1994 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

9-22-1994

Keystone Chptr, Associated Bldrs. & Contrs., Inc. v.

Foley

Precedential or Non-Precedential:

Docket 93-7548

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Recommended Citation

"Keystone Chptr, Associated Bldrs. & Contrs., Inc. v. Foley" (1994). 1994 Decisions. Paper 140.

http://digitalcommons.law.villanova.edu/thirdcircuit_1994/140
 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 _________________ 

 No. 93-7547 & 93-7573 

 _________________ 

 KEYSTONE CHAPTER, ASSOCIATED BUILDERS AND CONTRACTORS, INC., 

 in representation of its members 

v. 

 THOMAS P. FOLEY, in his official capacity 

 as the Secretary of Labor and Industry 

 for the Commonwealth of Pennsylvania 

 PENNSYLVANIA STATE BUILDING AND CONSTRUCTION TRADES COUNCIL 

 (Amicus in District Court) 

 Thomas P. Foley, 

 Appellant in No. 93-7547 

 Keystone Chapter, Associated Builders 

 and Contractors, Inc., in representation 

 of its members, 

 Appellant in No. 93-7573 

 _______________ 

 No. 93-7548 

 _______________ 

 BELL TELEPHONE COMPANY OF PENNSYLVANIA; 

 COMMUNICATIONS WORKERS OF AMERICA, AFL-CIO, DISTRICT 13 

v. 

 THOMAS P. FOLEY; in his official capacity 

 as Secretary of Labor and Industry 

 for the Commonwealth of Pennsylvania; 

 JAMES R. DAVIS; FRAYDA KAMBER; 

 RICHARD W. MARTZ; JOHN H. MICKENS 

 PENNSYLVANIA STATE BUILDING AND 

 CONSTRUCTION TRADES COUNCIL, AFL-CIO 

 (Amicus in District Court) 
 Thomas P. Foley; James R. Davis; 

 Frayda Kamber; Richard W. Martz; 

 John H. Mickens, 

 Appellants 
 _______________________________________________ 

 On Appeal from the United States District Court 

 for the Middle District of Pennsylvania 

 (D.C. Civil Action Nos. 92-00459 & 92-01105) 

 ___________________ 

 Argued April 13, 1994 

 Before: BECKER, MANSMANN and SCIRICA, Circuit Judges

 (Filed September 22, 1994) 

SUSAN J. FORNEY, ESQUIRE (Argued) 

Office of Attorney General of Pennsylvania 

Department of Justice 

Strawberry Square, 15th Floor 

Harrisburg, Pennsylvania 17120 

 Attorney for Appellant/Cross-Appellee, Thomas P. Foley, 

 and Appellants, Thomas P. Foley, James R. Davis, 

 Frayda Kamber, Richard W. Martz and John H. Mickens 

THOMAS R. DAVIES, ESQUIRE (Argued) 

Harmon & Davies 

2306 Columbia Avenue 

Lancaster, Pennsylvania 17603 

 Attorney for Appellee/Cross-Appellant, 

 Keystone Chapter, Associated Builders and 

 Contractors, Inc., in representation of its members, and 

 Amicus Curiae Appellee/Cross-Appellant, 

 Pennsylvania Utility Contractors Association 

MARY M. McKENZIE, ESQUIRE (Argued) 

Bell Atlantic Network Services, Inc. 

1717 Arch Street 

Philadelphia, Pennsylvania 19103 

MARIE L. MARTINO, ESQUIRE 

Dechert, Price & Rhoads 

4000 Bell Atlantic Tower 

1717 Arch Street 

Philadelphia, Pennsylvania 19103 
 Attorneys for Appellee, 

 The Bell Telephone Company of Pennsylvania 
RICHARD H. MARKOWITZ, ESQUIRE 

Markowitz & Richman 

121 South Broad Street, Suite 1100 

Philadelphia, Pennsylvania 19107 

 Attorney for Appellee, 

 Communications Workers of America, AFL-CIO, District 13 

IRWIN W. ARONSON, ESQUIRE (Argued) 

Handler, Gerber, Johnston & Aronson 

150 Corporate Center Drive, Suite 100 

P.O. Box 98 

Camp Hill, Pennsylvania 17001-0098 

 Attorney for Amicus Curiae Appellant/Cross-Appellee, 

 Pennsylvania State Building and Construction Trades Council 

JOHN H. WIDMAN, ESQUIRE 

McAleese, McGoldrick & Susanin 

Suite 240 - Executive Terrace 

455 South Gulph Road 

King of Prussia, Pennsylvania 19406 

 Attorney for Amicus Curiae Appellants, 

 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 Association, Inc. 
THOMAS A. BECKLEY, ESQUIRE 

Beckley & Madden 

212 North Third Street 

P.O. Box 11998 

Harrisburg, Pennsylvania 17108 

 Attorney for Amicus Curiae Appellants, 

 SMACNA of Pennsylvania, 

 Sheet Metal Contractors Association 

 of Central Pennsylvania, 

 Sheet Metal Contractors Association 

 of Philadelphia and Vicinity, 

 SMACNA of Western Pennsylvania, 

 National Electrical Contractors Association, Inc., 

 Western Pennsylvania Chapter, 

 Laurel Mechanical Contractors Association, Inc., 

 Mechanical Contractors of Northwest Pennsylvania, 

 Painting and Decorating Contractors of America, 

 Harrisburg Chapter, 

 Masonry Contractors Association of Central Pennsylvania 

RICHARD B. SIGMOND, ESQUIRE 

RICHARD C. McNEILL, JR., ESQUIRE 

Sagot, Jennings & Sigmond 

1172 Public Ledger Building 

Independence Square West 

Philadelphia, Pennsylvania 19106 

 Attorneys for Amicus Curiae Appellant, 

 Steamfitters Local Union No. 420, United Association of 

 Journeymen and Apprentices of the Plumbing and Pipefitting 

 Industry 

DEBORAH J. NATHAN, ESQUIRE 

Cleckner & Fearen 

Willow Grove Plaza, Suite 2000 

102 York Road 

Willow Grove, Pennsylvania 19090 

 Attorney for Amicus Curiae Appellee/Cross-Appellant, 

 Pennsylvania School Boards Association, Inc. 
MAURICE BASKIN, ESQUIRE 

Venable, Baetjer, Howard & Civiletti 

1201 New York Avenue, N.W., Suite 1000 

Washington, D.C. 20005 

 Attorney for Amicus Curiae Appellee/Cross-Appellant, 

 Central Pennsylvania Chapter, Lehigh Valley Chapter, 

 Southeast Pennsylvania Chapter, and Western Pennsylvania 

 Chapter of Associated Builders and Contractors, Inc. 

