Amicus Curiae Brief — Keystone Chapter Associated Builders & Contractors, Inc. v. Pennsylvania Secretary of Labor & Industry

No. 94-1237 a 125

In The ae |

Supreme Court of the A : | as oF

+

October Term, 1994

KEYSTONE CHAPTER, ASSOCIATED BUILDERS AND

CONTRACTORS, INC., IN REPRESENTATION OF ITS

MEMBERS,

Petitioners,

VS.

SECRETARY OF LABOR & INDUSTRY FOR THE

COMMONWEALTH OF PENNSYLVANIA,

Respondent.

On Petition for a Writ of Certiorari to the United States Court

of Appeals for the Third Circuit

MOTION OF THE ROOFING CONTRACTORS

ASSOCIATION. INDUSTRY FUND, ET AL. FOR

LEAVE TO FILE BRIEF AND BRIEF OF AMICUS

CURIAE IN OPPOSITION TO PETITION FOR WRIT

OF CERTIORARI

JOHN H. WIDMAN

Counsel of Record

BRIAN J. MCGAUGHAN

McALEESE, McGOLDRICK

& SUSANIN, P.C.

Suite 240 - Executive Terrace

455 South Gulph Road

King of Prussia, PA 19406

(610) 337-4510

Attorneys for Amicus Curiae

(Continued on next page)

6329

Agee (800) 3 APPEAL + (800) 5 APPEAL + (800) BRIEF 21

ervices, inc.

LAwta

Attorneys for Amicus Curiae,

The Roofing Contractors Association

Industry Fund; Contractors Association

of Eastern Pennsylvania; Mechanical

Contractors Association of Eastern

Pennsylvania; Mechanical Contractors

of Western Pennsylvania; Laurel Mechanical

Contractors, Inc.; Plumbing & Heating

Contractors Association of Philadelphia &

Vicinity, Inc.; Pen-Jer-Del Chapter of the

National Electrical Contractors Association;

Delaware Valley Insulation and Abatement

Contractors Associaton, Inc.

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TABLE OF CONTENTS

Description of Interest of AmicusCuriae .............

Consent of the Parties ............ 0... ccc cc cccc ecu.

Statement of the Case ......... 00. cc cece cece

Reasons for Denyingthe Writ ......................

I.

Il.

Assuming arguendo that ERISA § 514 applies to

the Act and its regulations, petitioner has not

demonstrated any error in the decision of the court

below nor any conflict among the circuits. ......

As Commerce Clause Legislation, ERISA was not

intended to and constitutionally cannot preempt

the Commonwealth of Pennsylvania from

establishing wage and benefit standards to be paid

by its contractors to workers employed on its

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TABLE OF CITATIONS

Cases Cited:

Associated Builders & Contractors v. MWRA, 935 F.2d

en nce weaecccbewecacees

Babler Brothers, Inc. v. Roberts, 995 F.2d 911 (9th Cir.

ES ES GIS ee

12

17

ul

Contents

Page

BCTC of Camden County, 104S.Ct. 1028 ............. 16

Bell Telephone Co. v. Foley, Civ. No. 92-1105 (E.D. Pa.

Be es NE ok a 600509 sd edd cea ee 4

Building & Construction Trades Council v. Associated

Builders & Contractors, 113 S. Ct. 1190 (March 8,

PE S660 64405 8b Nao oe oe eee eee 13,14, 16

Building and Construction Trades Council of Camden

County v. City of Camden, 465 U.S. 208 (1984) ...... 13

FMC Corp. v. Holliday, 498 U.S.52(1990) ............ 12

Fort Halifax Packing Co. v. Coyne, 107S. Ct. 2211 (1987)

