## 1997 D e c i sion s O p inion s of the U nit e d
S t a t e s C our t of Appe al s for the Thir d C ir c uit

6-10-1997 

# F e r g u son E lec C o I nc v

. F ole y

P r e c e de n t i al or N on-P r e c e de n t i al :

D ock e t 95-7454,95-7464

F o l lo w thi s a nd a dd it ion al w ork s a t : h tt p://d i g it alc ommon s .l a w

. v i l l a no v a

. e du/thir dc ir c uit_1997

Thi s de c i sion i s br ou gh t t o y ou for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t a t e s C our t of Appe al s for the Thir d C ir c uit a t V i l l a no v a
U niv e r sit y S choo l of L a

w Di g it al R e posit or y

. I t h as be e n a c c e pt e d for inclusion in 1997 D e c i sion s b y a n a uthor i z e d a dmini s tr a t or of V i l l a no v a
U niv e r sit y S choo l of L a

w Di g it al R e posit or y

. F or mor e infor m a t ion, p le as e c on t a ct Be n j a min

. C a rl s on@l a

w

. v i l l a no v a

. e du

. 

## R e c omme nde d C it a t ion

" F e r g us on Ele c C o I nc v

. F o ley " (1997). 1997 D e cisio n s

. P a pe r 126. h tt p://d i g it alc ommon s .l a

w

. v i l l a no v a

. e du/thir dc ir c uit_1997/126Filed June 10, 1997

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

Nos. 95-7454 and 95-7464

FERGUSON ELECTRIC CO., INC., A Connecticut Corporation

v.

THOMAS P. FOLEY, in his Official Capacity as the Secretary of Labor and Industry for the Commonwealt h of Pennsylvania; ROGER C. BITZEL, in his Official Capa city as the Director of the Prevailing Wage Division, Department of Labor and Industry for the Commonweal th of Pennsylvania; ROBERT S. BARNETT, in his Individu al and Official Capacity as the Secretary of Labor and Industry for the Commonwealth of Pennsylvania; JOHN NY J. BUTLER, Secretary of Labor and Industry; ROBERT RISALITI, Acting Director of the Prevailing Wage Di vision

Thomas P. Foley; Roger C. Bitzel; Robert S. Barnett; Johnny J. Butler; Robert Risaliti; *Robert Moore, Appellants at No. 95-7454

Ferguson Electric Co., Inc., Appellant at No. 95-7464

On Appeal from the United States District Court for the Middle District of Pennsylvania (D.C. Civil Action No. 93-cv-01977)

___________________________________________________ ______________

*[Pursuant to F.R.A.P. Rule 12(a)]Argued May 2, 1996

Before: SCIRICA, ROTH and GODBOLD,** Circuit Judges

(Filed June 10, 1997)

SUSAN J. FORNEY, ESQUIRE (ARGUED) Office of Attorney General of Pennsylvania Department of Justice Strawberry Square, 15th Floor Harrisburg, Pennsylvania 17120

Attorney for Appellants/ Cross-Appellees, Thomas P. Foley, Roger C. Bitzel, Robert S. Barnett, Johnny J. Butler, Robert Risaliti,
and Robert Moore

DAVID A. FLORES, ESQUIRE (ARGUED)
Harmon & Davies
2306 Columbia Avenue Lancaster, Pennsylvania 17603

Attorney for Appellee/ Cross-Appellant, Ferguson Electric Co., Inc.

___________________________________________________ ______________

**The Honorable John C. Godbold, United States Circ uit Judge for the Eleventh Judicial Circuit, sitting by designation.

2IRWIN W. ARONSON, ESQUIRE

(ARGUED) Handler, Gerber, Johnston &

Aronson 150 Corporate Center Drive
P.O. Box 98 Camp Hill, Pennsylvania 17001-0098

Attorney for Amicus Curiae Appellant/Cross-Appellee, Pennsylvania State Building and
Construction Trades Council

OPINION OF THE COURT

SCIRICA, Circuit Judge

.

The issue on appeal is whether certain Pennsylvania prevailing wage and apprenticeship requirements are preempted by the Employee Retirement Income Securit y Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461. Since or al argument, the same issue was addressed by the Unite d States Supreme Court in California Div. of Labor St andards Enforcement v. Dillingham Construction, N.A., Inc. , 117 S. Ct. 832 (1997). Accordingly, we hold ERISA does not preempt Pennsylvania's prevailing wage and apprenti ceship requirements insofar as they restrict the payment o f apprentice wages to apprentices registered in appro ved programs. We will reverse.