 and Associated Builders and Contractors, Inc. 

LOUDON L. CAMPBELL, ESQUIRE 

Calkins & Campbell 

223 North Front Street 

P.O. Box 1188 

Harrisburg, Pennsylvania 17108 

 Attorney for Amicus Curiae Appellee, 

 Pennsylvania Builders Association 

ROBIN S. CONRAD, ESQUIRE 

National Chamber Litigation Center, Inc. 

1615 H Street, N.W. 

Washington, D.C. 20062 

 Attorney for Amicus Curiae Appellee, 

 Chamber of Commerce of the United States of America 

 __________________ 

 OPINION OF THE COURT 

 __________________ 

SCIRICA, Circuit Judge. 

 In this appeal, we must decide whether the Employee 

Retirement Income Security Act of 1974 (ERISA)1 preempts a 

 

1. Pub. L. No. 93-406, 88 Stat. 829, (codified as amended in 

scattered sections of 5, 18, 26, 29, 31, & 42 U.S.C.). 
Pennsylvania minimum wage law applying to public works projects. 

We hold that such a law may not refer to ERISA plans or accord 

them special treatment, but may set minimum wages and give 

employers the option of satisfying a portion of the wage through 

contributions for employee benefits. 

 An employer, an employers' association, and a labor 

union2 sued Pennsylvania's Secretary of Labor and Industry and 

the members of the state Prevailing Wage Appeals Board 

(collectively, the Secretary) in federal district court, claiming 

Pennsylvania's Prevailing Wage Act (the Act),3 its accompanying 

regulations, and an administrative Declaratory Order interpreting 

the Act are preempted by ERISA. The district court agreed and 

overturned the Act, regulations, and order. The Secretary of 

Labor and Industry appeals, and the employers' association crossappeals. 

 We agree the Declaratory Order implements the Act in a 

manner preempted by ERISA. But we find the Act and its 

regulations are not preempted because they confer broad authority 

that may be implemented in a manner consistent with ERISA. 

Therefore we will affirm the judgment of the district court 

striking the Declaratory Order, but reverse its judgment striking 

the Act and accompanying regulations. 

 

2. These were, respectively, the Bell Telephone Company of 

Pennsylvania, Keystone Chapter, Associated Builders and 

Contractors, Inc., and the Communications Workers of America, 

AFL-CIO, District 13.. 

3. P.L. 987 (1961) (codified at 43 P.S.A. § 165). 
I.

 A. The Prevailing Wage Act

 The purpose of the Prevailing Wage Act "is to protect 

workers employed on public projects from substandard wages by 

insuring that they receive the prevailing minimum wage." 

Lycoming County Nursing Home v. Pennsylvania, 627 A.2d 238, 242 

(Pa. Commw. Ct. 1993). The statute provides, "Not less than the 

prevailing minimum wages as determined hereunder shall be paid to 

all workmen on public work," 43 P.S.A. § 165-5, and sets forth 

general rules for determining prevailing minimum wages. Before 

public contracts are put out to bid, the Secretary of Labor and 

Industry, in consultation with an Advisory Board, determines the 

prevailing minimum wage for each locality and for each "craft or 

classification" of worker to be employed. 43 P.S.A. § 165-7. In 

making this determination, "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." Id. The statute does not define "prevailing minimum 

wage rate," nor specify how contributions for benefits are to be 

integrated into the wage rate.4

 The seven-member Prevailing Wage Appeals Board hears 

"any grievance or appeal arising out of the administration of 

 

4. Pennsylvania's Commonwealth Court has held that despite the 

lack of definition the terms "prevailing minimum wage rate" and 

"craft or classification" are "adequate primary standards to 

guide the Secretary in the exercise of his duties under [§ 165-

7]," so that the statute does not assign the Secretary 

"unacceptably excessive discretion." Pennsylvania v. Altemose 

Construction Co., 368 A.2d 875, 881 (Commw. Ct. Pa. 1977). 
this act" "[p]romulgate[s] rules and regulations necessary to 

carry out [its] duties." 43 P.S.A. § 165-2.2(e). Contractors 

and subcontractors must "keep an accurate record showing the 

name, craft and the actual hourly rate of wage paid to each 

workman employed by him in connection with public work" for two 

years following payment, subject to inspection by the Secretary 

and the public body awarding the contract. Id. § 165-6. 

 B. The Accompanying Regulations

 The Pennsylvania Code, Title 34 §§ 9.101-9.112, 

provides additional rules for calculating and enforcing the 

prevailing minimum wage in public works contracts. The 

regulations make clear that a prevailing minimum wage will state 

a cash wage and a level of benefits contributions as separate 

components. Contractors and subcontractors must pay "[n]ot less 

than the general prevailing minimum wage rates determined by the 

Secretary." If a contract does not provide for employee benefits 

contributions "which the Secretary has determined to be included 

in the general prevailing minimum wage rate," the employer may 

pay "the monetary equivalent thereof." Id. § 9.106. 

