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

Supreme Court brief1995

Ask Donna

What actually matters in this document.

Text

: SE eree _ ko

ELLER

——

IN THE eid

SUPREME COURT OF THE UNITED STATES

October Term, 1994

KEYSTONE CHAPTER,

ASSOCIATED BUILDERS AND CONTRACTORS, INC.,

in representation of its members,

Petitioner,

JOHNNY J. BUTLER,

in his official capacity as

Acting Secretary of Labor and Industry

for the Commonwealth of Pennsylvania,

Respondent.

On Writ of Certiorari

To the United States Court of Appeals

For the Third Circuit

BRIEF IN OPPOSITION

ERNEST D. PREATE, OR.

Attorney General of Pennsylvania

By: JOHN G. KNORR, III

Chief Deputy Attorney General

Chief, Litigation Section

SUSAN J. FORNEY

Senior Deputy Attorney General

Counsel of Record

Office of Attorney General

15th Fl., Strawberry Square

Harrisburg, PA 17120

(717) 783-1471

QUESTION PRESENTED

Whether Pennsylvania’s Prevailing Wage Act

relates to employee benefit plans in more

than a "tenuous, remote and peripheral

manner" and therefore is pre-empted by

ERISA?

LIST OF PARTIES

The parties listed in the petition

for certiorari are accurate except that

respondent Thomas P. Foley, Pennsylvania’s

Secretary of Labor and Industry has been

succeeded in that office by Acting

Secretary Johnny J. Butler, who should be

substituted as respondent. See Sup. Ct.

ms Seeds

TABLE OF CONTENTS

Page

QUESTION PRESENTED................. i

ee | ii

TABLE OF CONTENTS.................. iii

TABLE OF AUTHORITIES............... iv

STATEMENT OF THE CASE.............. 1

REASONS FOR DENYING THE WRIT....... 11

I. THE PETITION DOES NOT PRESENT

AN ISSUE OVER WHICH THE COURTS

OF APPEALS ARE IN CONFLICT.... 11

II. THE ISSUE PRESENTED BY THE

PETITION WILL HAVE NO IMPACT

ON THE LAW OF ERISA

PRE-EMPTION BEYOND THE FACTS

OP TRIS CAMR. . . . . 5 ccc ccucae. 17

III. THE DECISION OF THE COURT OF

APPEALS IS CONSISTENT WITH

PRIOR DECISIONS OF THIS COURT. 19

nS 6 a 4 6-5 6 sp db 4 wo 4 ke kw es os 26

- iii -

TABLE OF AUTHORITIES

Cases: Page

Alessi v. Raybestos-Manhattan,

O02 GU.8. See 429s) «ooh hes oo 12

District of Columbia v.

Greater Washington Board of Trade,

506 U.S. _, 121 L.Ed.2d 513,

ek ee Ae oo! | hs rs 9,240

Fort Halifax Packing Co. v. Coyne,

S5e Gs Ce 6 004 6% 60 8 8 19,20

General Electric Co. v.

New York State Department of Labor,

B9i F.iaea ae taa Cee. ives) ..«.2k,k0,13

14,17,18

Lycoming County Nursing Home v.

Pennsylvania,

627 A.2d 238,

(ha. Commie. Cl. 1993) ....-.4. 2

Mackey v.

Lanier Collection Agency & Serv.,

S66 U.8. GAS (AO) «ssc cecess 7

Massachusetts v. Morash,

690 G.8. ABT Ciao) «usc ceeces 19,20

National Elevator Industry, Inc.

v. Calhoon,

957 F.2d 1555(10th Cir.1992). 18

Cases: Page

New York State Conference of

Blue Cross and Blue Shield Plans

v. Travelers Insurance Co.,

14 7.36 7Oe (26 Cir.),

cert. granted,

63 U.S.L.W. 3291 (1994)...... 14

Shaw v. Delta Air Lines, Inc.,

463 U.8. 85, 97° (4963) ..«2... 6,9,21

Statutes:

Employee Retirement

Income Security Act, (ERISA)

239 U.8.C. GaGe et U3) 04644 cece es 22

ae GVibeGs BAe) 44-4 eee eee p |

Pa. Stat. Ann., tit. 43, §165-1 1

Pa. Stat. Ann., tit. 43, §165-5 2

Pa. Stat. Ann., tit. 43, $165-7... 2

Pa. Stat. Anmh., tit. 63, 8a65<i7.. 1

Regulations:

