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

7 © IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1994

KEYSTONE CHAPTER, ASSOCIATED BUILDERS AND

CONTRACTORS, INC., IN REPRESENTATION OF ITS MEMBERS,

Petitioner,

V.

SECRETARY OF LABOR & INDUSTRY FOR THE

COMMONWEALTH OF PENNSYLVANIA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

BRIEF OF AMICUS CURIAE BY

STEAMFTITERS LOCAL UNION NO. 420,

UNITED ASSOCIATION OF JOURNEYMEN AND

APPRENTICES OF THE PLUMBING AND PIPE-

FITTING INDUSTRY, FOR THE RESPONDENT

Richard B. Sigmond, Esquire

Counsel of Record

Terence E. Coles, Esquire

SAGOT, JENNINGS & SIGMOND

150 South Independence Mall West

Suite 1172

Philadelphia, Pennsylvania 19106-3490

(215) 351-0669

Counsel for Amicus Curiae

PACKARD PRESS® / APPELLATE DIVISION, 1617 JFK BOULEVARD, PHILA, PA 19103 (215) 563-9000 -<qitsgeoss

No. 94-1237. |

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1994

KEYSTONE CHAPTER, ASSOCIATED BUILDERS AND

CONTRACT ORS, INC., IN REPRESENTATION OF ITS MEMBERS,

. Petitioner,

vs.

SECRETARY OF LABOR & INDUSTRY FOR THE

COMMONWEALTH OF PENNSYLVANIA,

Respondent.

MOTION FOR LEAVE TO FILE BRIEF AMICUS

CURIAE AND BRIEF AMICUS CURIAE

Steamfitters Local Union No. 420, United Association of

Journeymen and Apprentices of the Plumbing and Pipefitting

Industry hereby respectfully moves for leave to file the

attached brief amicus curiae in this case. The consent of the

attorney for the respondent has been obtained. The consent of

the attorney for the petitioner was requested but not received.

The interest of Steamfitters Local Union No. 420 in this

case arises from the fact that its members have a substantial

interest in obtaining and retaining employment on public

works projects that are covered by the Pennsylvania Prevail-

ing Wage Act, 43 PS. §§165-1, et seq.. A reversal of the deci-

sion of the Court below will automatically affect existing col-

lective bargaining agreements to which the Union is a party

and the collective bargaining relationship between the Union

and all employees performing work on public projects.

Respectfully submitted,

Richard B. Sigmond, Esquire

Counsel for Steamfitters Local Union No. 420

SAGOT, JENNINGS & SIGMOND

1172 Public Ledger Building

Philadelphia, PA 19106

(215) 351-0669

DATE: 2/15/95

COMMONWEALTH OF PENNSYLVANIA

OFFICE OF ATTORNEY GENERAL

ERNEST D. PREATE, JR. February 14, 1995

ATTORNEY GENERAL

Reply to:

15th Fl., Strawberry Sq.

Harrisburg, PA 17120

717-783-1471

FACSIMILE and U.S. MAIL

Richard B. Sigmond, Esquire

Sagot, Jennings & Sigmond

1172 Public Ledger Building

Independence Square

Philadelphia, PA 19106-3490

Re: Keystone Chapter ABC v. Secretary of Labor and

Industry

Dear Mr. Sigmond:

As we discussed over the telephone, respondent consents

to the filing of an amicus brief on behalf of the Steamfitters

Local Union No. 420, opposing the petition for a writ of cer-

tiorari in this matter.

Very truly yours,

SUSAN J. FORNEY

Senior Deputy Attorney General

SJF: dap

cc Elaine Mead

TABLE OF CONTENTS

STATEMENT OF INTERESTS OF AMICUS CURIAE

SUMMARY OF ARGUMENT .................0006-

'

Il.

Il.