 Contributions for employee benefits are defined 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." Id. § 9.102. Contractors may pay their 

workers above the prevailing rate. Id. 
 To determine the prevailing minimum wages and benefits 

in a locality, the Secretary considers local collective 

bargaining agreements between established bargaining 

representatives and employers and other information. Id. § 

9.105. The regulations specify additional records and reporting 

requirements for employers. Id. §§ 9.109, 9.110. The Secretary 

may investigate and hold hearings on allegations of underpayment, 

and may bar public contracts with a violating firm and request 

the Attorney General to recover penalties. Id. § 9.111. 

 C. The April 13, 1992 Declaratory Order

 Although the Act and regulations specify the prevailing 

minimum wage will have separate cash and benefits components, 

they do not state whether the benefits component should merely 

state the total level of benefits contributions an employer must 

make (through benefits contributions or their cash equivalent), 

or whether it should specify which types and levels of benefits 

must be given. That issue has been resolved by the Secretary and 

Board in different ways at different times. 

 For several years prior to April 13, 1992, the 

Secretary used a "line-item" approach in determining compliance 

with a prevailing wage's benefits component.5 The Secretary made 

 

5. The Department apparently officially adopted the line-item 

approach in 1988. In its brief to the Prevailing Wage Appeals 

Board, the Prevailing Wage Division of the Department of Labor 

and Industry cites as its earliest authority for the line-item 

approach a 1988 decision of the Secretary, In re: Francesco 

Scrivofilo, t/d/b/a Franco Elec. Co., Determination of the 

Secretary (Dec. 1, 1988). Bell and the Communications Workers of 

America claim their wage and benefits packages were not reviewed 

for line-item compliance for a number of years, presumably prior 

to 1988. 
a "predetermination" of the prevailing wage for each category of 

worker in a given locality, specifying the prevailing levels of 

benefits in a number of categories, such as "health-and-welfare," 

"pension," and "apprenticeship-and-training". An employer had to 

meet the prevailing level of each category of benefit, or pay the 

shortfall in cash to the worker. An employer was not given 

credit toward the benefits component for benefits provided in a 

given category in excess of that required in the 

predetermination, nor for any benefits paid in a category not 

included in the predetermination. Thus, in addition to paying 

the prevailing cash wage, an employer was required either to make 

benefits contributions in the specified categories and amounts or 

to pay cash to the extent its benefits contributions fell short 

in any specified category.6

 On November 28, 1990, counsel for Keystone Chapter, 

Associated Builders and Contractors, Inc., a construction 

industry employers' association wrote to the Secretary, 

 

6. For example, a prevailing minimum wage predetermination for a 

particular classification of worker on a public works project 

might be $7 cash, $2 pension, and $1 health-and-welfare, per 

hour. An employer could pay as specified in the predetermination 

-- $7 per hour cash, $2 pension, and $1 health-and-welfare -- or 

substitute cash for some or all of the prevailing benefits -- for 

example, $8 cash, $1 pension, and $1 health-and-welfare, or $10 

cash and no benefits. However, an employer paying $7 cash, $2 

pension, and $1 for apprenticeship-and-training would not satisfy 

the minimum, because it had neither contributed $1 for healthand-welfare nor replaced it with $1 cash. Similarly, an employer 

paying $7 cash and $3 pension would not be in compliance -- 

notwithstanding the extra dollar in the pension category; it too 

would be required either to pay $1 health-and-welfare or replace 

that contribution with $1 cash. 
complaining about the line-item approach. The complaint was 

referred to the Prevailing Wage Appeals Board, which treated it 

as a "Petition for Declaratory Order" and heard oral argument. 

Bell Telephone Co., an employer that performs public work, also 

participated in the proceeding. The petitioners argued that the 

line-item approach was not the best interpretation of the 

Prevailing Wage Act, that it was unfair to non-union and nonlocal contractors, and that it was preempted by ERISA. The 

Prevailing Wage Division of the Department of Labor and Industry 

(the Division) conceded that the Prevailing Wage Act did not 

require line-item specification of fringe benefits, but stated 

that as remedial legislation it should be interpreted broadly in 

favor of the protected class.7

 On April 13, 1992, apparently in response to the 

petitioners' ERISA preemption arguments, the Prevailing Wage 

Appeals Board issued a Declaratory Order modifying the 

implementation of the Prevailing Wage Act. The Board stated it 

"should interpret state law so that it comports with 

constitutional and federal law," Keystone App. at 71, and 

established a special bona fide status for contributions for 

ERISA benefits. It ordered: 

 2. That the [Prevailing Wage] Division 

must determine, in the first instance, 

whether or not a contribution for employee 

benefits is bona fide; 

 

7. John T. Kupchinsky, attorney for the Division, stated, "If 

you're going to fudge things, you fudge things to get more people 

covered by the act . . . ." Transcript of Oral Argument before 

Prevailing Wage Appeals Board, Nov. 12, 1991 at 35, Keystone App. 

at 180. 
 3. That a contribution is bona fide if 

that contribution: (a) is made to an 

"employee benefit plan" or fund or program 

subject to the [ERISA]; (b) has been 

determined to be bona fide by the Division; 

and (c) is not required by federal, state or 

local law; 

 . . . . 

Keystone App. at 73-74. 

 The next part of the order, paragraph 4, appears to 

abolish the line-item system, although it is not clear if this 

applies only to the ERISA benefit contributions discussed in 

paragraph 3, or to all benefits. It provides: 

 4. That credit for contributions for 

employee benefits, up to the maximum 

established by the predetermination, shall be 

given as follows: 

 . . . 

 c) Credit shall be given for contributions 

in each predetermined category up to the 

predetermined rate for each category; 

 d) Contributions which exceed the 

predetermined rate in any employee benefit 

category shall be credited in any other 

predetermined benefit category (or 

categories) for which the predetermined rate 

has not been satisfied; 

 e) Credit shall be given for contributions 

for employee benefits not included in the 

predetermined benefit categories; 

 f) The maximum credit for contributions for 

employee benefits shall not exceed the total 

amount of contributions for employee benefits 

established by predetermination; 

 . . . . 