S De. Cee es Bs eos ee ee wee eee 4

34 Pa. Gome §9.301-9.112....<cace:s 3

34 Fe. Coe Bec ss cokes cae eee 3

Rules of Court:

Dap. CE. B.. FO Bisse as Cee ii

STATEM fe

Pennsylvania’s Prevailing Wage Act,

Pa. Stat. Ann., tit. 43, §§165-1 through

165-17 (Purdon’s 1992), governs’ the

minimum wages to be paid to workers on

public work projects. Petitioner claims

that the Act, its regulations and an

administrative order implementing it are

pre-empted by Section 514(a) of the

Employee Retirement Income Security Act,

29 U.S.C. §1141(a) (ERISA).

? Petitioner is Keystone Chapter,

Associated Builders and Contractors, Inc.,

is a non-profit Pennsylvania corporation

whose members are involved in the

construction industry. C.A. App. 9, 66.'

Respondent is Pennsylvania’s Secretary of

Labor and Industry, who is’ generally

responsible for administering and

' CLA. App. refers to the appendix

filed in the Court of Appeals.

enforcing the Act. C.A. App. 9; Pet. App.

l3a, 14a.

The purpose of the Act "is to protect

workers employed on public projects from

substandard wages, " Lycoming County

Nursing Home v. Pennsylvania, 627 A.2d

238, 242 (Pa. Commw. ct. 1993), by

requiring that they receive at least the

"minimum prevailing wages" as determined

by the Secretary. Pa. Stat. Ann., tit.

43, §§165-5, 165-7. The Act specifically

requires the Secretary, in determining the

"minimum prevailing wages" to include

"employer and employe contributions for

employee benefits," ibid., and it is this

Provision which has given rise to this

case.

In accordance with this provision,

the wage rates established by the

Secretary contain both a wage component

and a benefits component. Pet. App. l4a.

EEE

The Act directs the Secretary to determine

wage rates by locality and job

classification, but neither the Act nor

its implementing regulations, 34 Pa. Code

§§9.101-9.112, give any further guidance

on just how the benefit component of the

wage rate is to be computed.?

Over the years the Secretary’s

approach to this issue has varied. Pet.

App. 15a. Before 1988 the Secretary

focused on the total contributions toward

benefits without regard to the specific

types of benefits funded or the specific

@ Section 9.102 of the regulations

does define contributions for empioyee

benefits as:

[F]ringe benefits’ paid or to be

paid, including payment’ made

whether directly or indirectly,

to the workmen for Sick,

disability, death, other than

Workmen’s Compensation, medical,

Surgical, hospital, vacation,

travel expense, retirement and

pension benefits. 34 Pa. Code

§9.102.

Te ee nS Oa

amount contributed to each. App. 15a,

nS. Later the Secretary took a "line-

item" approach, requiring employers to

contribute to benefits in the type and in

the amount the Secretary found to prevail

in each locality. Ibid. At all times,

however, employers could fulfill their

obligation either by making contributions

to employee benefits, or by paying their

employees the equivalent of those

contributions in cash. Pet. App. 14a; 9

Pa. Code §9.106.

In 1992, the Prevailing Wage Appeal

Board, an administrative board charged

with adjudicating grievances arising from

the administration of the Act, decided

that the line-item approach was no longer

appropriate with regard to ERISA plans.

In response to the grievances of the

petitioner and others, the Board issued a

Declaratory Order requiring the Secretary

to give ERISA plans special consideration

in determining compliance with’ the

benefits component of the Act. Under the

Order, contributions to ERISA plans were

to be credited against the benefits

component of the wage rate regardless of

whether the benefits provided matched the

categories the Secretary determined were

prevailing. Pet. App. 17a-19a; C.A. App.

70-76.

: * Petitioner then brought this

action seeking to have the Prevailing Wage

Act, its regulations and the Declaratory

Order declared pre-empted by ERISA.* On

cross-motions for summary judgment the

District Court entered summary judgment in

favor of Petitioner and declared the Act,

its regulations and the Declaratory Order

3 Petitioner also raised

constitutional claims which were not

addressed by either the district court or

the Court of Appeals.

invalid and unenforceable. Pet. App. 57a-

58a.

The District Court reasoned that the

Act could affect employee benefit levels

by discouraging employers from paying more

than the prevailing rate toward benefits.

