Amicus Curiae Brief — Lennes v. Boise Cascade Corp.

OCTOBER TERM, 1991

JOHN B. LENNES, JR., COMMISSIONER,

DEPARTMENT OF LABOR AND INDUSTRY,

STATE OF MINNESOTA, ET AL., PETITIONERS

VU.

BOISE CASCADE CORPORATION, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

KENNETH W. STARR

Solicitor General

MAUREEN E. MAHONEY

Deputy Solicitor General

CHRISTOPHER J. WRIGHT

Assistant to the Solicitor General

Department of Justice

MARSHALL J. BREGER Washington, D.C. 20530

Solicitor of Labor 202) 514-2217

STEVEN J. MANDEL

Deputy Associate Solicitor

ELLEN L. BEARD

Attorney

Department of Labor

Washington, D.C. 20210

QUESTION PRESENTED

Whether the Employee Retirement Income Security

Act of 1974 (ERISA), which supersedes state laws inso-

far as they “relate to” employee benefit plans, 29 U.S.C.

1144 (a), including certain “apprenticeship or other train-

ing programs,” 29 U.S.C. 1002(1), preempts the applica-

tion of a Minnesota occupational licensing law limiting

the number of apprentice pipefitters at a jobsite.

(1)

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TABLE OF CONTENTS

Page

Statutory and regulatory provisions involved .................. 1

SE SNR a ee a eS LO 2

a casienlagegeninnnunetainennsnaientiones 6

EE 18

EE DPE RR la

TABLE OF AUTHORITIES

Cases:

Aetna Life Ins. Co. Vv. Borges, 869 F.2d 142 (2d

Cir.), cert. denied, 493 U.S. 811 (1989) ~........... 14

Alessi Vv. Raybestos-Manhattan, Inc., 451 U.S. 504

Neen anne ee tlladacasanie 13

Begnaud Vv. White, 170 F.2d 323 (6th Cir. 1948)... 12

Electrical Joint Apprenticeship Comm. Vv. Mac-

Donald, 949 F.2d 270 (9th Cir. 1991), petition

for cert. pending, No. 91-1416 _.......0-...... 16, 17

Firestone Tire & Rubber Co. v. Neusser, 810 F.2d

I a lieainldsemionernes 14

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1

ERE a EE Sa ee Oe a 4,13

FMC Corp. V. Holliday, 111 S. Ct. 403 (1990)........ 13

Hughes Tool Co. v. Trans World Airlines, Inc., 409

ERISA tere ae SNE eae 12

Hydrostorage, Inc. v. Northern Cal. Boilermakers

Local Joint Apprenticeship Comm., 891 F.2d 719

(9th Cir. 1989), cert. denied, 111 S. Ct. 72

ER ie I an OE 16-17

(a TOR CB cA es SCE 13, 14

Kennedy Vv. Silas Mason Co., 334 U.S. 249 (1948).. 6

Lane Vv. Goren, 743 F.2d 1387 (9th Cir. 1984) ........ 14, 15

Local 598 v. J.A. Jones Constr. Co., 846 F.2d 1213

(9th Cir.), aff’d mem., 488 U.S. 881 (1988).... 16,17

Mackey v. Lanier Collections Agency & Serv., Inc.,

ny A es cccvensvennionpminnenne 13, 14, 15

Massachusetts v. Morash, 490 U.S. 107 (1989)....8, 9, 10

(111)

IV

Cases—Continued : Page

Metropolitan Life Ins. Co. V. Massachusetts, 471

Se My ED chilis nitcdaisdaeccantitiotlemebiiemmmacans 13

National Elevator- Indus., Inc. v. Calhoon, 957

PG BEBE CUO: Civ. LODB) 2... cccccccccrccccceccscccssncseeees 16,17

Pilot Life Ins. Co. Vv. Dedeaux, 481 U.S. 41 (1987)... 15

Rebaldo v. Cuomo, 749 F.2d 133 (2d Cir. 1984),

cert. denied, 472 U.S. 1008 (1985) 0.000000... 14, 15

Shaw V. Delta Air Lines, Inc., 463 U.S. 85 (1983)..4, 5, 13,

14, 18

Sommers Drug Stores Co. Employee Profit Shar-

ing Trust v. Corrigan Enterprises, Inc., 793 F.2d

1456 (5th Cir. 1986), cert. denied, 479 U.S.

UE ED csranshieelissiicbandcbacanipanieicuadintdaptaiienes 14

Vetter v. Frosch, 599 F.2d 630 (5th Cir. 1979).... 12

Statutes and rule:

Act of Oct. 14, 1969, Pub. L. No. 91-86, 88 Stat.

SES ae ERE Mc RR Be Re RE Loo ES i 10

Employee Retirement Income Security Act of

1974, 29 U.S.C. 1001 et seq.:

§ 3(1), 29 U.S.C. 1002 (1) ............. 1, 3, 7, 10, 11, 12, la

§ 3(1) (A), 29 U.S.C. 1002 (1) (A) -.......2........ 7,10, 11

§ 3(1) (B), 29 U.S.C. 1002 (1) (B) ....-02 ee... 7,10

§ 602 (a), 29 U.S.C. 1182 (a) .......20. ee. 9

By Be I, BEI cocbnewcccccrc cere cscsnecerscreenssnnescees 9

§ 514(a), 29 U.S.C. 1144(a) _...1, 4, 5, 7, 138, 15, 17, la

§ 614(d), 29 U.S.C. 1144 (d) ..........n.. ee eee 18

Labor-Management Relations Act, 1947, 29 U.S.C.

