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

No. 89-1590

IN THI

Supreme Court of the United States

MOTION FOR LEAVE TO FILE A BRIEF AMICUS

CURIARE ON BEHALF OF THE JOINT INDUSTRY

BOARD OF THE ELECTRICAL INDUSTRY AND

BRIEF AMICUS CURIAE IN SUPPORT OF THI

PETITIONERS’ WRITE OF CERTIORARI TO THI

UNITED STATES COURT OF APPEALS FOR THI

SECOND CIRCUTI

BEST AVAILABLE COPY

=

ino’ «=

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1990

No. 89-1590

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,

-against-

GENERAL ELECTRIC COMPANY,

Respondent.

MOTION FOR LEAVE TO FILE A BRIEF AMICUS

CURIAE ON BEHALF OF THE JOINT INDUSTRY

BOARD OF THE ELECTRICAL INDUSTRY IN

SUPPORT OF THE PETITIONERS' WRIT OF

CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE SECOND CIRCUIT

as Consent to the submission of a

brief amicus curiae by the Joint

2

Industry Board of the Electrical

Industry (JIB) having been granted by

the Petitioners and refused by the

Respondent the JIB hereby moves the

Court for leave to file the amicus

curiae brief submitted herewith.

as The JIB is a jointly trusteed

organization composed of an equal number

of representatives from both management

and labor in the electrical industry in

New York City. The JIB's purpose is to

promote harmony between employers and

employees while continuing to improve

the quality and safety of the electrical

work performed in New York City.

ae The JIB is also the

administrator of the numerous

3

multiemployer employee benefit plans

that have been established pursuant to

collective bargaining agreements between

the New York Electrical Contractors,

Inc., the Association of Electrical

Contractors, Inc., and Local Union No.

3, International Brotherhood of

Electrical Workers, AFL-CIO.

4. The decision of the Court of

Appeals for the Second Circuit, which

held that §220 of the New York State

Labor Law is preempted by ERISA has a

severe detrimental effect to both the

employers and the employees in the

electrical industry in New York, as well

as all employers and employees in the

building trades industry.

4

S. This decision undermines the

Clearly stated purpose of §220 by

expanding the preemption provisions of

ERISA to an area of state law that ERISA

was not intended to preempt.

6. The JIB believes that the

decision of the Court of Appeals for the

Second Circuit is incorrect and that

such a ruling will have a detrimental

effect not only on the electrical

industry and the building trades, but

also it will have a detrimental effect

on the safety of the public at large.

7. By finding that the prevailing

wage law of §220 of the New York State

Labor Law is invalid, employers will be

encouraged to hire less skilled and less

5

expensive labor which will lead to the

reduction of safety on public work

projects.

8. Although the Petition sets

forth appropriate grounds for the

issuance of the writ, it is our belief

that the JIB's brief amicus curiae will

serve to provide the Court with

additional information in support of the

issuance of the writ.

Dated: New York, New York

May 9, 1990

yee |

DONALD F. MENAGH y

Attorney for Joint

Industry Board of the

Electrical Industry

386 Park Avenue South

New York, New York 10016

(212) 532-3850

QUESTIONS PRESENTED

Does ERISA preempt state prerasting,

wage laws such as New York's Labor Law |

§220, which requires that contractors

employed on public work jobs either

provide its employees with the

prevailing fringe benefits or pay

workers a cash amount equal to the cost

of the benefits?

ii

TABLE OF CONTENTS

Question Presented 1

Table of Contents ii

Table of Authorities iii

Summary 2

Reason For Granting The Writ 4

I. The Writ of Certiorari

Should Be Counter 4

The United States Court 4

of Appeals for the

Second Circuit

Incorrectly Invalidated

New York State's

Prevailing Wage Law

Contrary to Pricr

Holdings of The State's

Court cf Last Resort

II. This Case Presents

Important Questions of

Federal Law Concerning

ERISA Preemption Which

This Court Should Resolve 5

A. The New York

Prevailing Wage and

Supplement Statute Is

Within the State's

Traditional Police Power

and Should Not Be

Preempted Unless Clearly

Intended By Congress 6

Conclusion

iil

B. The New York

Prevailing Wage and

Supplement Statute Does

Not Subject Employers to

Conflicting Requirements

and Was Not Intended to

Be Preempted by ERISA.

Cc. The Prevailing

Wage and Supplement Law

Affects Employee Benefit

Plans in Too Tenuous and

Remote a Manner to

Warrant Preemption.