THE PENNSYLVANIA PREVAILING WAGE

ACT IS A VALID EXERCISE OF HEALTH AND

SAFETY REGULATION AND IS NOT PRE-

PEE OPE SEED no oti ved eabesdsccscececesss

THE THIRD CIRCUIT’S DECISION UPHOLD-

ING THE PENNSYLVANIA PREVAILING

WAGE ACT FOLLOWS SUPREME COURT

EE rr yer Tee Perr ere ee ee

THE THIRD CIRCUIT’S DECISION UPHOLD-

ING THE PENNSYLVANIA PREVAILING

WAGE ACT IS CONSISTENT WITH OTHER

FEDERAL CIRCUIT COURT DECISIONS. .....

eee ek dN GAS EMO aRVO SSeS ees 20s .0

6

TABLE OF CITATIONS

Cases Cited: Page

Aetna Life Insurance v. Borges, 869 F.2d 142 (2d Cir.

1989), cert. denied, 493 U.S. 811 (1989) ............ 6

Associated Builders & Contractors v. Baca, 769 F.Supp.

Er re a es OE ks so tl eo keke ee enaeens 7

Associated Builders & Contractors, Saginaw Valley Area

v. Perry, No. 93-CV-10016-BC, 1994 WL 668241

(E.D.Mich.), 2 WH Cases 2d (BNA) 754.......... 7, 8

District of Columbia v. Greater Washington Board of

(i) ee o> ee eS e+ 4,5

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987)... .3, 8

General Electric Co. v. New York State Dept. of Labor,

891 F.2d 25 (2d Cir. 1989), cert. denied, 496 U.S. 912

CIR os ie wow aes Ua ee RS Ee en es 6

Keystone Chapter, Assoc. Builders and Contractors, Inc. v.

Foley, 37 F.3d 945 (3rd Cir. 1994) .......... a 2,6, 7,8

Kulzer Roofing v. Com. Dept. of Labor and Industry, 68

Pa.Cmwilth. 642, 450 A.2d 259 (Pa. Cmwith. 1982).. 3

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

(9th Cir. 1988), aff’d, 488 U.S. 881 (1988).......... 6

Mackey v. Lanier Collection Agency & Service Co., 486

Re I 6.8 5b oss Fa oon eee sda ases 5

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

Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724

ENN + sich 6 5 pk wok ode a haa ae ee es eee tua tes 3

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

(10th Cir. 1992), cert. denied, 113 S.Ct. 406, 121

Ree ee I i ok6 4 ks ha oko a hawet Glee thee 6

Pennsylvania Prevailing Wage Board of Appeals v. Steve

Black, Inc., 27 Pa. Cmwlth. Ct. 21, 365 A.2d 685

TABLE OF CITATIONS

Cases Cited: Page

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

Gahad, S72 EE. TOG CRIED «occ sv cncccctvasuccnes 6

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983)........ 4

Standard Oil Co. v. Agsalud, 633 F.2d 760 (9th Cir. 1980),

gE eer ee 6

United States v. Binghampton Const. Co., 347 U.S. 171

er ee entre Merry Kner 2

United Wire, Etc. v. Morristown Memorial Hosp., 995 F.2d

1179 (3d Cir. 1993), cert. denied, 114 S.Ct. 382, 126,

Ree ee CD 6-0 ns 5055 Xb eds ceeeeeee aes 4,6

Statutes Cited:

ie Se PE ove 60s 0o500005b sus eee 3

MUSE. CIT. oooncecccck vee 3

STATEMENT OF INTERESTS OF AMICUS CURIAE

Steamfitters Local Union No. 420, United Association of

Journeymen and Apprentices of the Plumbing and Pipefitting

Industry (“Local 420” or “Union”) is a labor organization that

represents more than 3500 skilled steamfitters, pipefitters and

welders in Southeastern Pennsylvania. The Union represents

employees who perform steamfitting, pipefitting and welding

work on a wide variety of private and public construction

projects as well as numerous skilled classifications in the heat-

ing, ventilation and air conditioning service industry. Its mem-

bership includes apprentices and tradespersons who, through

job experience and classroom instruction, have obtained jour-

heymen status. Local 420 is signatory to a number of collective

bargaining agreements with employers in the construction

industry. The collective bargaining agreements establish wages

and other terms and conditions of employment, including con-

tributions to employee benefit funds regulated by ERISA, for

work performed in the Private sector as well as on public

works projects.