141 et seq.:

§ 302 (c), 29 U.S.C. 186 (c) ........... Sainniasoealia 1, 3, 7,9, 10

§ 302 (c) (6), 29 U.S.C. 186 (c) (6) 2.0. 7,10

§ 302 (c) (7), 29 U.S.C. 186 (c) (7) .......2.-2.22.------ 7,10

Labor-Management Reporting and Disclosure Act

of 1959, Pub. L. No. 86-257, § 505, 73 Stat. 537-

RR eee EES ae ee ee 10

National Apprenticeship Act of 1937, 29 U.S.C.

Ie i cwababens 2,18

29 C.F.R.:

I 2,18

i ee 2a

Statutes and rule—Continued : Page

EE ES a eae nee eT esr BALD 8

Section 2610.3-1 (b) (8) Civ) ..............2.0..ccccceeee-e0s 8

Ey RE Real ee a SR I 8

Miscellaneous:

ERISA Advisory Opinion No. 76-01 2.22.02... &

ERISA Advisory Opinion No. 83-32A _................... 8,11

a RINE CAE ARCA Re ns SN PE Ee x

a I -cceicesicdsnstichancbicctacninctnintiesdenddsbimabasamldmaiian 8

1B James W. Moore et al., Moore’s Federal Prac-

SE GND senor icktiipteterdccieiiebirtaaee: 12

6 James W. Moore et al., Moore’s Federal Practice

GE Gi SE chtrinmerninceccsctniosiactainas en 12

Iu the Supreme Court of the United States

OCTOBER TERM, 1991

No. 91-707

JOHN B. LENNES, JR., COMMISSIONER,

DEPARTMENT OF LABOR AND INDUSTRY,

STATE OF MINNESOTA, ET AL., PETITIONERS

Vv.

BOISE CASCADE CORPORATION, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

This brief is submitted in response to the Court’s invi-

tation to the Solicitor General to express the views of the

United States.

STATUTORY AND REGULATORY

PROVISIONS INVOLVED

The pertinent portion of ERISA’s preemption provi-

sion, Section 514(a), 29 U.S.C. 1144(a); the definition

of “employee welfare benefit plan” set out in Section 3(1)

of ERISA, 29 U.S.C. 1002(1); the pertinent portion of

Section 302(c) of the Labor-Management Relations Act,

29 U.S.C. 186(c), which is cross-referenced in Section

3(1) of ERISA; and the portions of the Secretary of

Labor’s regulatory definition of “employee welfare benefit

plan” relating to apprenticeship programs and scholar-

ship funds are reprinted in the appendix to this brief.

(1)

2

STATEMENT

1. For many years, Minnesota has regulated high pres-

sure pipefitting. The reason is simple: improperly in-

stalled piping can explode and cause serious injury to both

workers and the public. The State’s regulatory scheme (1)

requires pipefitters to satisfy occupational licensing re-

quirements, and (2) establishes a code of technical safety

standards enforced through issuance of state permits and

inspections. Under these regulations, pipefitters must be

licensed to install high-pressure piping, and unlicensed

apprentices must work under the supervision of a licensed

journeyman. An employer who hires unlicensed pipe-

fitters is not required to establish an apprenticeship

training program, but apprentices must register with the

State and take the state licensing examination after four

years of experience in the trade. Pet. App. 3a-5a.

Minnesota also has a separate regulatory scheme gov-

erning apprenticeship programs, which are approved by

the State if they meet specified standards. That regula-

tory regime, which implements the National Apprentice-

ship Act of 1987 (the “Fitzgerald Act”), 29 U.S.C. 50,

administered by the U.S. Department of Labor, is purely

voluntary. Minnesota’s voluntary apprenticeship stand-

ards for pipefitters have traditionally included a mini-

mum jobsite ratio of journeymen to apprentices, in ac-

cordance with Department of Labor regulations. See 29

C.F.R. 29.5(b) (7). Any employer may establish an ap-

prenticeship program; historically, however, only unions

and unionized employers did so. Most pipefitter appren-

tices in Minnesota participated in those union-sponsored

programs. Pet. App. 4a-5a, 18a.

In the mid-1980s, non-union employers began estab-

lishing apprenticeship training programs that did not

comply with the State’s voluntary standards, including

the jobsite ratios. In response, the State in 1990 promul-

gated a mandatory rule—the “three-to-one rule”—requir-

ing employers using unlicensed pipefitters to employ one

licensed pipefitter for the first trainee and a ratio of three

licensed pipefitters for each additional trainee. Pet. App.

4a-6a.

3

2. Respondents include four companies, Boise Cascade

Corporation, BE&K Construction Company, Relco Uni-

systems Corporation, and Mid-States Mechanical Services,

Inc., that employ and train pipefitters within Minnesota.

Each employer has established (or proposed) an appren-

ticeship program that provides classroom instruction and

on-the-job training for apprentice pipefitters. None of

these programs has been approved by the State, and re-

spondents typically employ a much higher ratio of ap-

prentices to journeyman pipefitters than permitted by

the State’s three-to-one rule. Pet. App. 2a, 18a-19a & n.6.

To comply with Minnesota’s new rule, respondents

would have to incur significant expense for the obvious

reason that journeyman pipefitters must be paid higher

wages than apprentices. The four companies, joined by

three apprentice pipefitters, accordingly brought suit in

federal district court against the Commissioner of Minne-

sota’s Department of Labor and Industry. The action

sought an injunction against enforcement of the three-

to-one rule on the ground that it is preempted by ERISA

and the National Labor Relations Act (NLRA). The

Minnesota Mechanical Contractors Association intervened

as a defendant in support of the State. Pet. App. 28a,

38a n.3, 43a-45a.