17

19

iv

TABLE OF AUTHORITIES

CASES

Action Elec. Contr. Co. v.

Goldin, 64 N.Y.2d 213,485,

N.¥.S.40 241, 474 4.F.2D 601

(1984)

Aetna Life Ins. Co. v. Borges,

869 F. 2d 142 (2d Cir. 1989)

Alessi v. Raybestos-Manhattan,

Inc., 451 U.S. 504 (1981)

Atkins v. Kansas, 191 U.S. 207

(1903)

California Hosp. Assn. v.

Henning, 770 F.2d 856 (9th

Cir. 1985), cert. denied,

477 U.S. 904 (1986)

Fort Halifax Packing Co. Inc.

v.Coyne, 482 U.S.1 (1987)

Hughes v. Alexander Scrap

Corp., 426 U.S. 794 (1976)

Mackey v. Lanier Collection

Agency Service Inc., 486 U.S.

825 (1988)

Massachusetts v. Morash,

__U.S. __, 109 S.Ct. 1668

(1989)

Metropolitan Life Ins. Co. v.

Massachusetts, 471 U.S. 724

(1985)

19

41.39

14,18

18

10,13

Vv

Nachman Corp. v. Pension 9

Benefit Guaranty Corp., 446

U.S. 359 (1980)

Pettis Moving Co. Inc. V. 6

Roberts, 784 F.2d 439 (2d

Cir. 1986)

Pilot Life Ins. Co. V. 18

Dedeaux, 481 U.S. 41 (1987)

Rebaldo v. Cuomo, 749 F. 2d 21

133 (2d Cir. 1984)

Rice v. Santa Fe Elevator 7

Corp., 331 U.S. 218 (1974)

San Diego Bldg. Trades Council 8

v. Garmon, 359 U.S. 236

(1959)

Shaw v. Delta Air Lines, Inc., 19

463 U.S. 85 (1983)

White v. Mass. Council of 6

Constr. Employers, 460 U.S.

204 (1983)

STATUTES:

Employees Retirement Income Security

Act of 1974, 29 U.S.C. A. §1001 et seg

(ERISA) §514 3,10

New York State Labor Law §220 5,16,17

MISCELLANEOUS:

120 Cong Record 942 (1974) 10.,,32

120 Cong Record 4279-80 (1974) 9

IN THE

SUPREME COURT OF THE UNITED STATES

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,

-against-

GENERAL ELECTRIC COMPANY,

Respondent.

A BRIEF AMICUS CURIAE ON BEHALF OF THE

JOINT INDUSTRY BOARD OF THE ELECTRICAL

INDUSTRY IN SUPPORT OF THE PETITION FOR

A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

The Joint Industry Board of the

Electrical Industry (JIB) respectfully

submits this amicus curiae brief in

support of the petition for a Writ of

Certiorari submitted by the Petitioners.

2

UMMARY

—

In the exercise of their

traditional police powers, states have

set minimum labor standards for

individuals employed on public works

projects. When a state contracts for

labor on public works projects, it

performs a proprietary function. This

Court has recognized that when a state

acts in its proprietary capacity it has

broad power to regulate. In the absence

of compelling Congressional directive,

this power should not be superseded.

The legislative history of ERISA

indicates that Congress' primary

motivation behind the Act was to prevent

mismanagement of accumulated funds and

to ensure that employees receive the

benefits they are promised.

To meet these goals ERISA

3

establishes reporting and disclosu-e

requirements and imposes a fiduciary

standard of care upon the plan

administrators.

Concerned that administration of

employee benefit plans would be

complicated by conflicting federal and

state regulations, Congress enacted §514

of ERISA, 29 U.S.C. §144 to preempt any

state laws that "relate to" employee

benefit plans. Congress intended

primarily to preempt state laws that

seek to regulate employee benefit plans

and thereby subject employee benefit

plans to conflicting requirements.

Where state law does not impose

conflicting administrative duties, this

Court has declined to preempt the state

law. A more broad application of §514 is

inconsistent with Congressional intent.

4

New York's prevailing wage and

supplement statute affects ERISA plans

in too tenuous or remote a manner to

warrant preemption.

REASONS FOR GRANTING THE WRIT

) THE WRIT OF CERTIORARI SHOULD BE

GRANTED

A. The United States Court of

Appeals for the Second Circuit

Incorrectly Invalidated New

York State's Prevailing Wage

Law Contrary to Prior Holdings

Of The State's Court Of Last

Resort

The New York State Court of Appeals

previously passed upon the purpose of

§220 of the New York State Labor Law and

found it to be a proper state action.