I.

A.

In 1961, Pennsylvania adopted the Prevailing Wage A ct, which provides that "[n]ot less than the prevailing minimum wages . . . shall be paid to all workmen em ployed on public work." 43 Pa. Cons. Stat. § 165-5. The pu rpose of the Act was "to protect workers employed on public projects from substandard wages by insuring that they receiv e the prevailing minimum wage." Keystone Chapter, Associa ted

3Builders and Contractors, Inc. v. Foley , 37 F.3d 945, 950

(3d Cir. 1994)(quoting Lycoming County Nursing Home Assoc., Inc. v. Pennsylvania , 627 A.2d 238, 242 (Pa. Commw. Ct. 1993)), cert. denied , 115 S. Ct. 1393 (1995). The prevailing minimum wage is determined by the Secretary of Labor and Industry,1 who also investig ates charges of wage act violations. 43 Pa. Cons. Stat. §§ 165-7, 165-11. An intentional violation of the wage act re sults in the contractor's bar from public contracts for thre e years. 43 Pa. Cons. Stat. § 165-11(e). The contractor may also be liable to the Commonwealth for damages for underpay ment of wages due under the contract. 43 Pa. Cons. Stat. § 165- 11(f).

Pennsylvania law permits an exception to the mandat ory prevailing wage rate for apprentices in approved apprenticeship programs. The Pennsylvania Apprentic eship and Training Act permits the payment of "apprentice wage rates" which may be lower than the prevailing rate minimums. 34 Pa. Code § 83.5(b)(5)(i) ("The progres sively increasing schedule of apprentice wage rates shall be expressed in terms of percentages of the journeyper son hourly rate.").2 To prevent abuses of the apprentic eship system, the Pennsylvania Apprenticeship and Trainin g Act created a State Apprenticeship and Training Council to set standards for apprenticeship programs.3 43 Pa. Con s. Stat. §§ 90.3, 90.4.

___________________________________________________ ______________

1. The prevailing minimum wage varies depending on the "locality in which the public work is to be performed" and the " craft or classification of all workmen needed to perform public work contra cts." 43 Pa. Cons. Stat. § 165-7.

2. The regulations accompanying the Prevailing Wage Act specifically allow for the hiring of apprentices on public works projects. 34 Pa. Code § 9.103(9) ("[A]pprentices shall be limited to numb ers in accordance with a bona fide apprenticeship program registered with and approved by The Pennsylvania Apprenticeship and Training Council . .. .").

3. The Apprenticeship and Training Council is a Sta te Apprenticeship Agency empowered to regulate apprenticeship program s under federal
law. See 29 C.F.R. § 29.3(a) (1996). The Council approves o nly those apprenticeship programs which are "organized, writt en plan[s]" providing for the "employment and training of the apprentice in a skilled trade," "instruction in technical subjects related to the t rade," and a

4B.

Ferguson Electric Company contracted with the Schuylkill County Redevelopment Authority to provid e electrical work for a public works project. Ferguso n used nonunion labor and enrolled its apprentices in an apprenticeship program sponsored by the Keystone Ch apter of the Associated Builders and Contractors, an empl oyer's association. Ferguson is a member of the Associated Builders and Contractors, and its apprenticeship pr ogram had been approved by the Apprenticeship and Trainin g Council. After Ferguson submitted apprenticeship agreements to the Council for approval in June 1992 , its apprentices started working for apprentice wages. B ut the Council did not approve the agreements until Januar y 1993.

Because Ferguson started paying apprentice wages pr ior to receiving Council approval, the Pennsylvania Dep artment of Labor and Industry asked the Schuylkill County Redevelopment Authority to withhold its invoice pay ments. Then, in April 1993, the Department initiated an administrative proceeding against Ferguson under th e Prevailing Wage Act for: (1) paying apprentice wage s to employees before receiving Council approval; and (2 ) employing too many apprentices in violation of a st ate jobsite apprentice-to-journeyman ratio rule. The Depar tment sought monetary penalties and a ban on Ferguson's participation in public works projects for three ye ars.