Members of Local 420 have substantial interest in obtain-

ing and retaining employment on public works projects that

the State and local governments typically award to the lowest

responsible bidder. Local 420 members have worked in the

past, are presently working, and desire to work in the future

on public works construction projects that are covered by the

Act. In upholding the Act, the Third Circuit Court of Appeals’

decision directly effects the wages of Local 420 members who

are currently employed on public works projects. The earnings

of Local 420 members on future contracts are similarly

affected in a beneficial manner, as the wage and benefit rates

in the collective bargaining agreements to which Local 420 is

a party closely parallel the rates determined by the Secretary

of Labor and Industry for public works projects.

For members of Local 420 and other similarly-situated

tradespersons, the decision of the Court of Appeals results in

work opportunities and stable wages and fringe benefits on

1. The cost of labor on public works projects is an integral part of the

competitive bid submitted by a Prospective contractor.

1

2

public works projects. Employers who are bound by collective

bargaining agreements are placed on a competitive footing in

bidding on public contracts vis-a-vis employers who offer

fewer or no fringe benefits to their employees. If the Act were

to be overturned, employers who offer no benefits will have a

decided advantage as public works contracts are typically

awarded to the lowest responsible bidder. United States v.

Binghampton Const. Co., 347 U.S. 171 (1954).

SUMMARY OF ARGUMENT

The Pennsylvania Prevailing Wage Act (“Act”) is a valid

exercise of state power in the area of health and welfare and

is not preempted by ERISA. In upholding the Act, the Third

Circuit decision, Keystone Chapter, Assoc. Builders and Con-

tractors, Inc. v. Foley, 37 F.3d 945 (3rd Cir. 1994) (“Keystone”),

follows Supreme Court precedent and is consistent with other

Circuit decisions.

The Act does not relate to any benefit plan covered by

ERISA, and, therefore, does not fall under ERISA’s preemp-

tion standard. The Act directs the Secretary of Labor and

Industry to set minimum prevailing wages, including a cash

component and a benefit component. The benefit component

can be satisfied by contributions to employee benefits or addi-

tional cash wages. Therefore, the Act does not place any

restrictions or requirements on ERISA benefits, but rather,

only demands that certain wages be paid. In sum, the Act can

be fulfilled without any reference to ERISA-covered benefit

plans and neither directly or indirectly regulates conduct

towards ERISA plans.

ERISA’s preemption clause was not intended to prevent

states from regulating in the area of wages or employee com-

pensation generally. Although state wage regulation, such as

the Act, may affect employer decisions regarding ERISA-

covered benefit plans, both this Court and lower federal courts

have recognized that this type of affect falls well outside the

parameters of ERISA preemption. Thus, as a legitimate exer-

cise of state regulation, the Act is not preempted by ERISA

and the “Petition for a Wnt of Certiorari” should not be

granted.

3

ARGUMENT

I. THE PENNSYLVANIA PREVAILING WAGE ACT IS

A VALID EXERCISE OF HEALTH AND SAFETY

REGULATION AND IS NOT PREEMPTED BY

ERISA. ,

The purpose of the Act is to “protect workmen from sub-

standard pay by ensuring that they receive the prevailing mini-

mum wage.” Kulzer Roofing v. Com. Dept. of Labor and

Industry, 459 A.2d 259, 261 (Pa. Cmwith. Ct. 1982), citing,

Pennsylvania Prevailing Wage Appeals Bd. v. Steve Black, Inc.,

27 Pa. Cmwith. Ct. 21, 365 A.2d 685 (1976). In making a deter-

mination of the prevailing minimum wage, the “employer and

employe contributions for employe benefits pursuant to a

bona fide collective bargaining agreement shall be considered

an integral part of the wage rate.” 43 P.S.A. § 165-7. To accom-

plish this, the Act requires the Secretary set a prevailing wage

that consists of a cash component and may include a benefits

component.