In Action Elec. Contr. Co. v. Goldin, 64

N.Y¥Y.2d 213, 485 N.¥.&.2¢ 241, 474 W.E.2q¢

601 (1984) the Court found that the

purpose of the statute is not to require

contributions to a benefit plan but

5

rather to equalize the cost of labor.

The Court reviewed §220 of the New York

State Labor Law and upheld it so as to

allow employers to pay in cash, to the

employees, the equivalent of the cost of

providing the prevailing supplemental

benefits. Therefore, the New York Court

of Appeals has interpreted its own

state's prevailing wage law as not

regulating or interfering with employee

benefit plans governed by ERISA.

To the contrary the United States

Court of Appeals for the Second Circuit

was held in this case that §220 of New

York State's Labor Law is preempted by

ERISA because it relates to an employee

benefit plan which is covered by ERISA.

II. THIS CASE PRESENTS IMPORTANT

QUESTIONS OF FEDERAL LAW CONCERNING

ERISA PREEMPTION WHICH THIS COURT

SHOULD RESOLVE

6

The extent to which ERISA preempts

state laws which deal with a state's

ability to regulate public work jobs is

an issue which must be resolved by the

United States Supreme Court.

A. THE NEW YORK PREVAILING

WAGE AND SUPPLEMENT STATUTE IS

WITHIN THE STATE'S TRADITICNAL

POLICE POWER AND SHOULD NOT BE

PREEMPTED UNLESS CLEARLY

INTENDED BY CONGRESS.

States have traditionally, in the

exercise of their police powers,

regulated minimum labor standards for

construction contractors on state

4 A state acts in its

projects.

proprietary capacity when it contracts

for labor on public works projects.

White v. Mass. Council of Constr.

Ipettis Moving Co.,Inc., v.

Roberts, 784 F.2d 439 (2nd Cir 1986)

State law requiring pension pay for

hours worked over 40 held to be exercise

of traditional state police power.

7

Employers., 460 U.S. 204 (1983). When a

state acts in its proprietary capacity,

this Court has recognized that the state

has broad authority to set minimum labor

standards for those working on the

public project. Id. See also Hughes v.

Alexander Scrap Corp., 426 U.S. 794

(1976), Atkins v. Kansas, 191 U.S. 207

(1903).

Due regard for the presuppositions

of federalism requires that the police

powers of the state not be superseded by

federal act unless that was the clear

manifest intent of Congress. Rice v.

Santa Fe Elevator Corp., 331 U.S. 218,

230 (1974). Where the regulated conduct

involves local interests traditionally

left to state regulation, and the

activity regulated is merely a

peripheral concern of a federal act, the

8

Courts should not infer that Congress

has deprived the states of the power to

act, San Diego Bldg. Trades Council v.

Garmon, 359 U.S. 236, 243-244 (1959).

B. THE NEW YORK PREVAILING WAGE

AND SUPPLEMENT STATUTE DOES NOT

SUBJECT EMPLOYERS TO CONFLICTING

REQUIREMENTS AND WAS NOT INTENDED

TO BE PREEMPTED BY ERISA.

In any preemption analysis, "the

purpose of Congress is the ultimate

touchstone." Metropolitan Life Ins. Co.,

v. Massachusetts, 471 U.S. 724, 747

(1985). The legislative history

indicates that Congress' primary concern

in enacting ERISA was to control two

major abuses, "mismanagement of funds

accumulated to finance ... [employee]

benefits, and failure to pay employees

the benefits promised" from those

accumulated funds.” Through federal

act, Congress intended to ensure that if

an employee was promised pension

benefits upon retirement, and that

employee fulfilled the conditions

precedent to vesting of the promised

benefit, the employee would actually

receive those benefits. Nachman Corp. v.

Pension Benefit Guaranty Corp., 446 U.S.

359, 361 (1980).

To ensure that employee

expectations are not defeated, ERISA

establishes reporting and disclosure

obligations for plans, imposes a

fiduciary standard of care for plan

administration, and qstablishes

schedules for vesting and accrual of

california Hosp. Assn. v.

Henning., 770 F.2d 856, 859 (9th Cir.

1985), cert. denied 477 U.S. 904 (1986);

also see 120 Cong. Rec. 4279-80 (1974)

(statement of Rep. Bradenas).

10

pension benefits. Massachusetts v.

Morash., U.S. __, 109 S.Ct. 1668,

1671-72 (1989).

