have no more
objection than it can have to workers voluntarily spending
their wages at the hardware store rather than the drug store.
The workers were paid prevailing wages, so Davis-Bacon is
satisfied.
Brock concluded otherwise, contending that “there is no
tenable distinction between (1) direct deductions of employee
wages on government projects . . . and (2) union-required
employee payment of a percentage of their wages earned on
government projects,” and suggesting that “[t]o distinguish
between the two methods of JTP assessment would be to
elevate unacceptably form over substance.” 68 F.3d at
1200–01. Yet, as Chief Judge Edwards noted in his dissent
in Reich, the DOL had in that case “conceded that the
regulations do not prohibit unions from increasing their
general dues assessment and then internally allocating a
portion of that assessment to fund job targeting programs.”
Reich, 40 F.3d at 1286 (Edwards, C.J., dissenting).
I agree the distinction is ridiculous. But that is no reason
to expand the scope of Davis-Bacon to conduct that has
nothing to do with its language or purpose. Rather, the
distinction at issue — while earmarked payroll deductions to
fund job training programs are unlawful, mandatory dues
used internally to fund them are fine — is attributable to
DOL’s regulations and its interpretations of them, which
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carve out certain deductions as permitted but do not permit
workers collectively to decide to spend their own money in
this particular way. See id. (concluding that it was DOL’s
interpretation of Davis-Bacon itself that “elevates form over
substance”). The latter decision has essentially nothing to do
with the goals of Davis-Bacon.
In sum, in my view, DOL’s regulations barring such
deductions contravene the language and intent of Davis-
Bacon, and I would not defer to them. Moreover, even taking
DOL’s position on the deductions piece of this morass as
given, I would urge the court to reconsider Brock in a case in
which, unlike this case, a challenge to the ban on
contributions to union-instigated job-targeting funds traceable
to Davis-Bacon job wages is squarely presented.