Keystone App. at 74-75. 

 As interpreted by the Prevailing Wage Division, the 

Declaratory Order establishes that any contribution to an ERISA 

plan is per se bona fide, while other benefits contributions must 

be certified by the Division as such. Furthermore, ERISA 
benefits contributions are counted toward the benefits minimum no 

matter what category they fall in, while the line-item approach 

is maintained for non-ERISA benefits contributions. Letter from 

Susan J. Forney, Senior Deputy Attorney General, to the Court, 

(April 18, 1994).8 We accept this reading of the Declaratory 

Order as a reasonable interpretation.9

 D. Litigation

 Keystone filed a complaint in United States District 

Court for the Middle District of Pennsylvania seeking injunctive 

relief against the Secretary. Keystone claimed the Prevailing 

Wage Act was preempted by ERISA because it prevented employers 

from setting the terms of their benefits plans. Bell Telephone 

 

8. A May 29, 1992 memo from Field Inspection Supervisor A. 

Robert Risaliti to the Field Inspectors, who enforce the 

Prevailing Wage Act, confirms that the Declaratory Order has been 

thus implemented. It states that neither the Division nor the 

inspector is authorized to object to the presumed bona fide 

status of ERISA contributions, whether or not the contributions 

match the categories in the predetermination. The memo also 

indicates the line-item approach is still applied to non-ERISA 

benefits. 

 Ms. Forney's letter came as a correction to the 

Secretary's position at oral argument, that pursuant to the April 

13 Order the line-item approach was abandoned for all benefits, 

and that any non-ERISA benefit contributions are credited against 

the benefit contribution rate if they were judged by the Division 

to be bona fide. See Brief for Appellants at 10-11. 

9. The Appellees differ in their interpretation of the order. 

Keystone essentially agrees with the Secretary's interpretation. 

Bell and the CWA contend that only contributions to ERISA benefit 

plans now count towards the fringe benefit component; other 

benefits, they say, will not be credited at all. Although the 

order is somewhat unclear, we find it implausible that the Board 

would disqualify all non-ERISA benefits contributions from 

counting toward the prevailing minimum, as this would be a major 

departure from past practice without grounding in the Act. 
and its employees' union, the Communications Workers of America 

(CWA), brought a suit against the Secretary and the members of 

the Prevailing Wage Appeals Board seeking a declaratory judgment 

that the Prevailing Wage Act was preempted by ERISA or by the 

NLRA.10 They claimed their participation in public works 

projects was impeded because their collective bargaining 

agreements, which include centrally administered benefits plans 

for workers in several states, would not qualify as meeting the 

prevailing wage. Some of these contracts included non-ERISA 

benefit contributions that they believed would not be credited 

toward the benefits component, and some contracts gave benefits 

in excess of the prevailing benefits minimum that would not be 

credited against the cash wage component. Keystone, Bell, the 

CWA, and the defendants moved for summary judgment. 

 On July 30, 1993, the district court declared the 

Prevailing Wage Act, its accompanying regulations, and the 

Declaratory Order preempted by § 514(a) of ERISA, 29 U.S.C. § 

1144(a) (1988), which preempts state law relating to ERISA plans. 

The court found (1) the Declaratory Order specifically referred 

to ERISA plans, (2) the Prevailing Wage Act could affect the 

level of benefits paid to employees by discouraging benefits in 

excess of the prevailing rate, and (3) the Act imposed 

administrative burdens on ERISA plans by requiring employers to 

keep records of wages and benefits. The court declined the 

Secretary's request to sever the portion of the Act covering 

 

10. The latter claim was dismissed and is not raised on appeal. 
fringe benefits and leave standing a requirement that government 

contractors simply meet the prevailing cash wage because it 

believed such a system would be contrary to legislative intent. 

 On appeal, the Secretary argues the district court 

erred in finding the Prevailing Wage Act, its regulations, and 

the Declaratory Order preempted. Alternatively, he requests that 

if the Act's integration of benefits into the prevailing wage 

violates ERISA, we sever that portion and allow the Act to stand 

to the extent it regulates cash wages. Keystone and Bell ask us 

to affirm the district court. Keystone also cross-appeals, 

requesting that if we do not affirm the district court, we enjoin 

the Secretary from specifying line-item requirements for ERISA 

benefit contributions. The CWA requests that only the 

Declaratory Order be invalidated, claiming the law itself can be 

interpreted in a manner that is not preempted. 

 The district court had jurisdiction of these ERISA 

preemption claims under 28 U.S.C. § 1331 (1988). "A plaintiff 

who seeks injunctive relief from state regulation, on the ground 

that such regulation is pre-empted by a federal statute which, by 

virtue of the Supremacy Clause of the Constitution, must prevail, 

thus presents a federal question which the federal courts have 

jurisdiction under 28 U.S.C. § 1331 to resolve." Shaw v. Delta 

Air Lines, Inc., 463 U.S. 85, 96 n.14.11

 

11. Steamfitters Local Union No. 420, in its amicus brief, 

argues that New Jersey State AFL-CIO v. New Jersey, 747 F.2d 891 

(3d Cir. 1984), bars federal question jurisdiction. While we 

held there that a district court lacked jurisdiction of a labor 

union's action for declaratory judgment that ERISA preempted four 

New Jersey statutes, our holding simply rejected the union's 
 We have appellate jurisdiction under 28 U.S.C. § 1291, 

and our review of a summary judgment is plenary, Public Interest 

Research v. Powell Duffryn Terminals, Inc., 913 F.2d 64 (3d Cir. 