3. Respondents filed a motion for a preliminary in-

junction, and the State filed a motion for summary judg-

ment. The district court did not rule on the preliminary

injunction motion; instead, the court granted summary

judgment in favor of the State based upon its conclusion

that the three-to-one rule is not preempted by federal

law. For purposes of the State’s summary judgment mo-

tion, the parties stipulated that respondents’ pipefitter

apprenticeship programs are “employee welfare benefit

plan[s]” as defined in Section 3(1) of ERISA, 29 U.S.C.

1002(1). Pet. App. 44a." In light of the parties’ stipula-

1 ERISA defines an “employee welfare benefit plan” to inciude

(A) “apprenticeship or other training programs” and (B) “any

benefit described” in Section 302(c) of the Labor-Management Re-

lations Act (LMRA), 29 U.S.C. 186(c). Section 302(c) of the

LMRA in turn refers to ‘trust fund[s] established * * * for the

4

tion, the district court did not consider whether respond-

ents’ programs were subject to coverage under ERISA.

Instead, the only ERISA question presented to the

district court was whether Minnesota’s three-to-one rule

“relates to” an employee benefit plan within the meaning

of ERISA’s preemption provision, Section 514(a), 29

U.S.C. 1144(a). That section provides that ERISA “super-

sede{s! any and all state laws insofar as they may now

or hereafter relate to any employee benefit plan” covered

by ERISA. The district court recognized that ERISA

preemption is broad and not limited to laws specifically

designed to affect employee benefit plans. It noted that

the test established by this Court provides that a state

law “relates to” an employee benefit plan under Section

514(a) of ERISA “in the normal sense of the phrase, if

it has a connection with or reference to such a plan.”

Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97 (1983) ;

see Pet. App. 28a. The district court added, however,

that ERISA does not preempt ali state laws that merely

“affect” employee benefit plans, particularly in areas of

traditional state regulation such as occupational training

and public safety. Pet. App. 23a-24a.

Reviewing the case under the analytical framework of

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987),

the district court concluded that the three-to-one rule was

not preempted. The court reasoned that Minnesota’s rule

neither requires employers to establish employee benefit

plans, nor is specifically designed to affect such plans,

and it neither alters the terms of eligibility or the

amount of benefits available to plan participants, nor im-

poses any funding, vesting, reporting, or enforcement re-

quirements that would interfere with ERISA’s substan-

tive provisions. Pet. App. 27a. The court recognized that

the jobsite ratio would have what it termed an “incidental

effect” on existing apprenticeship plans because the rule

would limit the number of participants and affect how

purpose of * * * defraying costs of apprenticeship or other train-

ing programs.”

5

on-the-job training could be done. Jd. at 272-28a. Never-

theless, the district court found that requirement to be

comparable to other state occupational licensing require-

ments, such as years of experience and passing an ex-

amination, that ERISA would not preempt. Jd. at 30a.

Accordingly, the district court concluded that the rule

was not preempted by Section 514(a) of ERISA because

it is ‘a rule of general application concerning a subject

traditionally reserved to the states which has no implica-

tions for ERISA’s regulatory concerns and only an inci-

dental effect on the administration of training programs.”

[bid.*

3. The Eighth Circuit reversed. The court held that

the jobsite ratio rule is preempted by ERISA because it

“relates to” the apprenticeship training programs pro-

vided by the four respondent companies. Unlike the dis-

trict court, the court of appeals concluded that the three-

to-one rule was specifically designed to affect employee

benefit plans because its purpose is to require employers

to train apprentices in the manner the rule prescribes.

Pet. App. 10a-lla. In the court of appeals’ view, “the

fact that the minimum jobsite ratio rule is part of an

apprenticeship program and thus part of an employee

benefit ‘plan’ under ERISA, [and] not merely an em-

ployee benefit, distinguishes the present case from Fort

Halifax.” Id. at 10a. The court also noted that the Min-

nesota rule could expose employers to conflicting or in-

consistent state and local regulation, which ERISA pre-

emption was designed to avoid. Jd. at lla.

The court therefore determined that the effect of the

three-to-one rule on apprenticeship plans was more than

“incidental,” and could not be characterized as “tenuous,

remote, or peripheral” under Shaw, 468 U.S. at 100 n.21,

so as to permit the conclusion that the rule does not

* The district court went on to conclude that the three-to-one rule

is not preempted by the NLRA. Pet. App. 3la-34a. The court of

appeals, which held that the three-to-one rule is preempted by

ERISA, did not address the NLRA question. Nor do we.

6

“relate to” employee benefit plans. Pet. App. 12a. In-

stead, the court concluded that “(t]he minimum jobsite

ratio rule directly affects an ERISA plan: it regulates,

and was clearly intended to regulate, certain terms and

conditions of the apprenticeship programs by establish-

ing the manner in which employers can train and employ

both journeymen and apprentice pipefitters.” Ibid.

DISCUSSION

We do not believe that, in its present posture, this

case is suitable for review. As we explain below, it is

likely that further development of the record will estab-

lish that the apprenticeship programs operated by re-

spondents are not covered by ERISA. If the programs are

not subject to ERISA, then the Minnesota rule is not

preempted insofar as it relates to those programs. This

potentially dispositive threshold issue was not addressed

by either the parties or the courts, because the issue of

statutory coverage was conceded for purposes of the

State’s motion for summary judgment. In our view, this

Court should decline to reach the question whether Min-

nesota’s assertion of regulatory authority is improper,

since resolution of this preemption issue may be unneces-

sary. Cf. Kennedy v. Silas Mason Co., 334 U.S. 249

(1948) (declining review on the merits where the record

on summary judgment was incomplete).