Concernea that employers would be

subject to a variety of conflicting

federal and state regulation, Congress

enacted §514, 29 U.S.C. §1144.7 Senator

Willis, floor manager of the bill that

was to become ERISA and Chairman of the

Committee on Labor and Public Welfare

stated that except in limited

circumstances, ERISA would "preempt the

field for federal regulations thus

eliminating the threat of conflicting or

inconsistent state and local regulation

of employee benefit plans." 120 Cong.

Rec. 29, 942 (1974).

3section 514(a) of ERISA preempts

"any and all state laws insofar as they

may now or hereinafter relate to any

employee benefit plan" covered by ERISA.

aa

While the intent to preempt certain

areas of state law is clear, the

ultimate scope of that preemption is

-

not. Traditionally the role of the

Courts is to accommodate rigid statutory

language to a myriad of varying factual

Situations.

Where state law has created the

prospect that an employer's

administrative scheme would be subject

to conflicting requirements, this Court

has not hesitated to enforce ERISA's

preemption provision. For example, in

Alessi v. Raybestos-Manhattan Inc., 451

*senator Jacob Javits, ranking

minority member of the Committee on

Labor and Public Welfare suggested that

perhaps §514 was an over inclusive

starting point for preemption analysis

noting that "the desirability of further

regulation-at either the State or

Federal level-undoubtedly warrants

further attention." 120 Cong. Rec. 29,

942 (1974).

12

U.S. 504 (1981) this Court struck down a

New Jersey state statute prohibiting

oft, stting workers' compensation

payments against pension benefits, a

practice permitted under federal law.

The effect of the statute was to force

an employer either to structure its

benefits payments in accordance with New

Jersey law, or to adopt different

payment schedules for in-state and out-

of-state employees. The statute's only

purpose was to set forth additional

statutory requirements for pension

plans, a purpose not permitted by

Congress. Id at 524.

Where state law does not create the

prospects that the employer's

administrative scheme will be subject to

conflicting regulations, this Court has

declined to hold that the law is

13

preempted.

In Massachusetts v. Morash,

__U.S.__, 109 S.Ct. 1668 (1989) this

Court was called on to determine whether

an employer's policy of paying

discharged employees for unused vacation

time out of the company's general assets

constituted an "employee benefit plan"

within the meaning of ERISA. The Court

held that although §3 of ERISA defines

an "employee welfare benefit plan" as

"any plan maintained for the purpose of

providing...vacation benefits," when

viewed in light of the primary purpose

of preventing mismanagement of funds and

failure to pay promised benefits it

cannot be understood to, or relate to,

ordinary vacation benefits which are

payable on a regular basis from the

general assets of the employer. Id at

14

1673.

In upholding the Massachusetts law

requiring such payments the Court stated

that:

Because ordinary vacation

payments are typically fixed,

due at known times, and do not

depend on contingencies

outside employee's control,

they present none of the risks

that ERISA intended to

address. If there is a danger

of defeated expectations, it

is no different from the

danger of defeated

expectations of wages for

services performed--a danger

Congress chose not to regulate

in ERISA. Id at 1673

In Fort Halifax Packing Co. Inc. v.

Coyne, 482 U.S. 1 (1987), a Maine

statute required employers to provide a

lump sum severance payment to employees

laid off in the event of a plant

closing. Upholding the statute, the

Court said:

Congress intended preemption

a2

to afford employers the

advantages of a uniform set of

administrative procedures

governed by a single set of

regulations. This concern

arises, however, with respect

to benefits whose provision by

nature requires an ongoing

administrative program to meet

the employers obligation. Id

at il.

The Maine statute did not give rise

to these types of concerns. It neither

established nor required an employer to

maintain an employee benefit plan. No

administration was necessary for the

employer to meet its obligations.

The New York State prevailing wage

law requires that laborers, workers and

mechanics on public works projects be

paid not less than the rate of wages and

wage supplements which prevail for

workers in the same trade in the

16

locality of the project.” The employer

(contractor) meets its statutory

obligation when it pays in cash, totally

or partially, the cost of prevailing

supplemental benefits. Action Elec.

Contr. Co., v. Goldin, 64 N.Y. 2d 213,

222, 485 N.¥.S. 24 241, 245, 474 N.E. 20

601, 605 (1984). The statute does not

require the creation of a fund from

which prevailing supplemental benefits

Will be paid, nor does the statute

require that the employer contribute to

a benefit plan. As the New York State

Court of Appeals has concluded, "this

provision should not be interpreted to

>Wage supplements are defined as

"all remuneration for employment paid in

any median other than cash, or

reimbursement for expenses, or any

payments which are not '‘'wages,'

including benefits such as health

insurance, vacation and holiday pay."