Pe re ee TTY Pee Ee Pe ee ee Te 6

General Electric Company v. New York State, 891 F.2d 25

CEG SOEOD £65500 004 0dncreesueuseteee eee 5,9, 10

Keystone Chapter, Associated Builders & Contractors,

Inc. v. Foley, Civ. No.92-0459 ...... cc cee eee 4

Keystone Chapter of Associated Builders & Contractors,

Inc. v. Pennsylvania Department of Labor & Industry,

414A.2d 1129 (Pa. Cmwlth. 1980) ................ 6,8

Kulzer Roofing Inc. v. Pennsylvania Department of Labor

& Industry, 450 A.2d 259 (Pa. Cmwlth. 1982) ....... 7

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

(9th Cir.), aff'd, 488 U.S. 881 (1988) .............. 10

ul

Contents

Page

Lott Constructors, Inc. v. Camden County Board of Chosen

Freeholders, 1994 WL 263851 (D.N.J. 1994) ....... 15, 16

Mackey v. Lanier Collection Agency & Serv., 486 U.S. 825

CUED 6s cu sonveeeankeuseeect eeeere ees a 9

McCullom v. Roberts, 17 F.3d 1219 (9th Cir. 1994) ...... 15

Metropolitan Life Insurance Company v. Massachusetts,

OFS Was FOE CEE ocd cancdinsscatndeseeaaeers 6

National Elevator Indus., Inc. v. Calhoun, 957 F.2d 1555

(10th Cir.), cert. denied, 113 S. Ct.406(1992) ....... 10

Shaw v. Delta Airlines, Inc., 463 U.S. 85 (1983) ........ 6

United Building and Construction Trades Council of

Camden County v. City of Camden, 465 U.S. 208 (1984)

ccadeasenckéntate seevaeer cen chee 13

Statutes Cited:

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DESCRIPTION OF INTEREST OF AMICUS CURIAE

Amici are various contractor associations (“the

Associations”) which represent the interests of contractors who

perform or seek to perform work on construction projects

covered by Pennsylvania’s Prevailing Wage Act, 43 P.S. § 165-1

et seq. (Purdon’s 1992). The Associations represent their

members’ interests on a wide range of issues, including labor

relations, industry relations, government affairs, and market

developments. The contractors herein represented have entered

into collective bargaining agreements with various unions which

represent employees of the contractors. The collective bargaining

agreements establish certain wage rates and benefit rates that the

contractors must pay to or on behalf of their unionized

employees.

In filing an amicus curiae brief, the Associations are acting to

inform this Court not only of the soundness of the court of

appeals’ judgment that Congress did not intend ERISA to

preempt the Prevailing Wage Act but also of the benefits of the

Act and the harm which will result to workers on covered projects

and to amici’s members if the decision of the court below is

reversed.

The Prevailing Wage Act provides for minimum wage rates

and benefit rates that contractors must pay to their employees on

public works projects. The goal of the Act is to ensure that

workers on the covered projects are fairly compensated. Such

protection is necessary because Pennsylvania law requires that

contracts for such work be awarded in open bidding to the lowest

responsible bidder. In the absence of the Prevailing Wage Act, the

non-unionized contractors would be permitted to pay their

employees substandard wages and benefits on covered projects.

In addition, nonunion contractors would be permitted to

2

utilize substandard wage and benefit rates when calculating their

bids, effectively excluding unionized contractors from

competition on those projects. Because of the many

apprenticeship programs operated by unionized contractors in

conjunction with the trade unions, these contractors as a rule

employ the most highly skilled individuals in their respective

trades. Thus, exclusion of unionized contractors from bidding on

these projects would deprive the Commonwealth and its citizens

of the benefits of that highly skilled workforce. The law represents

a fair and reasonable method of equalizing the labor costs for all

employers who bid on covered projects, without regard to their

union affiliations.

Amici believe that they bring a unique perspective to the

Court in representing the interests of contractors who are bound

by the mutually beneficial collective bargaining process to pay

certain minimum compensation rates to their employees. This

perspective permits amici to offer certain insights and policy

considerations that will be helpful to this Court in its review of the

Petition for a Writ of Certiorari.

CONSENT OF THE PARTIES

Petitioner, Keystone Chapter, Associated Builders and

Contractors, Inc. (“Keystone ABC”) and respondent Thomas P.

