Amicus Curiae Brief — New York State Departmet of Labor v. General Electric Co.

No. 89-1590 MAY 19 1990

IN THE #MOSEPH F. SPANIO

SUPREME COURT OF THE UNITED § -—

OCTOBER TERM, 1989

NEW YORK STATE DEPARTMENT OF LABOR, THOMAS

F. HARTNETT, Commissioner of Labor of the State of New

York; CHARLES DROBNER, Director of Public Works, New

York State Department of Labor; ROBERT ABRAMS,

Attorney General of the State of New York,

Petitioners

¥

GENERAL ELECTRIC COMPANY,

ON PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF OF AMICUS CURIAE

STATE OF OHIO IN SUPPORT OF PETITIONERS

By ANTHONY J. CELEBREZZE, JR

Attorney General of Ohio

With Attorneys General Joining for the States of

CONNECTICUT, ILLINOIS, AND NEVADA

AND FOR THE COMMONWEALTH OF PENNSYLVANIA.

ANTHONY J. CELEBREZZE, JR.

Attorney General of Ohio

RITA S. EPPLER

Chief, Federal Litigation Sect

Counsel of Record

JAMES G. NEARY

ELIZABETH J. BIRCH

Assistant Attorneys Genera

State Office Tower, 10th Floor

30 East Broad Street

Columbus, Ohio 43266-0410

(614) 466-2980

ERNEST D. PREATE, JR

ATTORNEY GENERAL FOR THE

—————— arr

COMMONWEALTH OF PENNSYLVANIA

Strawberry Square-16th Floor

Harrisburg, Pennsylvania 17120

CLARINE NARDI RIDDLE

ATTORNEY GENERAL FOR THE

STATE OF CONNECTICUT

55 Elm Street

Hartford, Connecticut 06106

BRIAN MCKAY

ATTORNEY GENERAL OF THE

STATE OF NEVADA

Capitol Complex

Carson City, Nevada 89710

NEIL F. HARTIGAN

ATTORNEY GENERAL FOR THE

STATE OF ILLINOIS

100 West Randolph Street

Chicago, Illinois 60601

TABLE OF CONTENTS

Page

GARE THe PPPIO EES oe iccesccccsccvesscebcses T

pp Es Be er re iii

TATE) GC WOUUEEED wv ri ccc vcscasveeccevens« 1

SUMMARY OF ARGUMENT .................-00005- 3

REASONS FOR GRANTING THE WRIT ............... 4

|. THE COURT OF APPEALS DECISION THAT

LABOR LAW $220 IS PREEMPTED BY ERISA

UNDERMINES THE PURPOSE AND EFFECT

OF NEW YORK’S PREVAILING WAGE LAW

AND JEOPARDIZES THE EFFECTIVENESS OF

THE PREVAILING WAGE LAWS OF MANY

eo A Se ee 4

ll. THE COURT OF APPEALS’ ERRONEOUS

INTERPRETATION OF SECTION 514 OF

ERISA NULLIFIES THE EXERCISE OF THE

TRADITIONAL POLICE POWERS OF THE

STATE OF NEW YORK AND THREATENS THE

EXERCISE OF THE TRADITIONAL POLICE

POWERS OF MANY OTHER STATES. ....... 11

A. The Court of Appeals Misinterpreted

eR | ee 12

B The Decision of the Court of Appeals

Nullifies the Power of the State of New

York to Address a Legitimate Local

ED Sate ed Cae aes ae a ee we Se Gre 13

LPM Sceecshevedecd Gennes u ies eas0 x00 1§

QUESTION PRESENTED

Does ERISA preempt state prevailing wage statutes which

recognize, but do not regulate, the value of employer

contributions to employee benefit plans in determining

whether an employer has paid the prevailing wage to

employees performing services with respect to public work

projects?