Pet. App. S4a. The District Court also

concluded that as administered the Act

required employers to calculate what they

paid toward the wages and benefits which

imposed Ongoing administrative burdens

that "fall within the parameters of ERISA

plans." App. 53a-54a. Finally, the

District Court observed that the

Declaratory Order specifically mentioned

ERISA plans and therefore, in the District

Court’s view, "related to" employee

benefit plans under the holding of Shaw v.

Delta Air Lines, Inc., 463 U.S. 85, 97

(1983). Pet. App. 53a-54a.°

ri The Court of Appeals affirmed

the District Court’s order with regard to

the Declaratory Order, but reversed it

with regard to the Act and its

regulations. The Court of Appeals agreed

that the Declaratory Order was pre-empted

because it singled out ERISA plans for

special treatment contrary to this Court’s

teaching in Mackey v. Lanier Collection

Agency & Serv., 486 U.S. 825 (1988). Pet.

App. 25a-26a.

The Court of Appeals then turned to

the Act and its regulations. It held that

they were not pre-empted because they

could reasonably be interpreted as not

“ The district court went on to reject

the Secretary's argument that the

reference to contributions for fringe

benefits was severable from the Act. Pet.

App. 55a-56a.

requiring payment of benefits as part of

the prevailing wage. Pet. App. 27a.

Rather, the Court of Appeals concluded

under the Act and regulations an employer

had the option to pay the prevailing wage

entirely in cash; or, to satisfy part of

the wage through contributions to benefits

of its own choosing. Pet. App. 27a-28a.

Interpreted in this way, the Court of

Appeals reasoned that the statutory scheme

regulated wages, an area traditionally

governed by the States and not benefits.

Pet. App. 28a. The Court of Appeals noted

neither the Act nor its regulations were

designed to affect employee benefit plans.

Pet. App. 29a. Nor, did they single out

benefit plans for special treatment. Pet.

App. 29a.

The Court of Appeals also found that

the statutory scheme did not predicate

obligations solely upon benefit plans

covered by ERISA, as did the statute at

issue in District of Columbia v. Greater

Washington Board of Trade, 506 U.S.

, 121 L.Ba.24 $233, 133 §&.Ct. S80

(1992). Pet. App. 29a-30a. The Court of

Appeals noted benefit plans were but an

example of the different kinds of benefits

that could be considered in determining

prevailing wage rates. Pet. App. 29a-30a.

The Court of Appeals also considered

whether the Act and regulations had a

sufficient indirect relation to ERISA

plans to require pre-emption. Relying on

Shaw v. Delta Airlines, 463 U.S. 85

(1983), the Court concluded that merely

providing employers the option to satisfy

part of their obligation to pay prevailing

wages through benefit contributions did

not require pre-emption. Pet. App. 37a-

39a. The Court of Appeals noted providing

the option does not require employers to

provide benefits nor does it favor the

provision of certain benefits over others.

Pet. App. 33a, 38a-40a.

Finally, the Court concluded that

neither the Act nor its regulations

dictated or restricted the choice of plans

regarding their reporting and

administration. App. 41a.

This petition followed.

REASONS FOR DENYING THE WRIT

Bi THE PETITION DOES NOT PRESENT AN

ISSUE OVER WHICH THE COURTS OF

APPEALS ARE IN CONFLICT.

Petitioner argues that certiorari

should be granted to resolve a conflict

between the decision in this case and the

decision of the Second Circuit in General

Electric Co. v.-New York State Department

of Labor, 891 F.2d 25 (2d Cir. 1989).

Pet. 13-20. The statutory schemes at

issue in these cases were not the same;

therefore, the resulting decisions do not

present a conflict appropriate for

resolution by this Court.

The General Electric case concerned

whether the administration of New York’s

prevailing wage law was pre-empted by

ERISA. Under New York’s statute,

contractors on public projects were

required to pay their employees

"supplements" or fringe benefits in

accordance with prevailing practices in

the area where the project was located.

General Electric, 891 F.2d at 27. If the

fringe benefits offered by the contractor

did not correspond with the prevailing

supplements, the law required the

contractor to bring them into conformity

or to pay its employees the equivalent in

cash. Id. The contractor was not

permitted to substitute one form of

Supplement for another. Id. That is, the

contractor did not receive any credit

under the prevailing wage law for

providing a benefit different from those

found to be prevailing by New York’s

Commissioner of Labor. Id.