Foley, the Secretary of Labor and Industry for the Commonwealth

of Pennsylvania (“Secretary”) have consented to the filing of this

brief. Communication Workers of America, AFL-CIO, District 13

(“CWA”) and Bell Telephone Company of Pennsylvania,

(“Bell”), appellees in the court below, also have consented to the

filing of this brief. Such consents will be filed concurrently with

this brief.

RENT ta SUM aly AE Be en

3

STATEMENT OF THE CASE

The Associations adopt the Statement of the Case set forth in

respondent Secretary’s Brief in Opposition to the Petition for Writ

of Certiorari, as supplemented by the discussion below.

Pennsylvania’s Prevailing Wage Act, 43 P.S. § 165-1 et seq.

(Purdon’s 1992), requires the Commonwealth and its political

subdivisions to include in every contract for construction,

reconstruction, demolition, alteration and/or repair a specification

that workmen on those projects shall be paid the prevailing

minimum wage rate. 43 P.S. § 165-4. In determining the amount of

the prevailing wage applicable to a given project, the Secretary is

required to consider not only the prevailing cash wage rate but also

the amount contributed for employee benefits pursuant to a bona

fide collective bargaining agreement. 43 P.S. § 165-7. The law

does not apply to any other public or private construction projects

within the Commonwealth.

In April, 1992, Keystone ABC brought suit alleging that the

Secretary’s administration of the Prevailing Wage Act is

preempted by the Employee Retirement Income Security Act, 29

U.S.C. § 1101 et seg. (“ERISA”). Keystone ABC’s amended

complaint alleged that the manner in which the Secretary

considered contributions toward fringe benefits in determining

and enforcing the Prevailing Wage Act “relates to” employee

benefit plans as defined in ERISA and therefore is superseded by

§ 514(a) of ERISA, 29 U.S.C. § 1144(a). Keystone ABC did not

challenge the constitutionality of the Prevailing Wage Act or its

implementing regulations at 34 Pa. Code § 9.101 et seq.

In August, 1992, Bell and CWA filed a similar complaint,

alleging that the manner in which the Secretary considered

contributions toward fringe benefits in determining and enforcing

the Prevailing Wage Act “relates to” employee benefit plans as

——— a i

4

defined in ERISA and therefore is superseded by § 514. In

addition, Bell and CWA complained that because the Prevailing

Wage Act requires consideration of employer and employee

contributions for employee benefits in determining the minimum

wage rate, the entire prevailing wage scheme established by the

Prevailing Wage Act relates to and is preempted by ERISA.

On July 30, 1993, Judge Edwin M. Kosik granted motions for

summary judgment filed by the plaintiffs in both actions. In so

doing, the court not only struck down the method used by the

Secretary to enforce the Act but also concluded that the Act, its

accompanying regulations, and the Declaratory Order of the

prevailing Wage Appeals Board dated April 13, 1992 were

preempted by ERISA. Keystone Chapter, Associated Builders &

Contractors, Inc. v. Foley, Civ. No. 92-0459; Bell Telephone Co. v.

Foley, Civ. No. 92-1105 (E.D. Pa. July 30, 1993).

The court below reversed the district court’s invalidation of

the Act and its implementing regulations, concluding that they do

no more than “establish a system of wage regulation [for

Commonwealth construction projects] that neither burdens nor

influences the benefits or structure of employee benefit plans, nor

do they interfere with the uniform administration of such plans.”

(Pet. App. C, 44a-45a). However, the court below affirmed the

district court’s invalidation of the Declaratory Order solely

because it established a presumption that contributions to ERISA

benefit plans are bona fide (Pet. App. C, 25a).

REASONS FOR DENYING THE WRIT

The question presented by Keystone ABC’s petition is

whether Congress, in its effort to reserve to the federal

government exclusive regulation of employee benefit plans

through ERISA’s preemption provision, intended to preclude state

and local governments from specifying the minimum

ET TT ee

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compensation that workers on their construction projects are to

be paid. Petitioner contends that the court below erroneously

answered that question in the negative and that its decision is in

conflict with this Court’s many decisions concerning the intended

sweep of ERISA § 514(a) and with the decision of the United

States Court of Appeals for the Second Circuit in General Electric

Company v. New York State, 891 F.2d 25 (2d Cir. 1989).