a

TABLE OF AUTHORITIES

Cases Pages

Action Electrical Contractors Company v. Goldin

RR rr 7

Aetna Life Insurance Company v. Borges

869 F.2d 142 (2nd Cir. 1989) ............... 8, 9, 10, 13

Alessi v. Raybestos-Manhattan, Inc.,

rE soe occ ccc vcesWausseeeenseeve 14

American Progressive Life & Health Insurance Co.

v. Corcoran 715 F.2d 784 (2nd Cir. 1983) ........... 10

Decanas v. Bica 424 U.S. 351 (1976) ................. 14

Fort Halifax Packing Co. Inc. v. Coyne

Slats aac es 66-4 4.0 6 08:0.0.0:0 0s 14,15

Gilbert v. Burlington Industries, Inc.

ee 14

Lane v. Goren

Pee ae Panne WN GT. BOG) occ cece ceccccccceecs 4

Local Union 598, Plumbers and Pipefitters Industry

Journeymen and Apprentices Training Fund v.

J.A. Jones Construction Co. 846 F.2d 1213

ee ele see sue b daa cee nencestes 9

Massachusetts v. Morash,

Siam tf 109 S.Ct. 1668 (1989) .......... 811,14

Metropolitan Life Insurance Co. v. Massachusetts

I os cc vc cccvrccraccesecccenes 14

Rebai/ldo v. Cuomo

749 F.2d 133 (2nd Cir. 1984) ............ 8,9, 10,13, 14

Shaw v. Delta Airlines, Inc.

Ge Ahr CUED 6s wa doe tevescuaweveaes 3, 4, 8, 12, 13

Stone v. Webster Engineering Corporation

ee er ee er 9

United States v. Binghamton Construction Co.

347 U.S. 171 reh’q denied 347 U.S. 940 (1954) ....... 11

Universities Research Association, Inc. v. Coutu

a Cee, ark eel a kaa a Ves 6h eee d ees 11

STATUTES

Davis-Bacon Act, 40 U.S.C. §276a

Se Voc we Vebds ba500n4s 060 40% 5,10, 11

Employee Retirement Income Security Act of 1974

(ERISA) § 514(d), 29 U.S.C. §1144(d)

STEED sc5.08 4 be bs badass bees a wows passim

New York Labor Law $220 (McKinney 1986) ...... passim

Ohio Rev. Code Ann. $4115.03 (Page 1978) ............ 1

MISCELLANEOUS AUTHORITIES:

H.R. Rep. No. 308, Amendments to the Davis-Bacon Act,

88th Cong,., 1st Sess., 2-3 (1963) ...........ccceeees 6

STATEMENT OF INTEREST

Amici Curiae submit this brief in support of Petitioner New

York State Department of Labor urging that this Court grant

certiorari to review the judgment of the United States Court

of Appeals for the Second Circuit entered in the above action

on November 29, 1989, in order to protect and preserve the

respective prevailing wage laws of the amici states

represented herein.

At issue is the prevailing wage law of New York, Labor

Law §220, which requires the payment of the prevailing wage

rate and supplemental rate to each employee on a public

work project. The United States District Court for the Southern

District of New York held that Labor Law §220 was not

preempted by the Employee Retirement Income Security Act

of 1974 (“ERISA”), 29 U.S.C. §§1001 et seg., while the United

States Court of Appeals for the Second Circuit (Court of

Appeals) reversed and held that the provisions of Labor Law

$220 were preempted. The amici states represented herein

also have prevailing wage statutes and their respective state

Statutes are threatened by the ruling of the Court of Appeals.

During the depression era, many state legislatures began

enacting laws “to establish a fair rate of wages to be paid

to workmen and mechanics employed in construction of

public improvements.” Ohio Rev. Code Ann. $4115.03 et seq.

(Page 1978). The legislative intent of the acts was simple: to

provide a comprehensive uniform framework for workers’

rights and remedies vis-a-vis private contractors,

subcontractors and materialmen engaged in the construction

of public improvements of the state.