In striking down tthe New york

Statute, the Second Circuit noted that

under ERISA "’private parties and not the

government control the level of

benefits.’" Id., quoting, Alessi _ v.

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

S511 (1981). The Court then pointed out

that under New York’s prevailing wage law

the Commissioner of Labor determined the

benefits to be provided. General

Electric, 891 F.2d at 28. The Court found

the law effectively determined the "type

and amount of an employer’s contributions

to be a plan" and "the nature and amount

of benefits" provided. Id. at 29.

In contrast, in this case the Court

of Appeals specifically noted that

Pennsylvania’s Act does not require

contractors to provide particular benefits

at specified levels. App. 39a. Indeed,

the Court made it clear that _ had

Pennsylvania’s law either required the

payment of certain benefits over others or

created a cash incentive to provide

certain benefits, it would not survive

scrutiny under ERISA. App. 39a, 40a. The

Court pointed to the G lectric case

as an illustration of the sort of

Statutory scheme it believed would not

pass muster. App. 40a, n.22. Thus, the

decision in this case is consistent rather

than in conflict with the Second Circuit’s

decision in General Electric.

The petition also mentions New York

State Conference of Blue Cross and Blue

Shield Plans v. Travelers Insurance Co.,

14 F.3d 708 (2d Cir.), cert. granted, 63

U.S.L.W. 3291 (1994) and hints that the

case which is pending before this Court

shares a common issue with this matter.

Pet. 7. Petitioner is wrong.

The New York case concerns a hospital

rate setting statute that imposes rate

differentials which may increase the cost

of providing hospital benefits for some

ERISA plans. This Court granted

certiorari to determine whether a statute

that affects the cost to ERISA plans of

providing benefits, "relates to" those

plans and thus requires pre-emption of the

statute. As the Third Circuit noted, the

Prevailing Wage Act does not affect ERISA

plan costs, it affects employers’ wage

costs. App. 36a-37a, n.18. Thus, the

issue pending in the New York case bears

no resemblance to the issue presented by

this matter.

Finally petitioner also suggests that

this Court should grant certiorari because

the Third Circuit’s decision conflicts

with the reasoning of two district courts

-- one in California and one in Michigan.

Pet. 18. Assuming for purposes of

argument that these conflicts exist,

granting certiorari on this basis would be

premature. } would remove the

opportunity for the Courts of Appeals to

address the issues and perhaps eliminate

the conflicts which appear to exist. Even

if the asserted conflicts are not

eliminated, the Courts of Appeals should

have the Opportunity to focus and develop

the issues ina way that will assist this

Court’s review of them in the future. At

this juncture, the issues have not

sufficiently evolved in the lower courts

to merit this Court’s attention.

II. THE ISSUE PRESENTED BY THE

PETITION WILL HAVE NO IMPACT ON

THE LAW OF ERISA PRE-EMPTION

BEYOND THE FACTS OF THIS CASE.

Petitioner proposes that this Court

decide whether Pennsylvania’s Prevailing

Wage Act is related to employee benefit

plans within the meaning of §514(a) of

ERISA. While the resolution of this issue

is important to Pennsylvania, there is no

reason to believe that it will have any

application beyond Pennsylvania.

As the preceding argument

illustrated, whether the prevailing wage

statutes of the various states survive

ERISA pre-emption will often turn on the

facts. The manner in which the law is

administered certainly varies from state

to state. Compare, General Electric,

supra, and App. 27a-45a. These

differences in administration may well

call for different conclusions on pre-

emption which explains the different

results in General Electric and this case.

See also, National Elevator Industry, Inc.

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

(administration of Prevailing Wage Law

that favored participation in one type of

ERISA plan, over another is pre-empted).

Cast as it is, the petition does not

seek resolution of a legal issue of

general importance. Rather, it invites

this Court to review the decision of the

Court of Appeals for error. As such it

does not provide an appropriate basis for

the exercise of this Court’s discretionary

jurisdiction.

III. THE DECISION OF THE COURT OF

APPEALS IS CONSISTENT WITH PRIOR

DECISIONS OF THIS COURT.

The Court of Appeals held that

Pennsylvania could establish minimum wages

to be paid on public projects and afford

employers the option of satisfying a

portion of the wage through contributions

for employee benefits without intruding

into the area pre-empted by ERISA. App.

lla. The Court then concluded that

because the Prevailing Wage Act and its

regulations could be implemented in such a

fashion, they survived Petitioner’s

challenge. Pet. App. 27a.