As discussed below, this case does not present any

justification for the exercise of this Court’s certiorari jurisdiction

because the decision and opinion of the court below do not

conflict with Supreme Court precedent concerning ERISA

preemption and implicitly agree with much of the Second

Circuit’s reasoning in General Electric. Moreover, as discussed in

the last section of this brief, the Associations believe that the

petition should be denied because there is an additional, more

compelling ground for affirming the judgment of the court below.

Specifically, ERISA represents an exercise of -Congress’

legislative authority under the Commerce Clause. As such,

ERISA was not intended to and constitutionally cannot preempt

the Commonwealth of Pennsylvania from engaging in the

proprietary act of establishing wage and benefit standards to be

paid by its contractors to workers employed on its construction

projects.

1.

ASSUMING ARGUENDO THAT ERISA § 514

APPLIES TO THE ACT AND ITS REGULATIONS,

PETITIONER HAS NOT DEMONSTRATED ANY

ERROR IN THE DECISION OF THE COURT BELOW

NOR ANY CONFLICT AMONG THE CIRCUITS.

Whether § 514 preempts the Pennsylvania Prevailing Wage

Act, its implementing regulations, or the April 13, 1992,

6

Declaratory Order of the Prevailing Wage Appeals Board

ultimately is a question of Congressional intent. Metropolitan

Life Insurance Company v. Massachusetts, 471 U.S. 721, 747

(1985). This Court repeatedly has cited the comments of

Representative Dent and Senator Williams (the House and Senate

sponsors of ERISA) as the best evidence of the intended sweep of

§ 514. Shaw v. Delta Airlines, Inc., 463 U.S. 85 (1983); Fort

Halifax Packing Co. v. Coyne, 107 S. Ct. 2211, 2216 (1987). Both

legislators noted that Congress’ purpose in enacting § 514 was to

preempt the field for federal regulation, “thus eliminating the

threat of conflicting or inconsistent State and local regulation of

employee benefit plans.” Fort Halifax, 107 S. Ct. at2216.

With these comments in mind, Justice Brennan observed in

Fort Halifax: “We have not hesitated to enforce ERISA’s pre-

emption provision where state law created the prospect that an

employer’s administrative scheme would be subject to conflicting

requirements.” 107 S. Ct. at 2216. Justice Brennan emphasized

that the aim of § 514 is to ensure that employee benefit plans

covered by ERISA will be governed by only a single set of

regulations, thereby avoiding “a patchwork scheme of regulation

[which] would introduce considerable inefficiencies in benefit

program operation [and] which might lead those employers with

existing plans to reduce benefits, and those without such plans to

refrain from adopting them.” 107 S. Ct. at 2217.

In resolving the question of whether Congress intended that

ERISA preempt Pennsylvania’s Prevailing Wage Law, it is

important to recognize that the sole and exclusive goal of the

Prevailing Wage Act is “to protect the workmen employed on a

government project from payment of substandard wages, |

keeping in mind that the lowest responsible bidder is customarily |

awarded public contracts.” Keystone Chapter of Associated

Builders & Contractors, Inc. v. Pennsylvania Department of

Labor & Industry, 414 A.2d 1129, 1133 (Pa. Cmwlth. 1980). As

|

7

the Commonwealth Court noted in Keystone ABC, “by

guaranteeing such protection, the legislation helps to assure the

employment of skilled craftsman on the job .... The Act’s

purpose is not to preserve jobs for local craftsmen, but to assure

the local craftsmen who are employed standard wages... .” Id.

See also Kulzer Roofing, Inc. v. Pennsylvania Department of

Labor & Industry, 450 A.2d 259, 261 (Pa. Cmwlth. 1982).