A number of states, including New York, have enacted

laws that require public work project contractors to pay a

prevailing wage to its employees. A majority of these state

prevailing wage laws recognize fringe benefits in determining

prevailing wages.' To determine that ERISA preempts these

state prevailing wage laws prevents a state from providing

equal opportunities to public work contractors, protecting

the living standards of public work project employees and

keeping the local economy free from disturbance.

The resolution of the issues presented in this case will

have a substantial impact upon the continued protection of

employees and contractors who work on public work

projects, and on the economy of the locality of the public

work project under construction. This protection currently

exists through the enforcement of the states’ prevailing wage

laws, including those of the amici states herein. Like Labor

Law §220, the amici states have enforcement provisions

within their respective prevailing wage laws which recognize

an employer's contribution to an employee benefit plan in

determining the total compensation package received by an

employee on a public work project. Neither Labor Law §220

nor the prevailing wage laws of the amici states require that

employers establish, contribute to or otherwise maintain an

employee benefit plan to comply with the prevailing wage

requirements. Notwithstanding this absence of state

regulation of employee benefit plans, the Court of Appeals

found Labor Law §220 to be preempted by ERISA. Said

' Alaska, Alaska Stat. §36.05.010(7)(1982); California, Cal. Lab. Code

§ 1773.1 (West 1989); Connecticut, Conn. Gen.Stat. §31-53 (1987);Hawaii,

Haw. Rev. Stat. §§104-1 (1985); Illinois, Ill. Ann. Stat. Ch. 48, para. 39S-

2 (Smith-Hurd 1986); Kansas, Kans. Stat. Ann. §44-201; Kentucky, Ky.

Rev. Stat. §337.505 (Baldwin 1982); Maryland, Md. Stat. Fin. & Proc.Code

Ann., §17-208(1988); Massachusetts, Mass. Gen. Laws Ann. Ch. 149,

§ 27 (West 1982); Michigan, Mich. Comp. Laws §408.552 (1985);

Minnesota, Minn. Stat. Ann. §177.42 (West 1989); Missouri, Mo. Rev.

Stat. §290.210-345 (Vernon 1989); Montana, Mont. Code Ann. §18-2-

403 (1989); Nevada, Nev. Rev. Stat. §§338-010-338-130 (1989); New

Mexico, N.M. Stat. Ann. §13-4-11 et seq. (1953); Ohio, Ohio Rev. Code

Ann. 4115.03 (Page’s 1980); Oklahoma, Okla. Stat. Ann. tit. 40 §1961

(West 1980); Oregon, Or. Rev. Stat. §279.348 (1987); Pennsylvania, Pa.

Stat. Ann. tit. 43 §165-7 (Purdon 1964); Rhode Island, R.!. Gen. Laws

§§37-13-4-37-13-14(1984); Texas, Texas Lab. Code Ann. §5159a

(Vernon 1987); Washington, Wash. Rev. Code Ann. §39.12.010 (1972);

Wisconsin, Wis. Stat. Ann. §103.39 (West 1988); Wyoming, Wyo. Stat.

§27-4-405 (1977).

decision will have a strong and adverse impact upon the

continued enforcement of state prevailing wage laws;

therefore, the amici states represented herein respectfully

request this Court to grant certiorari in order to resolve these

issues and concerns regarding Labor Law §220.

SUMMARY OF ARGUMENT

New York’s prevailing wage law, Labor Law §220, which

requires a minimum rate of pay to employees on state public

work projects, is not preempted by ERISA. ERISA preempts

state laws which regulate, directly or indirectly, employee

benefit plans covered by ERISA. This Court has held that

those state laws which affect ERISA covered employee

benefit plans in too remote, tenuous or peripheral a manner

are not preempted under ERISA. Shaw v. Delta Airlines, Inc.,

463 U.S. 85, 100 n.21 (1983).

Labor Law §220 does not directly or indirectly regulate

employee benefit plans. Labor Law §220, like the prevailing

wage laws of many other states, takes into consideration

an employer's contribution to employee benefit plans in

calculating the prevailing rate of wages. There is no

mechanism within Labor Law §220 which would permit the

State to regulate employee benefit plans covered by ERISA.