1990), cert. denied, 498 U.S. 1109 (1991). "[T]he appellate 

court is required to apply the same test the district court 

should have utilized initially. Inferences to be drawn from the 

underlying facts contained in the evidential sources submitted to 

the trial court must be viewed in the light most favorable to the 

party opposing the motion." Goodman v. Mead Johnson & Co., 534 

F.2d 566, 573 (3d Cir. 1976), cert. denied, 429 U.S. 1038 (1977). 

The district court's conclusions of law are subject to plenary 

review. Gregoire v. Centennial Sch. Dist., 907 F.2d 1366, 1370 

(3d Cir.), cert. denied, 498 U.S. 899 (1990). 

II.

 A. ERISA

 ERISA provides uniform federal regulation of employee 

benefit plans. It is a comprehensive statute that protects the 

interests of employees and their beneficiaries in employee 

benefit plans, and promotes administrative efficiency through 

exclusive federal regulation of such plans. ERISA subjects 

(..continued) 

attempt to sue under ERISA's jurisdictional provision, 29 U.S.C. 

§ 1132(a)(1)(B) & (e)(1), which grants federal jurisdiction of 

civil actions only by participants and beneficiaries. New Jersey 

State AFL-CIO, 747 F.2d at 892-93. As we explained in Northeast 

Dept. ILGWU Health & Welfare Fund v. Teamsters Local Union No. 

229 Welfare Fund, 764 F.2d 147, 153 n.3 (3d Cir. 1985), "[t]he 

matter of federal question jurisdiction was not raised by the 

parties in AFL-CIO, nor was it considered by the panel." Shaw, 

as quoted above, makes clear that there is federal question 

jurisdiction where a party claims it will be subject to state 

regulation preempted by ERISA. 
employee benefit plans to participation, funding, and vesting 

requirements, and to uniform standards on matters like reporting, 

disclosure, and fiduciary responsibility. Shaw, 463 U.S. at 90-

91. 

 Section 514(a) of ERISA promotes uniform regulation of 

employee benefits plans, by preempting, with limited exceptions 

not applicable here, "any and all State laws insofar as they may 

now or hereafter relate to any employee benefit plan" covered by 

ERISA. 29 U.S.C. § 1144(a). ERISA covers pension benefit plans 

and plans for welfare benefits such as medical benefits, training 

programs, and daycare centers.12 29 U.S.C. § 1002(3) (1988). 

Typically, these plans create a need for "an ongoing 

administrative program for processing claims and paying 

benefits." Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 12 

(1987). 

 

12. The statute defines "employee benefit plan" as an "employee 

welfare benefit plan or an employee pension benefit plan or a 

plan which is both." 29 U.S.C. § 1002(3). An employee welfare 

benefit plan is any "plan, fund, or program . . . established or 

maintained by an employer or by an employee organization, or by 

both" to provide "(A) medical, surgical, or hospital care or 

benefits, or benefits in the event of sickness, accident, 

disability, death or unemployment, or vacation benefits, 

apprenticeship or other training programs, or day care centers, 

scholarship funds, or prepaid legal services, or (B) any benefit 

described in section 186(c) of this title (other than pensions on 

retirement or death, and insurance to provide such pensions)." 

Id. § 1002(1). 29 U.S.C. § 186(c) involves union welfare funds 

for benefits such as vacation benefits, scholarships, and housing 

assistance. An employee pension benefit plan is "any plan, fund, 

or program . . . established or maintained by an employer or by 

an employee organization, or by both . . . [that] (i) provides 

retirement income to employees, or (ii) results in a deferral of 

income by employees for periods extending to the termination of 

covered employment or beyond . . . ." Id. § 1002(2)(a). 
 In determining the scope of § 514(a), "as in any preemption analysis, `[t]he purpose of Congress is the ultimate 

touchstone.'" Metropolitan Life Ins. Co. v. Massachusetts, 471 

U.S. 724, 747 (1985) (quoting Malone v. White Motor Corp., 435 

U.S. 497, 504 (1978)) (alteration in original) (internal 

quotation marks and citation omitted). Recognizing the complex 

administrative task faced by employers maintaining employee 

benefit plans, Congress enacted § 514(a) to ensure that plan 

administration is subject to a single set of regulations rather 

than a "patchwork scheme." Fort Halifax, 482 U.S. at 11. 

 We summarized the standards for ERISA preemption in 

United Wire v. Morristown Memorial Hosp., 995 F.2d 1179 (3d 

Cir.), cert. denied, 114 S. Ct. 382, 383 (1993): 

 The preemption clause of ERISA is 

notable for its breadth, and manifests 

Congress's intention to establish pension 

plan regulation as an exclusively federal 

concern. Alessi v. Raybestos-Manhattan, 

Inc., 451 U.S. 504, 101 S.Ct. 1895, 68 

L.Ed.2d 402 (1981). The Supreme Court has 

noted that a state law "relates to" an ERISA 

governed plan, within the meaning of § 

514(a)'s preemptive reach, "if it has a 

connection with or reference to such a plan." 

Shaw v. Delta Air Lines, 463 U.S. 85, 97, 103 

S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983). The 

Court in Shaw noted, however, that "[s]ome 

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." 463 U.S. at 100, n. 

21, 103 S.Ct. at 2901 n. 21. 

Id. at 1191. We then set out guidelines for determining if a law 

related, directly or indirectly, to ERISA plans: 

 A rule of law relates to an ERISA plan 

if it is specifically designed to affect 
employee benefit plans, if it singles out 

such plans for special treatment, or if the 

rights or restrictions it creates are 

predicated on the existence of such a plan. 

. . . 

 This does not end our inquiry, however. 

A state rule of law may be preempted even 

though it has no such direct nexus with ERISA 

plans if its effect is to dictate or restrict 

the choices of ERISA plans with regard to 

their benefits, structure, reporting and 

administration, or if allowing states to have 

such rules would impair the ability of a plan 

to function simultaneously in a number of 

states. 