In order to accomplish that goal, the Prevailing Wage Act

requires the Secretary of Labor to determine the general

prevailing minimum wage in a locality by reference not only to

the actual wages paid for such work, but also to the employer and

employee contributions for employee benefits paid pursuant to a

bona fide collective bargaining agreement. Section 9.105 of the

regulations implements this statutory requirement by providing

that for purposes of making a determination of the general

prevailing minimum wage rates in a locality, the Secretary may

ascertain and consider the wage rates and employee benefits

established by collective bargaining agreements. 34 Pa. Code

§ 9.105(a). That section also requires the Secretary to consider

statements by contractors and subcontractors, whether unionized

or not, showing wage rates paid on projects within the locality, 34

Pa. Code. § 9.105(c)(3), and any other information pertinent to

the determination of prevailing minimum wage rates. 34 Pa.

Code § 9.105(c)(4). Finally, § 9.105(d) requires the Secretary to

conduct a continuing program to obtain wage rate information,

including information relating to contributions for fringe

benefits, from contractors, contractors’ associations, labor

organizations, public officials, and other interested parties. 34 Pa.

Code § 9.105(d).

In a previous challenge to the Commonwealth’s right to

impose a prevailing wage requirement on contractors with whom

it does business, petitioner Keystone ABC complained that the

Act’s requirement that fringe benefit contributions specified in

8

collective bargaining agreements be considered in setting the

prevailing wage rate denied the ABC’s nonunion members equal

protection of the laws because they did not have such agreements.

Keystone ABC v. Pennsylvania Department of Labor & Industry,

supra. In rejecting the ABC’s challenge, the Commonwealth

Court explained that §§ 9.105(c)(3) and (d) of the regulations do

not require the Secretary to include the fringe benefit

contributions specified in collective bargaining agreements in the

prevailing rate if the collected data shows nonunion construction

to be the dominating segment of the industry. In that instance,

only the contributions for fringe benefits paid by the nonunion

contractors, if any, would be included in the prevailing rate. If no

such benefits were provided, fringe benefits would have no effect

on the prevailing rate. 414 A.2d at 1133. The court emphasized,

however, that if union contractors perform the majority of the

construction work in the county, collective bargaining

agreements certainly should determine the prevailing wage rates.

According to the court, “it is a proper legislative prerogative to

mandate that fringe benefits included in a bargaining

agreement should be considered as part of the total wage

package paid the union employees because such benefits are

considered a part of the wage package in the marketplace.”

414A.2d at 1133.

The April 13, 1992, Declaratory Order of the Prevailing

Wage Appeals Board also stressed that, given the cost and

importance of fringe benefits in today’s world, a prevailing rate

which includes hourly wage rates and if prevailing, bona fide

contributions for fringe benefits, is the only way of ensuring that

the compensation paid to workers on its projects is not

substandard.

As noted above, the Associations contended in the court

below that the Act, the implementing regulations and the

Declaratory Order were not subject to ERISA preemption

9

analysis because they represent proprietary rather than regulatory

acts of the Commonwealth.' However, assuming arguendo that

ERISA § 514 applies to those laws, the court below was correct in

concluding that those requirements should not be preempted. As

the court noted, they do not bear any direct relationship to

employee benefit plans in that they are not intended to nor do

they regulate the affairs of employee benefit plans operating

within the Commonwealth; they do not exempt such plans from

any particular state action; and they do not otherwise single out

employee benefit plans for special treatment (Pet. App. C, 28a-

29a).

The court below also correctly noted that although the Act

contains a reference to ERISA plans, it does not require the

existence of employee benefit plans in order to be effective.

Again assuming that the Act is subject to ERISA § 514, the court

below properly relied upon this Court’s decision in Mackey v.

Lanier Collection Agency & Serv., 486 U.S. 825 (1988) in

concluding that the Act would conflict with ERISA if it counted

all remuneration to workers except benefits from ERISA plans in

calculating the prevailing rate (Pet. App. C, 29a-30a). Thus,

contrary to petitioner’s contention, the opinion of the court below

in no way conflicts with this Court’s many decisions concerning

the scope of ERISA § 514.

The petitioner also is incorrect in suggesting that the

decision of the court below conflicts with the decision of the

Second Circuit in General Electric Company v. New York State,

1. The court rejected that argument, concluding that the Commonwealth

was acting “with an interest in setting policy”, not as a proprietor and that the

law was intended to “establish labor standards” under its “traditional police

power” (Pet. App. C, 27a, n.14). In so concluding the court below failed to

recognize that this “policy-setting” conduct was limited to the

Commonwealth’s own projects.