This Court has recognized that Congress never intended

ERISA to infringe on traditional areas of state control such as

health and welfare. The state regulation of wages is one of

those “areas of traditional state regulation that ... Congress

did not intend to preempt.” Metropolitan Life Ins. Co. v. Mas-

sachusetts, 471 U.S. 724, 740 (1985). Similarly, the establish-

ment of minimum labor standards is a traditional police power

generally left to the states. Fort Halifax Packing Co, Inc. v.

Coyne, 482 U.S. 1, 21 (1987).

Il. THE THIRD CIRCUIT’S DECISION UPHOLDING

THE PENNSYLVANIA PREVAILING WAGE ACT

FOLLOWS SUPREME COURT PRECEDENT

The Third Circuit’s decision upholding the Act conforms

with the rulings of the Supreme Court. ERISA’s preemption

section — §514(a) — promotes uniform regulations of

employee benefits plans by preempting “any and all State law

insofar as they may now or hereafter relate to any employee

benefit plan” covered by ERISA. 29 U.S.C. § 1114(a) (empha-

sis added). This Court has interpreted “relate to” to mean

4

having a “connection with”, or “reference to”, ERISA-

covered plans, and the Court has cautioned that 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 v. Delta Air Lines, Inc., 463

US. 85, 97, 100 n.21 (1983). See also, District of Columbia v.

Greater Washington Bd. of Trade, ___ U.S. ___, 113 S.Ct. 580,

583 n.1 (1992). The Act has just such a “remote” and “periph-

eral” relationship to ERISA.

The Petitioner concedes that the Act and regulations do

not bear any direct relationship to ERISA plans. The Act

does not “single out” ERISA plans for special treatment or

even refer to such plans. United Wire, Etc. :. Morristown

Memorial Hosp., 995 F.2d 1179, 1192 (3d Cir. 1993), cert.

denied, 114 S.Ct. 382, 126, L.Ed.2d 332 (1993). Rather, the

Petitioner incorrectly argues that the Act is preempted by vir-

tue of its indirect relation to ERISA. Although a state law’s

indirect relation to ERISA can be grounds for preemption,

the Act bears no such relationship.

The Act’s relationship to ERISA is most analogous to the

New York disability benefits law upheld by this Court in Shaw,

supra. Although disability benefits are exempt from ERISA,

the New York law allowed employers tc include these benefit

obligations in multibenefit ERISA plans which were subject to

ERISA preemption. Even so, this Court held that the New

York law was not preempted because, even though the State

was prohibited from forcing an employer to alter its ERISA

plan, it could “force the employer to choose between provid-

ing disability benefits in a separately administered plan and

including the state-mandated benefits in its ERISA plan.”

Shaw, supra, at 108 (emphasis added). Thus, if New York was

dissatisfied with the disability benefits included in an employ-

er’s ERISA plan, it could avoid ERISA preemption by forcing

the employer to maintain a separate disability benefits plan.

The Act, like the New York law, refrains from placing any

requirements on ERISA benefits and only requires that an

employer fulfill a wage obligation and not a benefits obliga-

tion. Just as the New York law can be fulfilled by maintaining

a separate disability plan, the Act can be fulfilled using non-

5

ERISA benefit contributions or cash wages. As the Third Cir-

cuit noted, “[l]ike the New York law in Shaw, the Prevailing

Wage Act is not preempted because an employer may comply

without making any adjustment in its ERISA plans.” Key-

stone, 37 F.3d at 961. See also, Mackey v. Lanier Collection

Agency & Service Co., 486 U.S. 825, 830-841 (1982) (approv-

ing garnishment law that would apply to ERISA plan benefits

as well as other assets of debtors).