Further, the employer retains contro! over the selection and

administration of employee benefit plans.

The majority in the decision below overstated the impact

of the ERISA preemption clause and departed from previous

federal court decisions in the area of ERISA preemption.

The majority decision nullifies the power of the State of New

York to address a legitimate local need, and this decision

threatens the ability of many other states to also address

legitimate local needs and concerns. The decision of the

court below has far-reaching effects upon state laws which

were never intended by Congress when it enacted ERISA.

For these reasons, Amici Curiae respectfully request that

this Court grant certiorari so that these far-reaching effects

of the majority decision below are reviewed and ultimately

avoided.

REASONS FOR GRANTING THE WRIT

|. THE COURT OF APPEALS DECISION THAT LABOR

LAW §220 IS PREEMPTED BY ERISA

UNDERMINES THE PURPOSE AND EFFECT OF

NEW YORK’S PREVAILING WAGE LAW AND

JEOPARDIZES THE EFFECTIVENESS OF THE

PREVAILING WAGE LAWS OF MANY OTHER

STATES.

New York Labor Law $220 mandates a prevailing wage

rate and dees not directly or indirectly reguiate employee

benefit plans. The effect, if any, of Labor Law §220 on

employee benefit plans is “too tenuous, remote or peripheral”

to be preempted by ERISA.” Shaw v. Delta Airlines, Inc., 463

U.S. 85, 100 n.21. (1983) Labor Law §220 does not require

that contractors on public work projects establish, maintain

or contribute to employee benefit plans. Any administration

of an employee benefit plan is strictly within the control of

the employer. Indeed, there is no mechanism within New

York's prevailing wage law which would permit the state

to regulate the structuring, funding or administration of these

plans. The majority in the decision below misinterpreted and

overstated the requirements of Labor Law §220. This

misinterpretation severely damages the effectiveness of New

York's prevailing wage law, and threatens similar laws of

many states, including those of the amici states represented

herein.

Labor Law §220 and the prevailing wage laws of the amici

states herein were originally enacted without a provision for

the recognition of employer contributions to employee benefit

plans.? The undesirable result was an imbalance where those

employers who provided valued fringe benefits, such as

medical coverage, were penalized for not compensating their

employees at a higher cash rate of pay. To correct this

imbalance, and to equalize competition among contractors

2

With the exception of Pennsylvania, which enacted its prevailing wage

law in 1961.

bidding on state projects, states amended their prevailing

wage Statutes to include provisions for the recognition of

the value of certain fringe benefits provided by contractors

to their employees.

Indeed, Congress found it necessary to include fringe

benefits in the determination of the prevailing wage by

amending the federal prevailing wage statute, 40 U.S.C.

Section 276a, et seq. (Davis-Bacon Act): :

The amendments to the Davis-Bacon Act proposed

by H.R. 6041 would bring up to date the Davis-

Bacon Act by including fringe benefits in prevailing

wage determinations. There has been a

tremendous change in the concept of earnings

since Congress enacted the Davis-Bacon Act.

Group hospitalization, disability benefits, and other

fringe benefits plans were the rare exception in

the 1930's. Today more tnan 85 million persoris

in the United States depend upon the benefits they

provide. Regardless of the form they take, the

employer's share of the cost of these plans or the

benefits the employers provide are a form of

compensation. It has become increasingly

apparent that if the Davis-Bacon Act is to continue

to accomplish its purpose, prevailing wage

determinations isSued pursuant to the act must be

enlarged to include fringe benefits. The act was

founded on the sound principle of public policy

that the Federal Government should not be a party

to the destruction of prevailing wage practices and

customs in a locality. Unless the law is amended

to provide for the inclusion of fringe benefits in

wage determinations, prevailing wage practices

and customs will not be reflected in these

determinations.

3 Public Law 88-349, Section 1 amended 40 U.S.C. 276a by adding

a new subsection (b).

H.R. Rep. No. 308, Amendments to the Davis-Bacon Act,

88th Cong., 1st Sess., 2-3 (1963).