10

supra. Quite to the contrary, the court below implicitly agreed

with the Second Circuit’s analysis when it concluded that the

Secretary’s previous “line item” approach to enforcement would

be preempted by ERISA (Pet. App. C, 39a). In the view of the

court below, so long as “line item” compliance with the benefits

component is not required, the law does not require or encourage

an employer to provide certain benefits, to alter the manner in

which it provides benefits, or even to provide benefits at all. Jd. p.

37a. On that basis, the court properly distinguished its decision

from the General Electric decision and from decisions of the

Ninth and Tenth circuits in Local Union 598 v. J.A. Jones Constr.

Co., 846 F.2d 1213 (9th Cir.), aff’d, 488 U.S. 881 (1988), and

National Elevator Indus., Inc. v. Calhoun, 957 F.2d 1555 (10th

Cir.), cert. denied, 113 S. Ct. 406 (1992), respectively.? Thus, in

no way can it be said that the decision of the court below is in

substantial conflict with decisions of other courts of appeals.

As the opinion of the court below makes clear, the complaint

of Keystone ABC employers in this case really does not concern

regulation of their employee benefit plans at all. Rather, they

object to the prevailing wage requirements because the

requirements can have the effect of requiring contractors who

choose to do business on Commonwealth projects to pay their

employees additional wages.’ This is true because the law does

not require that any sort of fringe benefits be provided. Indeed, so

long as the wage rate specified is greater than the rate which the

petitioner’s members pay their employees, the law would have

2. The court below also properly noted that the Second Circuit's

objection to the administrative burden placed upon employers attempting to

comply with the benefits portion of the law appeared to stem from the fact that

the New York law required “line item” compliance with the benefits

specification (Pet. App.C, 40a-41a, n.22).

3. Of course, if the Secretary determines that in a given locale their

compensation package prevails, the law will have no effect on their employee

compensation costs.

11

the same effect (albeit to a lesser degree) even if the law did not

permit consideration of fringe benefits.

The following example illustrates the above proposition.

Assume that the members of the Keystone ABC compensate their

workers at the rate of $10.00 per hour in wages and $5.00 in fringe

benefit contributions. Assume further that, for a given project, the

Secretary determines that the wage rate prevailing in the locale

for such work (without regard to fringe benefit contributions) is

$13.00 per hour. In such a case, the ABC members would have the

same complaint regarding the law even though fringe benefits are

not considered; namely, that they will be forced to eliminate their

fringe benefit packages and pay their workers more in wages in

order to remain competitive. Indeed, it is quite likely that in such

a situation, the ABC members would claim that the state must

allow them to credit their fringe benefit costs towards satisfaction

of the wage requirement in order to avoid the adverse effect of the

law on their employee benefit plans. Of course, by so doing, they

would invite the very sort of fringe benefit record-keeping

against which they now protest.

Precisely because in today’s world fringe benefits constitute

a valuable component of employment compensation, the

specification of any wage rate, with or without regard to fringe

benefits, will create the same problem for a contractor who pays

his employees less than the specified wage because in all

likelihood he does provide those employees with fringe benefits.

Of course, as noted by the court below, any contractor who

desires to avoid the impact of those requirements can do so

simply by choosing not to bid on the Commonwealth’s projects

(Pet. App. C, 39a, n.19).