In any event, we do not share the State’s view that a

pressing need exists for this Court to reconsider the

general framework for analyzing ERISA preemption

questions. This is the first decision to address preemption

of jobsite supervisory ratios or other training require-

ments contained in state occupational licensing laws.

Not only is the issue quite fresh in the lively world of

ERISA-related litigation, but the lower courts’ erroneous

assumption that ERISA covered these programs may well

have skewed their analysis of the preemption issue. The

upshot is this: in its present posture, this case does not

7

present an appropriate occasion for a fundamental recon-

sideration of this Court’s approach to ERISA preemption.

1. a. Section 3(1) of ERISA, 29 U.S.C. 1002(1), de-

fines an “employee welfare benefit plan” as “any plan,

fund or program * * * established or maintained by an

employer or by an employee organization, or by both

* * * for the purpose of providing for its participants or

their beneficiaries” certain enumerated benefits. Included

among the benefits listed in Section 3(1)(A) are “ap-

prenticeship or other training programs” and “scholar-

ship funds.” Section 3(1)(B) further provides that a plan

providing “any benefit described” in Section 302(c) of

the Labor-Management Relations Act (LMRA), 1947, 29

U.S.C. 186(¢), is covered by ERISA. Section 302(c) (6),

in turn, defines benefits to include “a trust fund estab-

lished * * * for the purpose of * * * defraying costs of

apprenticeship or other training programs” and Section

302(c) (7) includes a “trust fund” established to provide

“scholarships.”

ERISA’s preemption provision, Section 514(a), 29

U.S.C. 1144(a), provides that ERISA “shall supersede

any and all State laws insofar as they * * * relate to any

employee benefit plan” covered by ERISA. The statutory

language establishes that the Minnesota rule is not pre-

empted unless respondents’ apprenticeship programs are

“employee benefit plans” within the meaning of ERISA.

Such a showing is a threshold prerequisite to preemption

under Section 514 (a).

b. In this case, it appears that neither the parties nor

the courts below conducted any inquiry inte coverage.

They simply assumed, based on the statutory definition,

that any “apprenticeship or other training program”’ is

an employee benefit plan covered by ERISA. That as-

sumption is wrong. The Secretary’s coverage regulations

and advisory opinions carve out a large exemption that

may well include all of the pipefitter training programs

operated by respondents.

First, the regulations exclude from coverage employee

benefit plans that provide compensation for on-the-job

8

training. See 29 C.F.R. 2510.3-1(b) (3) (iv) (excluding

“(p]ayment of compensation on account of periods of time

during which an employee performs little or no productive

work while engaged in training”). As the Secretary ex-

plained in proposing that exclusion, “[a]lthough section

3(1) of [ERISA] could be read to include job-skill train-

ing within the term ‘welfare plan,’ such training is virtu-

ally inseparable from an employee’s normal duties for

which compensation is paid, and therefore is not treated

as an employee benefit plan.” 40 Fed. Reg. 24,643 (1975).

That regulatory exclusion is just one part of a broader

coverage exclusion for a variety of “payroll practices”

(such as overtime pay, sick pay, and vacation pay) which

amount to nothing more than payment of ordinary com-

pensation out of the employer’s general assets. 29 C.F.R.

2510.3-1(b). Indeed, another part of the payroll practices

regulation (the exclusion of vacation pay) has been up-

held by this Court. Massachusetts v. Morash, 490 U.S.

107 (1989). Accordingly, in the Secretary of Labor’s

view, on-the-job training does not normally constitute an

ERISA plan.

Second, the Secretary’s regulations exclude various plans

that provide for classroom instruction. Specifically, the

regulations exclude so-called “{u]nfunded scholarship pro-

grams,” including “tuition and education expense refund

program(s], under which payments are made solely from

the general assets of an employer or employee organiza-

tion.” 29 C.F.R. 2510.3-1(k); see 40 Fed. Reg. 34,527

(1975). The Department of Labor has also issued an

advisory opinion stating that an in-house professional de-

velopment program maintained by an accounting firm to

provide continuing education for its licensed accountants,

financed by the firm’s general assets, is not an employee

welfare benefit plan as defined in ERISA. ERISA Ad-

visory Opinion No. 83-32A; see also ERISA Advisory

Opinion No. 76-01 (tuition refunds to bank employees

paid from the bank’s general assets do not constitute a

covered plan). Accordingly, in the Secretary’s view, un-

9

funded classroom training programs, whether provided

directly by an employer or purchased from an educational

institution, do not constitute ERISA plans.

If neither on-the-job training nor classroom training

paid for out of an employer’s general assets is an ERISA

plan, then an unfunded program providing both types of

training is plainly not an ERISA plan either. On the

other hand, apprenticeship programs and scholarship pro-

grams that are separately funded—such as joint appren-

ticeship trusts and scholarship trusts established under

Section 302(c) of the LMRA—are covered by ERISA.