The State of New York and the amici states have a strong

interest in the continued recognition of an employer's

contribution to an employee benefit pian. If the State of New

York or any other state with a prevailing wage law !s no

longer empowered to recognize the value of these

contributions, an imbalance in the competitive bidding

process would reappear. Those employers who would

continue to provide benefits to employees would be at a

competitive disadvantage in the bidding process.

Under Labor Law §220, the value of the employer's

contribution to an employee benefit plan is credited toward

the total compensation received by the employee while

employed on a public project. The total compensation

package received by the employee must be at least equivalent

to the prevailing rate of wages and the prevailing

supplementai rate.

Labor Law $220 states, in pertinent part:

With respect to each supplement determined to be

one of the prevailing practices in the localit,, the

amount of such supplement shall be determined

in the following manner. The amount of such

supplement shall be the one provided to the

majority of workmen, laborers or mechanics in the

same trade or occupation. In the event that it be

determined that there is not a majority in the same

trade or occupation provided with the same

amount, then the amount provided to the greater

number in such trade or occupation shal! be the

prevailing practice with respect to the amount of

such supplement...

Under Labor Law $220, the employer is free to chose the

method by which he can discharge his duty to pay the

prevailing rate of wages and the supplemental! rate. The

majority in the decision below, as the dissent accurately

notes, overstated the impact of the supplemental! rate

requirement when it held that Labor Law $220 prescribed

the type, nature and amount of the benefits to be provided

by the employer. The fiscal officer annually determines the

prevailing wage and supplemental rates: a decision

necessary for the preservation of local prevailing wages and

customs.‘ It is important to note that the fiscal! officer does

not control ERISA plans.

Under Labor Law $220, the employer retains total contro!

over employee benefit plans. The employer may choose to

provide an equivalent benefit package to the employees on

the project, or the employer may choose to provide a full

cash payment in lieu of a benefit package. The employer

also has the option of providing a combination of both:

When employees are supplied with the cash

equivalent of the cost of obtaining the prevailing

benefits or by providing an equivalent benefits plan,

or by a combination of benefits and cash equal

to the cost of the prevailing benefits.

Action Electrical Contractors Company v. Goldin 64 N.Y. 2d

213, 221-22, (1984) (The New York State Court of Appeals

held that an employer is not required to satisfy the

supplemental rate obligation by providing in-kind benefit

plans.)

The type and amount of the contributions the employer

makes, as well as the full administration of the plan, are

within the control of the employer. There is nothing in the

language of Labor Law §220 which prescribes the terms

or conditions of an employee benefit plan freely selected

by the employer.

As noted in Petitioners’ Petition for Certiorari, the fiscal officer is the

Commissioner of Labor for all public works projects outside of New

York City. In New York City, the fiscal officer is the city comptroller.

$220(5)(b).

4

In Shaw, supra, this Court found that a New York state

law mandating certain disability benefits, which was not

otherwise preempted by ERISA, did not become preempted

by ERISA simply because the state law permitted ERISA plans

to provide the mandated benefit. The mandate of a prevailing

wage by New York will not, in and of itself, be preempted

by ERISA. See, Massachusetts v. Morash, __. U.S. __,

109 S.Ct. 1668 (1989)(State law regarding payment of accured

vacation time not preempted by ERISA). Based on this Court's

analysis in Shaw, supra, and Morash, supra, the fact that

New York's prevailing wage law permits public work

contractors to offset their wage requirements with the

contractors’ costs of providing certain ERISA-covered

benefits does not cause ERISA to preempt New York's

prevailing wage law.