In summary, Pennsylvania’s prevailing wage requirements

are nothing more than a mechanism employed by the

Commonwealth to ensure that workers on its projects are fairly

compensated. This mechanism is especially important given the

12

fact that Pennsylvania law requires the Commonwealth to award

its construction contracts to the lowest responsible bidder. The

Prevailing Wage Act’s requirement that the cost of fringe benefits

be considered in determining what rate of compensation is fair

represents an acknowledgment by the Commonwealth that fringe

benefits generally are a valuable part of an employee’s

compensation. The fact that some employers who choose to work

on the Commonwealth’s construction projects may have to pay

their workers more in wages because of the particular make-up of

their fringe benefit packages does not represent the kind of

“relationship” to employee benefit plans that Congress intended

to prohibit when it enacted ERISA. As the court below properly

noted, “ERISA’s preemption clause aims ‘to ensure benefit plans

will be governed only by a single set of regulations,’ FMC Corp.

v. Holliday, 498 U.S. 52, 60 (1990), not to bestow upon employers

a uniform regulatory and economic environment for all their

activities across the country.” (Pet. App. C, 35a-36a).

Il.

AS COMMERCE CLAUSE LEGISLATION, ERISA

WAS NOT INTENDED TO AND CONSTITUTIONALLY

CANNOT PREEMPT THE COMMONWEALTH OF

PENNSYLVANIA FROM ESTABLISHING WAGE AND

BENEFIT STANDARDS TO BE PAID BY ITS

CONTRACTORS TO WORKERS EMPLOYED ON ITS

CONSTRUCTION PROJECTS.

Even if the Court were to grant certiorari, the Associations

submit that the Court would not reach the issue raised by

petitioner. Rather, as discussed below, it would conclude that the

Act and its implementing regulations are not preempted by

ERISA because they represent proprietary rather than regulatory

acts of the Commonwealth.

It is clear from the above description of the law and its

13

purpose that the Commonwealth’s prevailing wage requirements

are not intended to nor do they in fact “regulate” within the field

of employee benefits because they are limited in application to

employers who choose to work on the Commonwealth’s

construction projects. As this Court recognized in United

Building and Construction Trades Council of Camden County v.

City of Camden, 465 U.S. 208 (1984), this distinction between the

State acting as a regulator and the state acting as a proprietor is

critical for purposes of Commerce Clause preemption analysis.

There the Court noted: “The Commerce Clause acts as an implied

restraint upon state regulatory powers. ... When the State acts

solely as a market participant, no conflict between state

regulation and federal regulatory authority can arise.” 465 U.S. at

220. Camden County involved a challenge to resident hiring

requirements applicable only to Camden County projects.

Because of the above limitation on Congress’ power under the

Commerce Clause, the Court concluded: “Camden may, without

fear of violating the Commerce Clause, pressure private

employers engaged in public works projects funded in whole or

in part by the city to hire city residents.” 104 S.Ct. at 1029.

The Court reiterated this distinction recently in Building &

Construction Trades Council v. Associated Builders &

Contractors, 113 S. Ct. 1190 (March 8, 1993). In that case, the

Massachusetts Chapter of the Associated Builders and

Contractors challenged the Massachusetts Water Resources

Authority’s right to impose a project labor agreement on the

Boston Harbor clean-up project on the grounds of ERISA and

National Labor Relations Act preemption. The trial court rejected

the ABC’s ERISA challenge, concluding that ERISA was not

intended to prohibit a state or local authority from requiring

contractors to participate in identified employee benefit plans on

one of their projects. See Associated Builders & Contractors v.

MWRA, 935 F.2d 345 (ist Cir. 1991). The ABC persisted in its

claim that the NLRA preempted the contractual requirement,

however, arguing that the requirement constituted state

14

regulation of an area that Congress intended to be left for

determination by the free play of the economic forces of

management and labor.

This Court acknowledged that the Massachusetts Water

Resource Authority’s requirement constituted direct interference

within this protected area of labor-management relations insofar

as any persons seeking to do business on the project were

concerned. Nonetheless, the Court concluded that the State’s

action was not preempted because it constituted proprietary acts

of the state rather than regulation within a protected zone. 113 S.

Ct. at 1196.

The Court went on to hold that so long as the State’s

procurement activities are not used for regulatory purposes, the

State should be free to impose the same requirements on its

contractors that a private purchaser lawfully may impose. 113 S.

Ct. at 1198. Importantly, the Court noted that even though such

requirements may force government contractors to alter their

mode of operation, those contractors can avoid the impact of such

requirements by choosing not to do business with the State. 113 S.

Ct. at 1198.