Id. at 1192-93 (footnotes omitted). We will apply this analytic 

framework to the Declaratory Order, the Prevailing Wage Act, and 

its accompanying regulations. 

 B. The Declaratory Order

 The District Court correctly held that ERISA preempts 

the Declaratory Order, because it "singles out [ERISA] plans for 

special treatment."13 United Wire, 995 F.2d at 1192. Under the 

Order, the Prevailing Wage Division treats contributions for 

ERISA benefits as per se bona fide, but must approve other 

contributions. Further, any ERISA benefits contributions count 

toward the benefits minimum, while non-ERISA benefits only count 

if they are in one of the benefit categories listed in the 

predetermination. 

 

13. The Declaratory Order is "State law" subject to ERISA 

preemption under § 514, for "State law" includes not only 

statutes, but "all laws, decisions, rules, regulations, or other 

State action having the effect of law, of any State." 29 U.S.C. 

§ 1144(c)(1). See National Elevator Indus., Inc. v. Calhoon, 957 

F.2d 1555 (10th Cir.) (invalidating ruling of Commissioner of 

Oklahoma Department of Labor under state's prevailing wage act as 

preempted by ERISA), cert. denied, 113 S. Ct. 406 (1992). 
 Such special treatment for ERISA plans is grounds for 

preemption. In Mackey v. Lanier Collection Agency & Serv., 486 

U.S. 825 (1988), the Supreme Court struck down a provision of a 

Georgia statute that barred garnishment of ERISA plan funds. 

Because the provision expressly referred to ERISA benefit plans 

and accorded them special treatment, the Court found it "related 

to" such plans within the meaning of § 514(a). Id. at 829-30. 

Though the law might have been enacted to further ERISA's 

purposes, the Court said, "[l]egislative `good intentions' do not 

save a state law within the broad pre-emptive scope of § 541(a)." 

Id. at 830. See also McCoy v. Massachusetts Inst. of Tech., 950 

F.2d 13, 19-20 (1st Cir. 1991) (§ 514(a) preempts mechanics' lien 

law expressly inuring lien to advantage of various types of ERISA 

plans), cert. denied, 112 S. Ct. 1939 (1992). 

 Here, too, there may have been "good intentions" behind 

the special treatment given to ERISA plans. The Prevailing Wage 

Appeals Board was responding to a claim that the Prevailing Wage 

Act was preempted by ERISA, and stated its intention to 

"interpret state law so that it comports with constitutional and 

federal law." Declaratory Order at 2. Despite this effort, the 

Board interpreted the Prevailing Wage Act in a way that is 

preempted by ERISA.14

 

14. Amicus Curiae, the Roofing Contractors Association, argues 

that preemption should not apply to state actions where the state 

is acting as a proprietor. Because we find the Prevailing Wage 

Act and its accompanying regulations not preempted on other 

grounds, this argument could only affect our decision regarding 

the Declaratory Order. The Association relies on Building & 

Constr. Trades Council v. Associated Bldrs. and Contractors, 113 

S. Ct. 1190 (1993), in which the Supreme Court held a bid 
 C. The Act and its accompanying regulations

 Although the Declaratory Order implemented the 

Prevailing Wage Act in a manner preempted by ERISA, we hold that 

neither the Prevailing Wage Act nor its accompanying regulations 

are preempted. Under at least one reasonable interpretation of 

the Act and regulations, an interpretation the Agency is free to 

adopt, the Act and regulations merely require that the Secretary 

set a prevailing wage that consists of a cash component and may 

include a benefits component. Employers must pay the cash 

(..continued) 

specification by a Massachusetts state authority, requiring 

bidders to abide by a particular labor agreement, was not 

preempted by the National Labor Relations Act, despite the 

argument that the bid specification was a state intrusion into 

labor-management relations, a regulatory realm preempted by the 

federal government under the NLRA. 

 The Supreme Court rejected the preemption claim because 

the state was acting "as a market participant with no interest in 

setting policy," rather than in "a role that is 

characteristically governmental." Id. at 1197. The Court 

explained that when a state acts in the market place as an owner 

and manager of property, it "is not subject to pre-emption by the 

NLRA, because pre-emption doctrines apply only to state 

regulation." Id. at 1196. 

 Were we to reach the merits of this novel argument, we 

would have to begin by considering the differences between 

preemption under the NLRA, which has no explicit preemption 

provision, and preemption under ERISA, whose preemption clause is 

expansive. We need not pursue the inquiry, however, because the 

theory could not apply here in any event. In applying the 

Prevailing Wage Act, Pennsylvania is clearly acting with an 

"interest in setting policy," not as a proprietor. Id. at 1197. 

The Prevailing Wage Act aims to ensure that workers receive 

adequate wages, a governmental objective. Throughout its brief, 

the state justifies its action in terms of its "right to 

establish labor standards," which it calls a "traditional police 

power." Brief for the Appellants at 14-15. It would be 

difficult for the state to claim it is acting as a private market 

participant when it is making rules that raise the cost of its 

contracts. 
component of the wage in cash, but they may pay the benefits 

component either in benefits or cash. Any benefits they provide, 

regardless of type, would count toward the benefits component.15 

Under this interpretation, the Prevailing Wage Act and the 

regulations do not control benefits, but rather require certain 

wages to be paid. 

 The Act and regulations thus fall into the field 

of state regulation of wages, which is one of those "areas of 

traditional state regulation" that we "must presume that 

Congress did not intend to pre-empt." Metropolitan Life Ins. Co. 

v. Massachusetts, 471 U.S. 724, 740 (1985). That presumption is 

rebuttable, however, for "to avoid being preempted, a state law 

in addition to being an exercise of traditional police powers 

must also affect the plan `in too tenuous, remote or peripheral a 

manner to warrant a finding that the law "relates to" the plan.'" 