In Aetna Life Insurance Company v. Borges, 869 F.2d 142,

(2nd Cir. 1989), the Second Circuit Court of Appeals reviewed

a Connecticut escheat law requiring that drafts for employee

benefits which remained uncollected for three years or more

revert to the state treasurer. The court noted that although

the escheat law impacted on employee benefit plans, the

effect on the plans was too tenuous and remote to warrant

ERISA preemption. The court stated:

What triggers ERISA preemption is not just any

indirect effect on administrative procedures but

rather an effect on the primary administrative

functions of benefit plans, such as determining an

employee's eligibility for a benefit and the amount

of that benefit.

ld. at 146-147 (2nd Cir. 1989)

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

Second Circuit Court of Appeals held that state regulation

of hospita! costs and rates are not preempted by ERISA even

though the regulation increases the costs of maintaining

employee benefit plans. The court wisely recognized that

ERISA does not preempt every state law that incidentally

touches upon an employee benefit plan. In the instant case,

the majority in the Court of Appeals rejected its own wisdom

by extending ERISA preemption to state laws which only

incidentally touch upon employee benefit plans. If permitted

to stand, this result will have damaging consequences to

a variety of state laws in many different areas of state

regulation.

The majority in the decision below, in reasoning that Labor

Law §220 is preempted by ERISA, mistakenly relies upon

inapposite case authority which preempted state laws

requiring employee benefit contributions. The state laws

examined in Loca/ Union 598, Plumbers and Pipefitters

Industry Journeymen and Apprentices Training Fund v. J.A

Jones Construction Co., 846 F.2d 1213 (9th Cir. 1988), and

Stone v. Webster Engineering Corporation, 690 F.2d 323 (2nd

Cir. 1982), were in complete contrast to Labor Law $220

and the prevailing wage laws of the amici states. The majority

in the decision below failed to acknowledge that there is

no provision in Labor Law §220 requiring an employer's

contribution to any particular employee benefit plan. The

dissent correctly notes that the majority “breaks stride’ with

the previous decisions of the court in the area of ERISA

preemption. The dissent properly states that Aetna Life, supra,

and Rebaldo, supra, should be followed as they discuss state

statutes which are more similar to the prevailing wage law

in issue here. 891 F.2d 25, 31 (2nd Cir. 1989).

If the negligible effect of Labor Law $220 on the

administrative procedures of maintaining an employee

benefit plan, freely chosen and administered by the employer,

is sufficient to preempt New York's prevailing wage law, then

certainly many other state laws will be called into question.

In Lane v. Goren, 743 F.2d 1337 (9th Cir. 1984), the court,

in reviewing whether ERISA preempts state regulations which

merely increase the costs of maintaining employee benefit

plans, held:

That argument [that the state regulation is

preempted] does not withstand scrutiny. So too,

for example, do state laws and municipal

ordinances regulating zoning, health, and safety

W

increase the operational costs of ERISA trusts. but

no one could seriously argue that they are

preempted.

Id. at 1340. See also Rebaldo, supra, p. 138-139 (“[I]f ERISA

is held to invalidate every state statute which affects the

operation of employee benefit plans, those plans will be

permitted a charmed existence that was never contemplated

by Congress.”); and American Progressive Life & Health

Insurance Co. v. Corcoran, 715 F.2d 784, 787 (2nd Cir. 1983)

(Court refuses to preempt state regulation of employee benefit

plans where only the administrative costs of the plans were

affected).

The majority in the Court of Appeals extends the

preemption provision far beyond what Congress intended

when it enacted ERISA. As the court in Aetna Life Insurance.

supra, observed:

Congress, .. . could not possibly have meant to

preempt all laws having any impact on such plans.

no matter how small or how tangential.

Aetna Life Insurance Co., supra, at 145.

It is also unlikely that Congress intended to preempt al!

State prevailing wage laws while preserving federal laws of

the same character with respect to plans covered by ERISA.