Building & Construction Trades Council v. ABC concerned a

single project specification. However, on June 9, 1993, the Ninth

Circuit Court of Appeals did not hesitate in applying that analysis

to a section of Oregon’s Prevailing Wage statute which, like

Pennsylvania’s, applied only to state and local public works

projects. Babler Brothers, Inc. v. Roberts, 995 F.2d 911 (9th Cir.

June 9, 1993). In that case, the appellants contended that the

statute interfered with collective bargaining relationships -

because it did not establish an across the board minimum

standard applicable to all employers and that enforcing the statute

in today’s world had the effect of making it more difficult for non-

union contractors to bid on public jobs. According to the

appellants, the statute interfered with collective bargaining

15

relationships by weighing in on the side of the union as opposed

to nonunion contractors on public jobs. 995 F.2d at 915-16.

The Ninth Circuit rejected appellants’ preemption claim,

explaining:

We believe that these concerns are adequately

addressed by the Supreme Court’s recent

decision in Associated Builders. As in

Associated Builders, the State here has not

endeavored to regulate the bargaining

relationship of employers and employees.

Rather, the State is enforcing prescribed

working conditions on public projects in

which the State and local jurisdictions have a

proprietary interest. In Associated Builders,

Massachusetts restricted bidding to union

contractors and subcontractors and the Court

held the restriction was not pre-empted. The

obstacle to non-union bidding under the

Oregon statute cannot possibly be as great as

the obstacle imposed in Massachusetts by the

requirement that all contractors on the job be

Signatory to a collective bargaining

agreement. Accordingly, we conclude that the

Oregon statute is not pre-empted by federal

labor law. Any remedy for the appellants is to

be found in the legislature and not in the

federal courts.

995 F.2d at 916 (emphasis added). The Ninth Circuit recently

reaffirmed the Babler analysis in McCullom v. Roberts, 17 F.3d

1219, 1223 (9th Cir. 1994).4

4. In Lott Constructors, Inc. v. Camden County Board of Chosen

Freeholders, 1994 WL 263851 (D. N.J. 1994), the U.S. District Court for the

(Cont'd)

16

Pennsylvania’s prevailing wage requirements similarly do

not constitute regulation within the zone protected by § 514 of

ERISA. Rather, the requirements have the sole purpose and effect

of ensuring that workers on the Commonwealth’s projects are

fairly compensated. Although they are codified requirements,

they do nothing more than establish uniform contract

requirements for the Commonwealth’s construction projects.

Admittedly, contractors who have wage and benefit costs which

do not match the wage and benefit specifications on a given

project will have to alter the wage component or benefit

component of their compensation package if they desire to

participate on the project. However, as the Supreme Court noted

in Building & Construction Trades Council v. ABC, any

contractor can avoid the impact of those requirements by

choosing not to do business on the Commonwealth’s construction

projects.

Viewed in this light, Pennsylvania’s prevailing wage

requirements clearly are not the type of state action with which

Congress was concerned when it enacted ERISA. Just as

Congress did not intend to prohibit the Commonwealth from

establishing wage and benefit standards for its own workers, so

also it did not intend nor constitutionally could it have intended to

prohibit the Commonwealth from establishing wage and benefit

standards applicable to workers employed on its projects by

independent contractors. BCTC of Camden County, 104 S. Ct.

1028 (“for purposes of the Commerce Clause everyone employed

on acity public works projectis. . . ‘working for the City’ ”); see

also Lott Constructors, Inc. vy. Camden County Board of Chosen

Freeholders, supra.

(Cont'd)

District of New Jersey extended this distinction to ERISA preemption,

upholding a Camden County resolution that workmen employed on all of its

projects be paid specified wages and benefits in accordance with a specified

project labor agreement. /d. at *18.

17

CONCLUSION

For all of the above reasons, this Court should deny the

petition.

Respectfully submitted,

JOHN H. WIDMAN

Counsel of Record

BRIAN J. McGAUGHAN

McALEESE, McGOLDRICK

& SUSANIN, P.C.

Attorneys for Amicus Curiae