The rationale for such a distinction is explained in

Massachusetts v. Morash, 490 U.S. at 112-119. In Morash,

the Court approved the Secretary’s similar determination

that only funded—and not unfunded—vacation pay ar-

rangements were covered by ERISA. The Court stated

that “[i]n enacting ERISA, Congress’ primary concern

was with the mismanagement of funds accumulated to

finance employee benefits and the failure to pay employees

benefits from accumulated funds.” Jd. at 115. The exist-

ence of separate plan assets makes funded plans suscepti-

ble to the kinds of fiduciary abuses that ERISA was de-

signed to prevent. The Court accordingly upheld the Secre-

tary’s payroll practice regulation insofar as it excluded

unfunded vacation benefits from coverage.

In reaching that conclusion, the Court also noted that

“the extension of ERISA to claims for vacation benefits

would vastly expand the jurisdiction of the federal courts,

providing a federal forum for any employee with a vaca-

tion grievance.” 490 U.S. at 118-119. Similarly, if all

employer-provided training is covered by ERISA, em-

ployees would have the right to bring benefit claims or

fiduciary breach claims in federal court under Section

502(a) of ERISA, 29 U.S.C. 1132(a), each time their

employer denied them an opportunity to attend a training

course. ERISA was not intended to sweep so broadly;

the Secretary quite properly exercised her rulemaking

authority under Section 505 of ERISA, 29 U.S.C. 1135,

10

to define the proper scope of the term “employee welfare

benefit plan.”

As this Court has recognized, the Secretary’s coverage

regulations are entitled to deference. Massachusetts v.

Morash, 490 U.S. at 115-118. Excluding unfunded ap-

prenticeship and scholarship programs from ERISA cov-

erage is a permissible interpretation of the statutory

language and is fuily consistent with Congress’s intent.

The LMRA was amended in 1959 to permit employers

and unions to establish joint trust funds “for the pur-

pose of * * * defraying costs of apprenticeship or other

training programs.” Labor-Management Reporting and

Disclosure Act of 1959, Pub. L. No. 86-257, § 505, 73

Stat. 537-539, adding Section 302(c) (6) of the LMRA,

29 U.S.C. 186(c) (6). The language incorporated in the

ERISA definition, “apprenticeship or other training pro-

grams,” mirrors that employed in the LMRA. This con-

gruence of language suggests that Congress was referenc-

ing the form of separately funded apprenticeship and

training trusts traditionally sponsored by unions. Simi-

larly, Section 3(1) of ERISA refers to “scholarship

funds,” while Section 302(c) (7) allows a union to estab-

lish a “trust fund” to provide “scholarships.” See Pub. L.

No. 91-86, 83 Stat. 183 (1969). Accordingly, both the

statutory language and its enactment history support the

Secretary’s regulations limiting ERISA coverage to ap-

prenticeship programs and scholarship programs that are

separately funded.*

3In Massachusetts Vv. Morash, the Court rejected the argument

that the reference to “vacation benefits” in Section 3(1)(A) of

ERISA must include unfunded programs because the cross-reference

to Section 302(c) of the LMRA in Section 3(1)(B) already covered

funded vacation plans (since Section 302(c)(6) mentions “a trust

fund established” to provide “‘pooled vacation” benefits). The Court

instead recognized that Congress was “not concerned with duplica-

tion” in drafting Section 3(1). 490 U.S. at 114 n.9. Similarly, the

fact that the cross-reference to Section 302(c) of the LMRA in

Section 3(1)(B) brings funded apprenticeship and scholarship pro-

grams within ERISA’s coverage does not preclude the Secretary’s

11

ec. In this case, the court of appeals’ decision is silent

as to the funding status of the apprenticeship and train-

ing programs operated by the four employer respondents.

However, the record includes affidavits submitted by each

respondent describing its program. Those affidavits reveal

that three of the four employers do not sponsor a funded

apprenticeship training program. Relco and Mid-States

simply provide on-the-job training and pay for classroom

instruction to prepare apprentice pipefitters for the state

licensing examination. See Affidavits of Loren Corle,

owner of Relco (Jan. 19, 1990), and Kent Durenberger,

President of Mid-States (Jan. 19, 1890). Boise Cascade

had proposed, but not implemented, an apprenticeship

training program while this case was pending before the

district court. See Affidavit of Bob Anderson, Public

Affairs Manager (Jan. 22, 1990). Based on affidavits

presented to the district court, it seems clear that none

of those three employers currently offers an apprenticeship

training program that is an employee benefit plan under

Section 3(1) of ERISA, as construed by the Secretary.

For a number of years, BE&K has offered an extensive

apprenticeship program covering a variety of trades.

BE&K typically includes in its contracts a ten-cent per

payroll hour charge earmarked to pay for training and

educating its employees, and maintains an in-house account

that it calls the BE&K Training and Education Fund.

See Affidavit of W. Douglas Cross, Vice-President of

Operations (Jan. 22, 1990). It does not appear that this

is a trust fund within the meaning of ERISA. In ERISA

Advisory Opinion No. 83-32A, the Department of Labor

determined that a similarly financed plan was excluded

interpretation of “apprenticeship or other training programs” and

“scholarship funds” in Section 3(1)(A). To the contrary, reading

Section 3(1) as a whole supports the Secretary’s decision that only

funded apprenticeship and scholarship plans are subject to ERISA.

4 We were informed that Boise Cascade has not implemented the

proposed apprenticeship program described in its filing in the dis-

trict court, but instead is currently considering offering apprentice-

ship training through a union fund.

12

from coverage. That opinion involved an accounting firm

whose branch offices contributed a percentage of their net

fees to their national office, which used the funds to pro-

vide continuing education programs. The Department

concluded that earmarking revenues in this manner does

not involve a “trust arrangement,” subject to ERISA’s

coverage. There is, accordingly, substantial reason to

doubt whether the BE&K program is covered; and further

factual development in the district court would be neces-

sary to resolve that issue.