ERISA Section 514(d) provides that “[NJothing in this title

[including the ERISA preemption provision] shall be

construed to alter, amend, modify, invalidate, impair, or

supersede any law of the United States or any rule or

regulation issued under any such law.”* In the context of

federal public contracts, the Davis-Bacon Act imposes

prevailing wage requirements which, like the New York State

requirements, set wage requirements based upon local

° Except as provided in sections 111 [concerning the repeal of the

Welfare and Pension Plans Disclosure Act] and 507(b) [concerning

authorization for Department of Labor personnel]

11

considerations.®

in light of ERISA Section 514(d) and the Davis-Bacon Act,

contributions to ERISA-covered employee benefit plans

made by an employer in connection with federal prevailing

wage requirements are not affected by ERISA. Indeed, the

Court has recognized that, on its face, the Davis-Bacon Act

is NO more than a federal prevailing wage law designed for

the benefit of workers on federal construction projects.

Universities Research Association, Inc. v. Coutu, 450 US.

754, 772 (1981); United States v. Binghamton Construction

Co., 347 US. 171, 178, reh’q denied 347 U.S. 940 (1954)

Congress has indicated no intent to have ERISA preempt

long-standing state prevailing wage laws, while leaving

federal prevailing wage laws intact. Such a result would

severely disrupt “the separate spheres of governmental!

authority’ as to minimum wage laws and would have “far-

reaching consequences’ of the sort contemplated by the

Court in Morash, supra.

The majority decision in the Court of Appeals threatens

many state laws which Congress could not possibly have

intended when it enacted ERISA. The effects of the majority

decision will reach far beyond the prevailing wage laws of

the State of New York and of the amici states represented

herein. Certiorari should be granted in this case so that these

troubling, far-reaching effects of the majority's decision are

reviewed and ultimately avoided.

ll. THE COURT OF APPEALS’ ERRONEOUS

INTERPRETATION OF SECTION 514 OF ERISA

NULLIFIES THE EXERCISE OF THE TRADITIONAL

POLICE POWERS OF THE STATE OF NEW YORK

AND THREATENS THE EXERCISE OF THE

TRADITIONAL POLICE POWERS OF MANY

OTHER STATES.

it should be noted that the Davis-Bacon Act applies to public work

projects involving the District of Columbia.

12

A. The Court of Appeals Misinterpreted Section

514 of ERISA.

The majority in the decision below incorrectly interpreted

the provisions of Section 514 of ERISA (Section 514) when

it held that Labor Law $220 is preempted by ERISA because

it ‘relates to” ERISA covered employee benefit plans.

Section 514(a) provides, in part:

[T]he provisions of this title and title IV shall

supersede any and al! State laws insofar as they

may now or hereafter relate to any employee benefit

plan

Section 514(c)(2) defines the term “State”, as it appears

in 514(a), to include

a State, any political subdivisions thereof or any

agency or instrumentality of either which purports

to regulate, directly or indirectly, the terms and

conditions of employee benefit plans covered by

this title. (Emphasis added.)

in order to interpret the term “relate to,” as it applies in

Section 514(a), it is crucial to examine the term “State,” as

defined in Section 514(c)(2). Section 514, when read in full,

clearly provides that a state law is not preempted unless

it regulates, directly or indirectly, an employee benefit plan

covered under ERISA. Since Labor Law §220 does not

purport to regulate the terms or conditions of ERISA-covered

employee benefits plans, directly or indirectly, Labor Law

5220 cannot relate to employee benefit plans within the

meaning of ERISA.

This Court's reasoning in Shaw, supra, illustrates that the

majority decision was incorrect. This Court recognized the

distinction between those state laws which truly “relate to”

employee benefit plans and those state laws which have

a purpose unrelated to employee benefit plans and which

“affect employee benefit plans in too tenuous, remote or

13

peripherai a manner to warrant a finding that the law ‘relates

to’ the plan.” 463 U.S. at 100 n.21 (1988). This Court's holding

in Shaw, supra, acknowledges that a state law which

reguiates an ERISA benefit plan, directiy or indirectly, is

preempted by ERISA, whereas those laws with an unrelated

state purpose and which only remotely affect ERISA covered

plans do not “relate” in the sense that they are preempted

by ERISA. /d. See also Reba/do, supra, p. 147.