Denying any violation, Ferguson brought this federa l action alleging the state officials colluded with t he

___________________________________________________ ______________

"progressively increasing schedule" of wages. 34 Pa . Code § 83.5(a),(b)(1), (b)(4),(b)(5). Apprenticeship programs must limit t he "ratio of apprentices to journeymen [to] be consistent with proper superv ision, training, and continuity of employment." 34 Pa. Code § 83.5(b)(7)

.

Apprentices must be individually registered with th e Council. Such registration is effected by submitting apprenticesh ip agreements to the Council for approval. 34 Pa. Code § 83.3(b). An "ap prenticeship agreement" is the agreement between the apprentice and his employer which contains the terms and conditions of the empl oyment and training of the apprentice. 34 Pa. Code § 83.2.

5International Brotherhood of Electrical Workers and the

Foundation for Fair Contracting to prosecute it and other non-union contractors while ignoring the wage act violations of union contractors, thereby violating Ferguson's due process rights. Ferguson also claimed the Preva iling Wage Act was preempted by ERISA. Ferguson sought damages and injunctive relief that would have prohi bited defendants from prosecuting their administrative ac tion against it or interfering with its attempt to bid o n public
works contracts.

Both parties moved for summary judgment. Abstaining on all but the ERISA preemption issue,4 the distri ct court held the state prevailing wage and apprenticeship l aws were preempted insofar as they require a minimum journey manto-apprentice ratio and may forbid the retroactive approval of apprentices. Both sides appealed.5

II.

The district court had jurisdiction under 28 U.S.C. §§ 1331 and 1343. See Keystone Chapter, Associated Builders and Contractors, Inc , 37 F.3d at 953. We have jurisdiction under 28 U.S.C. §§ 1291 and 1292(a)(1)

.

We review summary judgment decisions under a plenar y standard. See Waldron v. SL Indus., Inc. , 56 F.3d 491, 496 (3d Cir. 1995). We must apply the same test as the district
court and therefore must view the evidence in the l ight most favorable to the nonmovant and affirm only if" there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Waldron , 56 F.3d at 496.

___________________________________________________ ______________

4. The district court abstained under Younger v. Ha rris , 401 U.S. 37 (1971).

5. On appeal, defendants challenge the district cou rt's decision to not abstain from deciding Ferguson's ERISA preemption c laim as well as the judgment of preemption. Ferguson challenges the dis trict court's failure to hold the Prevailing Wage Act is entirely preempt ed by ERISA insofar as it applies to apprenticeship programs.

6III.

After oral argument, we took the case under advisem ent awaiting the Supreme Court decision in California D ivision of Labor Standards Enforcement v. Dillingham Constr uction, N.A., Inc. , 117 S. Ct. 832 (1997). Dillingham Construction employed apprentices on a California public works c ontract. The apprentices were enrolled in an apprenticeship program which did not receive state approval until after they started working. The Division of Apprenticeshi p Standards of the California Department of Industria l Relations issued a notice of noncompliance to Dilli ngham for violating California's prevailing wage law, and the county was ordered to withhold Dillingham's payment s. Dillingham filed suit to prevent the state from int erfering with its contract. It alleged ERISA preempted enfor cement of the prevailing wage law because the law related to the apprenticeship program, which was an ERISA plan.

The Supreme Court granted certiorari in Dillingham on the following issue:

Did Congress intend, in enacting ERISA, to pre-empt states' traditional regulation of wages, apprentice ships, and state-funded public works construction when expressed in a state prevailing wage law that restr icts contractors' payment of lower apprentice specific w ages to apprentices duly registered in programs approved as meeting federal standards?

Examining "the objectives of the ERISA statute," th e Court found no preemption. Id. at 838.

ERISA was enacted to provide uniform federal regula tion of employee benefit plans. See Keystone Chapter, Associated Builders and Contractors, Inc. , 37 F.3d at 954. To further this goal, ERISA preempts "any and all S tate laws insofar as they may now or hereafter relate to any employee benefit plan . . . ." 29 U.S.C. § 1144(a). Ferguson contends Pennsylvania's apprenticeship scheme is preempted by ERISA because it "relates to" the Asso ciated Builders and Contractors apprenticeship program, wh ich is an "employee benefit plan" under ERISA. 6 A "law `r elate[s]

___________________________________________________ ______________

6. The term "employee benefit plan" includes "any p lan, fund, or program
which was heretofore or is hereafter established or maintained by an

7to' a covered employee benefit plan . . . `if it [1 ] has a

connection with or [2] reference to such a plan.' " Dillingham , 117 S. Ct. at 837 (quoting District of Columbia v. Greater Washington Bd. of Trade , 506 U.S. 125, 129 (1992)).