In short, it is not apparent that any of the four em-

ployers sponsor apprenticeship programs that constitute

“employee welfare benefit plans” within the meaning of

Section 3(1) of ERISA. In light of the threshold cover-

age question, review of the preemption issue presented by

petitioners is not warranted at this time.®

2. a. With respect to the question presented, petition-

ers recognize that this Court has repeatedly held that a

5It appears that the coverage issue may be raised by petitioners

on remand. Petitioners apparently conceded ERISA coverage only

for the purpose of their own summary judgment motion, Pet. App.

44a, and all that has happened in this case thus far is that the

district court granted summary judgment in favor of the State,

despite that concession, and the court of appeals reversed. Respond-

ents did not move for summary judgment. In any event, as a general

rule, concessions that a party makes in support of its own motion

for summary judgment do not carry over and support a cross-motion

for summary judgment by the opposing party. 6 James W. Moore

et al., Moore’s Federal Practice { 56.13, at 56-176 to 56-177 (2d ed.

1988); Vetter v. Frosch, 599 F.2d 630, 632 (5th Cir. 1979);

Begnaud v. White, 170 F.2d 323, 327 (6th Cir. 1948). Accordingly,

it appears that the district court, on remand, may take evidence

and decide the coverage issue on the merits. Similarly, the court of

appeals has discretion to reconsider the preemption question in light

of the coverage issue. 1B James W. Moore et al., Moore’s Federal

Practice © 0.404[1], at 117-124 (2d ed. 1983). This Court would be

free to consider both the coverage and preemption issues (assuming

both were preserved) if certiorari were granted following an appeal

from a judgment on remand. ZId. at § 0.404[4.-6], at 140-141;

Hughes Tool Co. v. Trans World Airlines, Inc., 409 U.S. 363, 365-

366 n.1 (1973).

13

state law “relates to” an employee benefit plan under

Section 514(a), and is therefore preempted, “if it has a

connection with or reference to such a plan.” Shaw, 463

U.S. at 96-97; Ingersoll-Rand Co. v. McClendon, 111 S. Ct.

478, 483 (1990). Petitioners contend that the result in

this case “demonstrates that this formulation of ERISA

preemption doctrine simply does not provide the lower

courts with sufficient guidance.”’ Pet. 17. In their view, a

new test should be formulated that limits the effect of

Section 514(a). Regardless of whether a new “test” is

needed, this case does not, in any event, present an appro-

priate occasion on which to reconsider this Court’s inter-

pretation of Section 514 (a).

By preempting state laws “insofar as they relate

to” ERISA plans, Congress broad'y shielded such plans

from state regulation. Under Section 514/a), preemption

is not limited to ‘“‘state laws specifically designed to affect

employee benefit plans” or to “state laws dealing with the

subject matters covered by ERISA—reporting, disclosure,

fiduciary responsibility, and the like.” Shaw, 463 U.S. at

98; FMC Corp. v. Holliday, 111 S. Ct. 403, 408 (1990).

The purpose of the state law is not dispositive; ERISA

preempts state laws that intrude either directly or in-

directly upon the area of exclusive federal concern. Alessi

v. Raybestos-Manhattan, Inc., 451 U.S. 504, 524-525

(1981) ; Metropolitan Life Ins. Co. v. Massachusetts, 471

U.S. 724, 739 (1985). Preemption is virtually required

if the state law makes a specific “reference to” ERISA

plans or is “specifically designed to affect’? such plans.

Mackey v. Lanier Collections Agency & Serv., Inc., 486

U.S. 825, 829 (1988) ; Ingersoll-Rand, 111 8S. Ct. at 483.

Even if the state law does not expressly refer to substan-

tive matters regulated by ERISA, preemption is neverthe-

less required if the State thereby subjects employers and

plan administrators to conflicting state regulations bur-

dening the administration of nationwide plans. FMC, 111

S. Ct. at 408; Fort Halifax, 482 U.S. at 10.

Contrary to petitioners’ assertions, however, not all

state laws imposing additional costs or administrative

*# &

14

burdens on employee benefit plans are preempted. Mackey,

486 U.S. at 831; Ingersoll-Rand, 111 S. Ct. at 483. “Some

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.” Shaw, 463

U.S. at 100 n.21.° In general, courts have declined to

preempt “laws of general application—often traditional

exercises of state power or regulatory authority—whose

effect on ERISA plans is incidental.” Aetna Life Ins. Co.

v. Borges, 869 F.2d 142, 146 (2d Cir.), cert. denied, 493

U.S. 811 (1989). This exception to the general rule of

preemption ‘follows as a matter of common sense from

the fact that ERISA plan members and managers are

bound to engage in myriad transactions that Congress

never considered when it drafted $514. A preemption

provision designed to prevent state interference with fed-

eral control of ERISA plans does not require the creation

of a fully insulated legal world that excludes these plans

from regulation of any purely local transaction.” Rebaldo

v. Cuomo, 749 F.2d 133, 188 (2d Cir. 1984), cert. denied,

472 U.S. 1008 (1985).7 Ultimately, however, the fact that

6 Applying this exception, courts have found no ERISA preemp-

tion of state laws involving matters as varied as garnishment of

welfare plan benefits to collect debts of plan participants (Mackey) ;

escheat of uncollected ERISA benefit checks to a State (Aetna Life

Ins. Co. V. Borges, 869 F.2d 142 (2d Cir.), cert. denied, 493 U.S. 811

(1989) ); a city income tax of general application affecting employee

contributions to benefit plans (Firestone Tire & Rubber Co. Vv.