The majority in the Court of Appeals interprets Section

514 in a manner which obscures the purpose of ERISA, and

the intent of Congress. As stated in Reba/do, supra:

ERISA does not invalidate those State statutes

whose effect on pension plans is simply tangential

in nature. This conclusion 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 federal 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.

id. p. 138. See also Aetna Life, supra, p. 145.

B. The Decision of the Court of Appeals Nullifies

the Power of the State of New York to Address

a Legitimate Local Need.

The majority in the Court of Appeals below misinterpreted

Section 514(a) when it held that ERISA “sought to preempt

all state laws that relate to an employee benefit plan and

not just state laws which purportto regulate an area expressly

covered by ERISA”. 891 F.2d 25, 29 (2nd Cir. 1989) The

majority ignores Section 514(c)(2) and reads Section 514(a)

in isolation. Such a reading will broadly sweep away many

of the states’ traditional police powers which Section 514(c)(2)

was undoubtedly designed to protect.

14

The purpose of each prevailing wage law is to respond

to legitimate, purely local needs. One such need involves

the state’s concern with the employment of its local citizens.

The prevailing wage rate set by state statute deters out of

state contractors from successfully bidding on state projects

and subsequently employing out-of-state employees ata rate

of pay lower than the wages prevailing in the locality of the

project. It was Congress’ intent to leave to the states the

authority to promulgate regulations which serve the state’s

local economic needs. Morash, supra. Preemption of Labor

Law $220 would infringe upon the State of New York's ability

to respond to this legitimate local need.

The exercise of a state’s police powers should not be

superseded by federal regulations unless that was the clear

intent of Congress. Alessi v. Raybestos-Manhattan, Inc., 451

U.S. 504 (1981). See also Rebaldo, supra. State regulation

of labor standards on public work projects is within the

traditional police powers exercised by the state. Fort Halifax

Packing Co. Inc. v. Coyne, 482 U.S. 1 (1987). States possess

broad authority under their police powers to regulate the

employment relationship with the state. Metropolitan Life

Insurance Co. v. Massachusetts, 471 U.S. 724 (1985)

Examples of this authority include minimum and other wage

laws. /d. See also Decanas v. Bica, 424 U.S. 351 (1976). It

is clear that New York’s prevailing wage law is a valid

exercise of the state's traditional police power.

lt is clear that Labor Law $220 does not “relate to”

employee benefit plans within the meaning of ERISA. The

majority in the decision below infringes upon the exercise

of New York's traditional! police powers and has the potential!

of causing a similar infringement upon the police powers

of the amici states represented herein. Absent a clear

expression of intent from Congress, ERISA cannot be

construed to preempt wage collection statutes which have

only a remote and tenuous connection to employee benefit

plans, because these state statutes represent a fundamental!

exercise of the state’s police power. Morash, supra. See a/so

Gilbert v. Burlington Industries, Inc. 765 F.2d 320 (2nd Cir.

1985). The dissent in the court below correctly stated that

15

a state law governing labor costs was not the type of statute

that Congress intended to preempt.

The goal of Congress in enacting ERISA was to ensure

the uniformity of employee benefit plans so “that empioyers

would not face conflicting or inconsistent state and local

regulation of employee benefit plans.” Fort Halifax Packing

Co. v. Coyne, 482 U.S. 1 (1987). Neither Labor Law §220,

nor the prevailing wage laws of the amici states, do any

harm to this goal. Labor Law $220 and the prevailing wage

laws threatened by the decision of the Court of Appeals,

do not regulate, directly or indirectly, ERISA-covered

employee benefit plans.

CONCLUSION

For the foregoing reasons, the petition for writ of certiorari

should be granted.

Respectfully submitted,

ANTHONY J. CELEBREZZE, JR.

Attorney General for the State of Ohio

RITA S. EPPLER

Chief, Federal Litigation Section

Counsel of Record

JAMES G. NEARY

ELIZABETH J. BIRCH

Assistant Attorneys Genera!

State of Ohio

State Office Tower, 10th Floor

30 East Broad Street

Columbus, Ohio 43266-0410

May 10, 1990