Gilbert v. Burlington Indus., Inc., 765 F.2d 320, 327 (2d Cir. 

1985) (quoting Shaw, 463 U.S. at 100 n.21), aff'd, 477 U.S. 901 

 

15. We read the Prevailing Wage Act as a statute that may 

properly be implemented in a number of ways, so that in 

overturning the Declaratory Order we need not invalidate the 

Prevailing Wage Act itself or its regulations. We see nothing in 

the Act or the regulations requiring that the benefits component 

specify particular types of benefits and the amounts to be 

contributed in each. The variety of official interpretations 

given the Prevailing Wage Act at different times shows that the 

Secretary and the Prevailing Wage Appeals Board also believe 

line-item specification of benefits is but one of the approaches 

at their disposal under the Act. See supra, note Error! Bookmark 

not defined.. 

 There may be other interpretations of the statute that 

are not preempted. Because there is one such reasonable 

interpretation, the Act and regulations themselves are not 

preempted. 
(1986). Nevertheless, the state law at issue here avoids 

preemption because it does not impede the goals of ERISA and has 

only incidental and insignificant relations to ERISA plans. 

 1. Direct relation

 The Prevailing Wage Act and regulations lack any of the 

three types of direct relations to ERISA plans described in 

United Wire. See supra at 20. The Act and regulations are not 

"specifically designed to affect employee benefit plans." United 

Wire, 995 F.2d at 1192. The Act aims to protect workers on 

public projects from substandard pay by requiring a minimum cash 

wage that may be supplemented by either prevailing benefits or 

their cash equivalent. Neither the Act nor its regulations 

require that certain benefits plans be established, that certain 

benefits be given, or that ERISA plans be administered in a 

certain way. 

 The Act and regulations do not "single[] out [ERISA] 

plans for special treatment," or even refer to such plans. 

United Wire, 995 F.2d at 1192. Rather, they merely refer to 

employee benefits, with no distinction between ERISA and nonERISA benefits. The Supreme Court has rejected the argument 

"that ERISA forecloses virtually all state legislation regarding 

employee benefits," and instead directs us to inquire whether the 

state law "relates to" ERISA benefit plans. Fort Halifax, 482 

U.S. at 7. While some of the benefits the Secretary is permitted 

to count in calculating the prevailing wage will come from ERISA 
plans,16 we do not believe ERISA requires a state to ignore the 

existence of ERISA benefits when considering overall remuneration 

to workers. The Court has allowed the inclusion or implication 

of ERISA plans in generally valid state legislation. See, e.g., 

Mackey, 486 U.S. at 830-841 (approving garnishment law that would 

apply to ERISA plan benefits as well as other assets of debtors); 

Shaw, 463 U.S. at 106-08 (approving disability benefits 

requirements that could be satisfied through ERISA plans). 

Indeed, Mackey suggests that a law would be preempted if it 

counted all remuneration to workers except benefits from ERISA 

plans, for this would be special treatment. 

 Finally, although ERISA plans are within the scope of 

the regulator's consideration under the Prevailing Wage Act, the 

Act does not create a legislative scheme in which an ERISA plan 

is so central that "the rights or restrictions [the law] creates 

are predicated on the existence of such a plan." United Wire, 

995 F.2d at 1192. An example of a law predicated on ERISA plans 

 

16. Indeed, one regulation gives examples of employee benefits 

that include benefits which would come from ERISA plans, such as 

"retirement and pension benefits." 34 Pa. Code § 9.102. While 

the Supreme Court has held a statute's reference to ERISA plans 

grounds for preemption, District of Columbia v. Greater 

Washington Bd. of Trade, 113 S. Ct. 580 (1992), as discussed 

below, that statute referred only to the ERISA plan as the basis 

for the rights it accorded. But the listing of an ERISA plan 

benefit as an example of the factors to be calculated into a 

broader determination, such as a prevailing wage, is in and of 

itself inconsequential. We have held that "[w]here, as here, a 

reference to an ERISA plan can be excised without altering the 

legal effect of a statute in any way, we believe the reference 

should be regarded as without legal consequence for § 514(a) 

purposes." United Wire, 995 F.2d at 1192 n.6. 
was the statute in Greater Washington Bd. of Trade, 113 S. Ct. at 

584, which required health coverage for injured employees on 

workers' compensation to be equivalent to regular employees' 

"existing health insurance coverage." Such coverage was, in 

turn, "a welfare benefit plan under ERISA," so that injured 

employees' rights were premised on the existence of ERISA plans. 

Id. Similarly, in Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 

139-140 (1990), the Court held ERISA preempted a state cause of 

action in favor of an employee who alleged his employer 

terminated him to avoid contributing to his pension plan, where 

"the existence of a pension plan [was] a critical factor in 

establishing liability." 

 In United Wire we set out a test to distinguish between 

laws predicated on ERISA plans and laws that implicated such 

plans in a nonessential manner. A New Jersey statute set 

hospital rates for all payors, and included a surcharge to 

compensate hospitals for their losses in providing care to 

Medicare patients. While the dissent argued that New Jersey's 

system for funding underreimbursed care would not be viable 

without the participation of ERISA plans, United Wire, 995 F.2d 

at 1199-1200 (Nygaard, J., dissenting), we stated: 

 [I]t is of no legal consequence if removing 

ERISA plans from the scene would diminish the 

likelihood that the statute would meet its 

social goals. Rather, the test for 

preemption in this regard is whether the 

existence of ERISA plans is necessary for the 

statute to be meaningfully applied. 
Id. at 1192 n.6. Because the New Jersey law set standard rates 

and surcharges for all payors, we held it could be meaningfully 

applied in the absence of ERISA plans. Id. 