N.Y. Labor Law §220(5) (McKinney's

1986) (40a).

17

require that the employer maintain or

contribute directly to a benefit plan

equivalent in kind to the prevailing one

in order to comply with the statute."

Thus the fund management and

administration concerns of ERISA are not

implicated.

The prevailing wage and wage

supplement rates are determined annually

by the fiscal officer.°®

The employer is

not required to adjust its benefit plan

contributions or to make additional

calculations to achieve compliance with

the law. The payments remain fixed

amounts payable directly to the

employees with their regular

The fiscal officer for all public

works contracts, other than those on

behalf of New York City, is the State

Commissioner of Labor. For contracts on

behalf of New York City, the City

Comptroller acts as the fiscal officer.

N.Y. Labor Law §220(5) (6).

18

compensation from the contractor's

general assets. "To do little more than

write a check hardly constitutes the

operation of a benefit plan." Fort

Halifax Packing Co.. 482 U.S. 1, 12

(1987).

Cc. THE PREVAILING WAGE AND

SUPPLEMENT LAW AFFECTS EMPLOYEE

BENEFIT PLANS IN TOO TENUOUS AND

REMOTE A MANNER TO WARRANT

PREEMPTION.

Generally, the laws which this

Court has ruled preempted, are those

that provide an alternative cause of

action to employees to collect benefits

protected by ERISA or laws that apply

specifically to ERISA plans.’

™State laws or actions that have

been preempted include: Common law tort

and contract actions asserting improper

processing of benefit clause, Pilot Life

Ins., Co. v. Dedeaux, 481 U.S. 41

(1987); state law specifically exempting

ERISA covered benefits from a generally

applicable garnishment law, Mackey v.

19

Laws that have not been preempted

are laws of general application--often

traditional exercises of state police

power or regulatory authority--whose

effect on ERISA plans are incidental to

the law's primary objectives. Aetna

Life Ins. Co. v. Borges, 869 F.2d 142

(2nd Cir. 1989). Some state laws may

“affect employee benefit plans in too

tenuous, remote or peripheral a manner"

to warrant preemption. Shaw v. Delta Air

Lines Inc., 463 U.S. 85, (1982).

Based upon these cases, it appears

Lanier Collection Agency Service Inc.,

486 U.S. 825 (1988); state law

prohibiting discrimination in benefit

progress on the basis of pregnancy, Shaw

v. Delta Air Lines, Inc., 463 U.S. 85

(1983); and state law prohibiting method

of benefit calculation permitted by

ERISA, Alessi v. Raybestos-Manhattan,

Inc., 451 U.S. 504 (1981). See

generally Aetna Life Ins. Co. v. Borges,

869 F.2d 142 (2nd Cir. 1989). cert

denied 110 S.Ct. 57 (1989).

20

that what "triggers preemption is not

just any indirect effect or

administrative procedures, but rather an

effect on the primary administrative

functions of benefits plans, such as

determining an employee's eligibility

for a benefit and the amount of that

benefit." 869 F.2d 142 at 146-47.

New York's prevailing wage law does

net effect a benefit plan's

administrative procedures, does not

effect benefit eligibility and does not

regulate the amount of a benefit paid by

a plan. It merely seeks to equalize

labor costs for employers bidding on

public works contracts. Any

administrative constraints that this law

places on plan administrators is merely

incidental.

New York's prevailing wage law may

21

make an employer's benefit plan more

expensive to operate, but the mere fact

that the statute has some economic

impact on a plan does not require that

the statute be invalidated. In Rebaldo

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

the Court held:

If ERISA is held to invalidate

every State action that may

increase the cost of operating

employee benefit plans, those

plans will be permitted a

charmed existence that never

was contemplated by Congress.

Where, as here, a State statue

of general application does

not affect the structure, the

administration, or the type of

benefits provided by an ERISA

plan, the mere fact that the

statute has some economic

impact on the plan does not

require that the statute be

invalidated. Id at 138-139.

22

CONCLUSION

For the reasons stated herein, the

Petition for a Writ of Certiorari should

be granted.

Dated: New York, New York

May 9, 1990

Respectfully submitted,

Yours, etc.

DONALD F. MENAGH

386 Park Avenue South

New York, New York 10016

(212) 532-3850