Neusser, 810 F.2d 550 (6th Cir. 1987)); a State law imposing

fiduciary duties on corporate officers for the benefit of shareholders,

including ERISA plans (Sommers Drug Stores Co. Employee Profit

Sharing Trust v. Corrigan Enterprises, Inc., 793 F.2d 1456 (5th Cir.

1986), cert. denied, 479 U.S. 1034, 1089 (1987)); a law prescribing

hospital rates for inpatient care, including the rates charged to

plans (Rebaldo v. Cuomo, 749 F.2d 133 (2d Cir. 1984), cert. denied,

472 U.S. 1008 (1985)); and application of a state fair employment

practices law to a plan in its capacity as an employer (Lane Vv.

Goren, 743 F.2d 1337 (9th Cir. 1984) ).

T Accordingly, this Court has assumed that ERISA plans are

subject to many “run-of-the-mill state-law claims such as unpaid

15

a state law is one of general application representing a

traditional exercise of state authority will not insulate

it from preemption if the law significantly affects employee

benefit plans. See, e.g., Pilot Life Ins. Co. v. Dedeaux,

481 U.S. 41 (1987) (preempting a state common law

action for improper processing of a claim for benefits from

an ERISA plan).

Whether a state law “relate[s] to” an employee benefit

plan in a manner that requires preemption is admittedly

not always easy to determine. But Section 514(a) does

not create the “regulatory ‘black hole’ of maramoth pro-

portions” that petitioners allege. Pet. 15. That allegation,

and the hypothetical examples supporting it, are based in

part on petitioners’ misunderstanding cf the scope of the

definition of “employee welfare benef.t plan.” For exam-

ple, petitioners’ charge that most state rules governing

nursing trainees would be preempted under the logic of

the court of appeals’ decision, Pet. 14, is incorrect if only

funded apprenticeship programs are subject to ERISA.

Moreover, the court of appeals’ overbroad assumptions

about ERISA coverage also appear to have skewed its

preemption analysis. For instance, when the court of

appeals concluded that “[t]he minimum jobsite rule was

specifically designed to affect employee benefit plans,” Pet.

App. lla, so as to be automatically preempted under

Mackey, it erroneously assumed that any law relating to

apprenticeship or training necessarily relates to covered

plans only. That is not the case. Although the Minnesota

rule was plainly designed to affect on-the-job supervision

and training of unlicensed pipefitters, such training will

often occur outside the context of an ERISA plan.

rent, failure to pay creditors, or even torts committed by an ERISA

plan.” Mackey, 486 U.S. at 833. The lower courts similarly have

assumed that ERISA would not preempt “state Jaws and municipal

ordinances regulating zoning, health, and safety” (Lane v. Goren,

743 F.2d at 1340); “labor laws that govern working conditions and

labor costs” (Rebaldo v. Cuomo, 749 F.2d at 138) ; and “rent control

laws that determine what employee benefit plans pay or receive for

rental property” (ibid.),

16

These coverage-related factors—that the three-to-one rule

affects many programs not subject to ERISA and that

Congress included apprenticeship and scholarship pro-

grams in the definition of “employee welfare benefit plan”

because it was concerned with regulating trust funds

established to provide training—should have been con-

sidered in the preemption analysis under the standards

formulated by this Court.

On the record as it now exists, however, it is difficult to

determine under those standards whether the three-to-one

rule is preempted insofar as it affects employee benefit

plans covered by ERISA. For that reason as well as the

fact that the coverage issue was not addressed by the

lower courts, this case is not a suitable vehicle for recon-

sidering the standards established by this Court to deter-

mine whether a state law “relate[s] to” an ERISA plan.

b. Nor do we discern any pressing need to review this

case. In particular, there is no conflict in the circuits

regarding ERISA preemption of state apprenticeship

regulations. This is the first case specifically to ad-

dress state jobsite supervisory ratios or other training

standards contained in state occupational licensing

laws. In relaied cases, the Ninth and Tenth Circuits

have struck down certain rules involving apprenticeship

programs imposed on public works contractors by state

prevailing wage and benefit laws. Thus, in Electrical

Joint Apprenticeship Comm. v. MacDonald, 949 F.2d 270

(9th Cir. 1991), petition for cert. pending, No. 91-1416

(filed Feb. 3, 1992), and National Elevator Indus., Inc. v.

Calhoon, 957 F.2d 1555 (10th Cir. 1992), the preempted

state laws required employers to participate in state-

approved apprenticeship programs in order to avoid hav-

ing to pay full journeyman wages to all employees work-

ing on state public works projects. Similarly, in Local

598 Vv. J.A. Jones Constr. Co., 846 F.2d 1213 (9th Cir.),

aff’'d mem., 488 U.S. 881 (1988), the preempted state law

compelled employers with state public works contracts to

contribute to apprenticeship training funds at a state-

mandated level. In Hydrostorage, Inc. v. Northern Cal.

a

17

Boilermakers Local Joint Apprenticeship Comm., 891 F.2d

719 (9th Cir. 1989), cert. denied, 111 S. Ct. 72 (1990),

the preempted state law required employers with public

works contracts to: (1) establish or join apprenticeship

programs complying with state-approved apprenticeship

standards; (2) employ apprentices in a state-mandated

minimum ratio; and (3) contribute to apprenticeship and

other trust funds (or pay an equal amount to the State).*

While consistent with the decision below in that the

Ninth and Tenth Circuits held in each case that state laws

relating to apprenticeship programs were preempted, those

decisions do not show that ERISA preemption is so broad

that this Court must reconsider its construction of Section

514(a). In the cases decided by the Ninth and Tenth

Circuits, the preempted state law required the employer

to establish, join, or contribute to a funded apprenticeship

plan as a condition for receiving state public works con-

tracts. Thus, the laws in question appeared to have a

close relationship to plans covered by ERISA.