A law has a "connection with" ERISA plans if it dic tates the choices faced by ERISA plans. It is not enough if the law merely provides economic incentives to ERISA pl ans but does not "bind [them] to anything." Dillingham , 117 S. Ct. at 841. The apprenticeship scheme in Pennsylvan ia does not bind ERISA plans to anything, but merely p rovides economic incentives to encourage apprenticeship pro grams to obtain state approval. In Pennsylvania, as in Ca lifornia, "[i]f a contractor chooses to hire apprentices for a public works project, it need not hire them from an approv ed program (although if it does not, it must pay these apprentices journeyman wages)." Id . Like California's program, Pennsylvania's apprenticeship scheme does not
have a "connection with" ERISA. See id . at 842 ("We could not hold preempted a state law in an area of tradit ional state regulation based on so tenuous a relation wit hout doing grave violence to our presumption that Congre ss intended nothing of the sort.").

Apprenticeship laws make "reference to" ERISA plans where "approved apprenticeship programs need . . . necessarily be ERISA plans." Id. at 838. Where apprenticeship laws are "indifferent to the funding , and attendant ERISA coverage, of apprenticeship program s," they do not make "reference to" ERISA plans. Id . at 839. In Dillingham , the Court held California's prevailing wage law and apprenticeship requirements did not make "refer ence to" ERISA plans because apprenticeship programs nee d not necessarily be ERISA plans; apprenticeship programs could be maintained by a single employer and their costs could

___________________________________________________ ______________

employer or by an employee organization, or by both , to the extent that such plan, fund, or program was established or is m aintained for the purpose of providing for its participants or their beneficiaries . . . apprenticeship or other training programs . . . ." 29 U.S.C. § 1002(1),(3) (emphasis added). It is uncontested t hat the Associated Builders and Contractors apprenticeship program is an ERISA plan.

8be defrayed out of the employers' general assets."B enefits

paid out of an employer's general assets present[ ] risks indistinguishable from `the danger of defeated expe ctations of wages for services performed,' a hazard with whi ch
ERISA is unconcerned." Id . (quoting Massachusetts v.
Morash , 490 U.S. 107, 115 (1989)).

Similarly, in Pennsylvania, an apprenticeship progr am may be approved regardless of its funding source an d whether it is maintained by a single employer. See 34 Pa. Code § 83.2 (allowing a "person, association, commi ttee, or organization" to "sponsor" an apprenticeship progra m); § 83.5 (setting standards for apprenticeship progra ms without limiting the acceptable funding sources or sponsors). Like California's prevailing wage law, Pennsylvania's apprenticeship scheme does not make
"reference to" ERISA.7

IV. Conclusion

ERISA does not preempt Pennsylvania's prevailing wa ge and apprenticeship requirements insofar as they res trict the payment of apprentice wages to apprentices regi stered in approved programs. It is immaterial that the apprenticeship program in this case, the Associated Builders and Contractors program, is an ERISA plan. The apprenticeship program's choices were not dictated by Pennsylvania law. For the foregoing reasons, we wil l reverse the judgment of the district court and direct the d istrict court to enter judgment in favor of defendants.8

___________________________________________________ ______________

7. Ferguson contends this case is distinguishable f rom Dillingham because the latter "hinged on the fact that Califor nia's apprenticeship standards were `substantially similar' to [federal apprenticeship standards]." But the Court only mentioned the simil arity in passing in a
footnote and declined to resolve the issue of wheth er "uniformity of substantive standards" is even possible. Dillingham , 117 S. Ct. at 842 n.10. More importantly, the laws in California and Pennsylvania do not materially differ in any way relevant to this issue . In both states, the "apprenticeship standards are not mandatory." Id. 8. The district court reached Ferguson's preemption claim only after denying defendants' motion to abstain. Defendants o riginally appealed
the abstention decision but did not brief the issue in their supplemental briefs submitted after the Dillingham decision. As we are ruling in defendants' favor, we see no reason to address the abstention issue.

9A True Copy:

Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

10