The state statutes and regulations that this Court has

found preempted by ERISA are distinguished from the Penn-

sylvania law in that they directly or indirectly require compli-

ance with ERISA benefits. In District of Columbia v. Greater

Washington Bd. of Trade, __ U.S. __, 113 S.Ct. 580 (1992)

(“Greater Washington”), a District of Columbia worker com-

pensation law was held preempted by ERISA because it

required employers who provided health insurance for their

employees to provide equivalent workers’ compensation. The

District could only determine an employer’s workers compen-

sation benefit obligation by reference to that employer’s obli-

gations under its ERISA plan. Therefore, the required health

insurance was held preempted because it was a welfare benefit

plan regulated by ERISA. Greater Washington, supra, at 583.

The Act is clearly distinct from the worker compensation

law in Greater Washington in that it does not regulate a plan

covered under ERISA. Whereas the District’s law was predi-

cated on the existence of ERISA plans, the Pennsylvania law

is only predicated on the existence of a prevailing wage.

Under the Act, the Pennsylvania Secretary of Labor and

Industry could measure a locality’s prevailing benefits contri-

butions even if all of the contributions were non-ERISA ben-

efits. Similarly, a public works contractor could satisfy the ben-

efits component of a given prevailing wage by only making

non-ERISA benefit contributions, or by paying the equivalent

in cash. As the Third Circuit noted, “[i]n the absence of

ERISA plans, the Prevailing Wage Act could be meaningfully

applied.” Keystone, 37 F.3d at 957.

6

Ill. THE THIRD CIRCUIT’S DECISION UPHOLDING

THE PENNSYLVANIA PREVAILING WAGE ACT IS

CONSISTENT WITH OTHER FEDERAL CIRCUIT

COURT DECISIONS.

The Third Circuit decision and ERISA preemption analy-

sis conforms with other federal Appellate Court decisions that

have found other state laws “too tenuous, remote, or periph-

eral” to warrant ERISA preemption. A previous Third Circuit

decision held that a New Jersey statutory scheme setting mini-

mum hospital rates was not preempted despite its obvious eco-

nomic impact on ERISA plans because the statute could be

“meaningfully applied” in the absence of any ERISA plans.

United Wire, Etc. v. Morristown Memorial Hosp., 995 F.2d

1179 (3d Cir. 1993), cert. denied, 114 S.Ct. 382, 126 L.Ed. 332

(1993). In Aetna Life Ins. Co. v. Borges, 869 F.2d 142, 148 (2d

Cir. 1989), cert. denied, 493 U.S. 811 (1989), the Second Circuit

upheld escheat laws that affected ERISA plans because a

law’s “indirect impact alone is not sufficient”. See also,

Rebaldo v. Cuomo, 749 F.2d 133, 140 (2d. Cir. 1984), cert.

denied, 472 U.S. 1008 (1985) (statute regulating hospital rates

that affected ERISA plans’ ability to negotiate rates held not

preempted).

State laws that Circuit Courts have found ERISA pre-

emption can be distinguished from the Act by their far greater

affect on ERISA benefits. Local Union 598 v. J.A. Jones

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

(1988) (state prevailing wage statute requiring contributions to

apprenticeship program, an ERISA plan, preempted by

ERISA), aff’d, 488 U.S. 881 (1988); Standard Oil Co. of Cali-

fornia v. Agsalud, 633 F.2d 760 (9th Cir. 1980), aff’d, 454 U.S.

801 (1981) (Hawaii law requiring comprehensive health ben-

efits for all workers preempted by ERISA); National Elevator

Industry, Inc. v. Calhoun, 957 F.2d 1555, 1561 (10th Cir. 1992),

cert. denied, 113 S.Ct. 406, 121 L.Ed.2d 331 (1992) (Oklahoma

law reducing the minimum wage for employees only in speci-

fied apprenticeship program, which was an ERISA plan, pre-

empted by ERISA); General Electric Co. v. New York State

Dept. of Labor, 891 F.2d 25 (2d Cir. 1989), cert. denied, 496

U.S. 912 (1990) (New York prevailing wage law requiring ben-

7

efit contributions in particular categories preempted by

ERISA). Unlike these laws, the Pennsylvania Act neither

favors nor restricts ERISA benefits.