This Court has repeatedly cautioned

that where ERISA pre-emption is at issue

the inquiry "must be guided by respect for

the separate spheres of governmental

authority preserved in our federalist

system." Massachusetts _v. Morash, 490

U.S. 107, 119 (1989), quoting, Fort

Halifax Packing Co. y. Coyne, 482 U.S. : -

19 (1987). In both Morash and Fort

Halifax, the Court recognized the states’

traditional authority to regulate wages

and upheld _ statutes exercising that

authority against Challenges based on

ERISA pre-emption. Massachusetts y.

Morash, supra (upholding Massachusetts’

regulation of an employer’s vacation pay

policy); Fort Halifax Packing Co., Supra

(upholding a Maine Statute requiring

employers to provide severance pay). In

line with those principles the Court of

Appeals in this case concluded that the

Prevailing Wage Act authorized the

Secretary to establish a minimum

prevailing wage without infringing on the

area reserved for federal regulation by

ERISA.

The Court of Appeals also properly

concluded that Pennsylvania could afford

employers the option to pay the wages in

cash or to satisfy a portion of the

obligation through contributions to

benefits of their own choosing, regardless

of whether the benefits were offered

through plans covered by ERISA. In Shaw

v. Delta Aji Inc., 463 U.S. 85

(1983), this Court recognized that while a

state may not require employers to design

their ERISA plans to conform to state law,

it may permit them to choose between

complying through a mechanism not covered

by ERISA and complying through their ERISA

plans.

Shaw concerned the validity of New

York’s disability benefits law that

required employers to provide certain

disability benefits. The Court concluded

that the law fell within an exception to

ERISA’s pre-emption clause for benefit

plans maintained solely to comply with a

state’s disability law.5 id. at 106. The

Court was then confronted with the

argument that the law waS nonetheless

unenforceable with regard to employers who

choose to provide disability benefits

through multi-benefit ERISA plans. a4.

While the court agreed that the state

could not require employers to modify

their ERISA Plans, it went on to hold that

the state "May force the employer to

choose between providing disability

benefits ina separately administered plan

and including state mandated benefits in

its ERISA Plan." Id. at 107-08. That is

exactly what the Court of Appeals

determined the Prevailing Wage Act could

> 29 U.S.C. §1003 (b) (3) exempts from

pre-emp-ion:

any employee benefit plan

maintained solely for the

Purpose of complying with

applicable , Gisability

insurance laws.

do. It could require employers to choose

between paying the entire wage in cash or

satisfying part of at through

contributions to fringe benefits.

Finally, the Court of Appeals’

decision is also consistent with District

of Columbia v. Greater Washington Bo of

Trade, 506 U.S. , AZ &.8G.26 $13,

113 S.Ct. 580 (1992). That case involved

a statute that required employers’ who

provided health insurance for’ their

employees to provide equivalent coverage

for injured employees who were eligible

for worker’s compensation benefits. The

Court held the law pre-empted by ERISA

because its obligations were premised on

the existence of ERISA-covered plans. Id.

at _—___, 121 L.Ed.2d at 520-21, 113 S.Ct.

at 583-84. Absent such plans, the statute

could not be applied.

The Court of Appeals correctly

recognized that such is not the situation

presented by the Prevailing Wage Act:

In the absence of ERISA plans

the Prevailing Wage Act could be

meaningfully applied. The Act

requires the Secretary to

measure prevailing benefit

contributions in a locality for

a given class of worker. The

Secretary would do so even if

all of these were non-ERISA

benefits -- that is benefits

"Payable on a regular basis from

the general assets of the

employer" . . . and that "Create

no need for an ongoing

administrative program for

Processing claims and paying

benefits."

Pet. App. 3la (citations omitted).

The Court also noted the act could be

meaningfully applied if a contractor

Satisfied the benefits component of the

wage by contributing to non-ERISA benefits

or by paying its monetary equivalent. Id.

Thus, the decision of the Court of

Appeals is consistent with prior decisions

of this Court concerning ERISA pre-

emption.

CONCLUSION

For these reasons, the respondent

asks the Court to deny the writ of

certiorari.

Respectfully submitted,

ERNEST D. PREATE, JR.

Attorney General of Pennsylvania

JOHN G. KNORR, III