Nor do the decisions in the other cases compel the con-

clusion that the three-to-one rule is preempted insofar as

it affects funded plans in Minnesota, since the relationship

of the three-to-one rule to apprenticeship training pro-

grams is somewhat more attenuated. First, the Minnesota

rule does not require employers to hire any apprentices

at all; an employer would be in full compliance if it used

only licensed journeyman pipefitters. Second, the rule

does not require employers to establish or maintain any

kind of structured or formalized apprenticeship training

program; it requires only that unlicensed pipefitters be

supervised on the job by a certain ratio of licensed pipe-

fitters to ensure that their work is performed properly.

8 Each of the decisions of the Ninth and Tenth Circuits involved

funded apprenticeship programs. In National Elevator Industry,

Hydrostorage, and Local 598, the state law affected traditional

apprenticeship programs operated by unions. See 957 F.2d at 1558;

891 F.2d at 728; and 846 F.2d at 1217. In Electrical Joint Appren-

ticeship Comm., the apprenticeship funds were administered by an

employer trade association. See 949 F.2d at 272.

18

Third, the rule does not require any employer to establish

or contribute to a separate apprenticeship or training

fund, which, as we have stated, is a requisite for coverage

under ERISA.®

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

MAUREEN E. MAHONEY

Deputy Solicitor General

MARSHALL J. BREGER CHRISTOPHER J. WRIGHT

Solicitor of Labor Assistant to the Solicitor General

STEVEN J. MANDEL

Deputy Associate Solicitor

ELLEN L. BEARD

Attorney

Department of Labor

JUNE 1992

® Contrary to petitioners’ argument, Pet. 26-30, the Fitzgerald

Act, 29 U.S.C. 50, and ERISA’s savings clause for other fed-

eral laws, 29 U.S.C. 1144(d), have no bearing on this case. In

promulgating its jobsite ratio for pipefitters, Minnesota did not

purport to act under the authority of the Fitzgerald Act, but rather

acted under the authority of its state occupational licensing law for

pipefitters. Moreover, the State’s mandatory jobsite ratio goes

beyond anything required by the voluntary federal regulations,

which merely provide for registered apprenticeship programs to

set out a specific ‘numeric ratio of apprentices to journeymen, con-

sistent with proper supervision, training, safety, and continuity of

employment, and applicable provisions in collective bargaining agree-

ments.” 29 C.F.R. 29.5(b)(7). Thus, preemption of the State’s

three-to-one rule would in no manner impair the operation of the

voluntary federal program. See generally Shaw, 463 U.S. at 100-

104. Indeed, the employers here did not even have state-registered

voluntary apprenticeship programs.

APPENDIX

Section 514(a) of ERISA, 29 U.S.C. 1144(a), provides

in pertinent part:

Except as provided in subsection (b) of this sec-

tion, the provisions of this [title] and [title IV] shall

supersede any and all State laws insofar as they

may now or hereafter relate to any employee benefit

plan described in section 1003(a) of this title and

not exempt under section 1003(b) of this title.

Section 3(1) of ERISA, 29 U.S.C. 1002(1), provides:

The terms “employee welfare benefit plan” and

“welfare plan” mean any plan, fund, or program

which was heretofore or is hereafter established or

maintained by an employer or by an employee or-

ganization, or by both, to the extent that such plan,

fund, or program was established or is maintained

for the purpose of providing for its participants or

their beneficiaries, through the purchase of insur-

ance or otherwise, (A) medical, surgical, or hospital

care or benefits, or benefits in the event of sickness,

accident, disability, death or unemployment, or vaca-

tion benefits, apprenticeship or other training pro-

grams, 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).

Section 302(c) of the Labor-Management Relations

Act, 29 U.S.C. 186(c), provides, in pertinent part:

* * * * *

(6) * * * a trust fund established by such repre-

sentative for the purpose of pooled vacation, holiday,

severance or similar benefits, or defraying costs of

apprenticeship or other training programs .

(7) * * * a pooled or individual trust fund estab-

(la)

2a

lished by such representative for the purpose of

(A) scholarships * * *.

29 C.F.R. 2510.3-1, “employee welfare benefit plan,”

provides in pertinent part:

* * * * *

(b) Payroll practices. For purposes of title I of

the Act and this chapter, the terms “employee wel-

fare benefit plan” and “welfare plan” shall not

include—

(3) Payment of compensation, out of the employ-

er’s general assets, on account of periods of time

during which the employee, although physically and

mentally able to perform his or her duties and not

absent for medical reasons (such as pregnancy, a

physical examination or psychiatric treatment) per-

forms no duties; for example—

* * * * *

(iv) Payment of compensation on account of pe-

riods of time during which an employee performs

little or no productive work while engaged in train-

ing * * -.

(k) Unfunded scholarship programs. For pur-

poses of title I of the Act and this chapter, the terms

“employee welfare benefit plan” and “welfare plan”

shall not include a scholarship program, including

a tuition and education expense refund program,

under which payments are made solely from the

general assets of an employer or employee organi-

zation.

YoU. S. GOVERNMENT PRINTING OFFicE; 1992 312324 45457