Two lower court decisions have incorrectly interpreted

both the ERISA preemption test applied by this Court and

the Third Circuit Keystone decision. See Associated Builders &

Contractors, Saginaw Valley Area v. Perry, No. 93-CV-10016-

BC, 1994 WL 668241 (E.D.Mich.), 2 WH Cases 2d (BNA) 754

(“Perry”); Associated Builders & Contractors v. Baca, 769

F.Supp. 1537 (N.D. Cal. 1991)(“Baca”). In both cases, the Dis-

trict Courts held that their respective state prevailing wage

laws were preempted by ERISA because the laws did not

credit fringe benefits paid in excess of the fringe benefit com-

ponent of the prevailing wage requirement. By limiting the

amount of benefits that could be subtracted from the per diem

wage calculations, these lower courts held that the laws

‘related to’ and regulated ERISA by discouraging payment of

benefits at higher than prevailing levels. Perry, 1994 WL

668241, at *4, 2 Wage & Hour Cas. at 758; Baca, 769 F.Supp.

at 1548. The Petitioner — presenting a similar argument in

this — case misinterprets the legal standard necessary for

ERISA preemption.

When Petitioner presented this position on appeal to the

Third Circuit, that court observed the irony of this argument:

the party objects to a state prevailing wage law on the grounds

that is does not relate enough to employee benefits and ben-

efit plans. Thus, Petitioner suggests that the level of required

cash wages should be tied to the level of benefits, whereas the

Act currently fixes a cash wage component independent of a

benefits component. As the Third Circuit noted, “[a] state law

does not dictate or restrict the choices of ERISA plans by

having nothing to do with employee benefits.” Keystone, 37

F.3d at 959.

In fact, the objection raised by the Petitioner and the

Michigan District Court could be raised against a prevailing

hourly cash wage law that did not even have any benefits

component. “Such a law would create the same “disincentive”

against awardirg benefits,“ the Third Circuit stated in Key-

stone, "because employers would have to pay the wage no

8

matter what level of benefits they provided.“ Jd. Like the ben-

efits component, the minimum cash wage requirement

imposes an additional cost on the Pennsylvania works contrac-

tor and could influence its choices regarding ERISA benefits

contributions. However, any wage regulation could have this

effect and such wage regulation is clearly not preempted by

ERISA. Massachusetts v. Morash, 490 U.S. 107 (1989) (Massa-

chusetts statute requiring employers to pay employees for all

unused vacation time upon discharge not preempted because

law was instance of wage regulation and did not relate to ben-

efit plans); Fort Halifax, 482 U.S. at 3-4 (Maine statute requir-

ing employers to give severance payment of one week’s salary

for every year an employee had worked in event of plant clos-

ing not preempted).?

The Third Circuit’s decision in Keystone upholds a valid

exercise of state wage regulation. In its ruling, the Third Cir-

cuit follows Supreme Court precedent and conforms with

other Appellate Court decisions. This Court should not grant

this Petition given the absence of any real conflict among the

lower federal courts.

2. Both the Petitioner and the Eastern District Court of Michigan

missed this crucial distinction between the Pennsylvania and District of

Columbia laws and, based on this misperception, incorrectly accused the

Third Circuit of using a discredited two-step ERISA preemption analysis.

Perry, 1994 WL 668241, at *5, 2 Wage & Hour Cas. at 757. Greater Wash-

ington held that if a state law mandates disability benefits that are covered

under ERISA, the law is preempted. Contrary to the Eastern District’s opin-

ion, the Third Circuit used the same analysis. However, unlike the District's

law, the Act does not mandate any benefits covered under ERISA and

therefore, the Act is not preempted. There was no “second step” in the

Third Circuit’s analysis.

9

CONCLUSION

The Petition for a Writ of Certiorari should not be

granted.

Respectfully submitted,

RICHARD B. SIGMOND

Counsel of Record

SAGOT, JENNINGS & SIGMOND

Attorney for Amicus Curiae

1172 Public Ledger Building

Philadelphia, PA 19106

(215) 351-0669

February 15, 1995