 In the absence of ERISA plans, the Prevailing Wage Act 

could be meaningfully applied. The Act requires the Secretary to 

measure prevailing benefits 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," 

Massachusetts v. Morash, 490 U.S. 107, 116 (1989), and that 

"create[] no need for an ongoing administrative program for 

processing claims and paying benefits," Fort Halifax, 482 U.S. 

at 12. Similarly, the statute would be "meaningfully applied" in 

the absence of ERISA plans if a public works contractor satisfied 

the benefits component of a given prevailing wage by making 

contributions for non-ERISA benefits, or by paying the equivalent 

in cash. Thus, no element of the Prevailing Wage Act is premised 

on the existence of an ERISA plan. 

 2. Indirect relation

 We next determine whether there is an indirect relation 

to ERISA plans requiring preemption. "ERISA pre-empts any state 

law that refers to or has a connection with covered benefit plans 

(and that does not fall within a § 514(b) exception) `even if the 

law is not specifically designed to affect such plans, or the 

effect is only indirect,' and even if the law is `consistent with 

ERISA's substantive requirements.'" Greater Washington Bd. of 

Trade, 113 S. Ct. at 583 (citations omitted). ERISA preempts 
laws that "dictate or restrict the choices of ERISA plans with 

regard to their benefits, structure, reporting and 

administration," or "impair the ability of a plan to function 

simultaneously in a number of states." United Wire, 995 F.2d at 

1193. Here, however, the only connections between ERISA plans 

and the Act are "too tenuous, remote, or peripheral . . . to 

warrant a finding that the law `relates to' the plan." Shaw, 

463 U.S. at 100, n. 21. 

 State laws are preempted because they dictate or 

restrict ERISA plans when, for example, they eliminate a method 

of calculating benefits in ERISA plans that is permitted by 

federal law, FMC Corp. v. Holliday, 498 U.S. 52 (1990) (state law 

prohibiting ERISA plans from requiring reimbursement of benefits 

from beneficiaries who recover in tort for the same expenses 

preempted by ERISA); Alessi v. Raybestos-Manhattan, Inc., 451 

U.S. 504 (1981) (state law prohibiting offset of workers' 

compensation awards against retirement benefits preempted by 

ERISA). A state cannot require an employer to contribute to 

certain ERISA plans, Local Union 598 v. J.A. Jones Constr. Co., 

846 F.2d 1213 (9th Cir.) (state prevailing wage statute requiring 

contributions to apprenticeship program, an ERISA plan, 

preempted), aff'd 488 U.S. 881 (1988), or to provide certain 

benefits through an ERISA plan, Standard Oil Co. v. Agsalud, 633 

F.2d 760 (9th Cir. 1980) (Hawaii law requiring comprehensive 

health benefits for all workers preempted), aff'd, 454 U.S. 801 

(1981). One court has held that favoring one ERISA plan over 

another through financial incentives is barred. National 
Elevator Industry, Inc., 957 F.2d at 1559 (Oklahoma prevailing 

wage law allowing reduced trainee wages only for participants in 

certain ERISA training programs preempted). 

 a. Cash component

 The primary restriction imposed by the Prevailing Wage 

Act is that employers on public contracts pay the predetermined 

prevailing minimum wage which, as we have described, has a cash 

component and a benefits component. We will consider each 

component in turn. The cash component fixes a minimum cash wage 

that must be paid, regardless of benefits contributions. This 

does not dictate or restrict the choices of ERISA plans, directly 

or indirectly. Employers must pay the cash minimum, regardless 

of what benefits they provide. 

 Appellees argue that the Prevailing Wage Act restricts 

their choice of plan benefits and structure because employers are 

not given credit for benefits contributions beyond the prevailing 

benefits minimum. This, they say, makes it difficult for a 

single plan "to function simultaneously in a number of states." 

United Wire, 995 F.2d at 1193. Bell explains that it negotiates 

uniform contracts with its workers in several states that may 

award lower wages and higher benefits than those called for in 

the prevailing minimum wage for a particular public works 

project. In this case, Bell says it would be forced to continue 

the benefits contributions it had agreed to in its national 

contract, but also raise its wages on the public works project. 

 Ironically, the Appellees here are objecting to an 

aspect of the Prevailing Wage Act that does not relate enough to 
employee benefits and benefit plans for their taste. They would 

like the level of cash wages required to be tied to the level of 

benefits paid by an employer, but the state has chosen to fix the 

cash wage component independent of benefits contributions. A 

state law does not dictate or restrict the choices of ERISA plans 

by having nothing to do with employee benefits. 

 The flaw in Appellees' objection is that it could be 

raised even against a prevailing hourly cash wage law with no 

benefits component. Such a law would create the same 

"disincentive" against awarding benefits, because employers would 

have to pay the wage no matter what level of benefits they 

provided. We do not believe ERISA preempts such basic state wage 

regulation. "The States have traditionally regulated the payment 

of wages," and the Supreme Court has not found "any indication 

that Congress intended such far-reaching consequences" as the 

preemption of this sphere of state authority. Massachusetts v. 

Morash, 490 U.S. at 119. See also 29 C.F.R. § 2510.3-1(b) (1993) 

("employee welfare benefit plan" does not include "[p]ayment by 

an employer of compensation on account of work performed by an 

employee."). ERISA does not preempt cash wage requirements 

unrelated to employee benefits, nor does it require the state to 

encourage benefits contributions by reducing the minimum cash 

wage where an employer makes large benefits contributions.17

 

17. Through the benefits component, the state has in fact 

extended employers the option of paying part of the minimum wage 

through cash or benefits. As discussed below, we find this 

permissible under Shaw, 463 U.S. 85. See infra at II(C)(2)(b). 

The state is, however, under no obligation to offer employers 
 Plainly, a minimum cash wage requirement will impose an 

additional cost on a Pennsylvania public works contractor which 

would otherwise pay less than the minimum, and this cost, like 

any other imposed on an employer, could influence its choices 

regarding ERISA benefits contributions. But this could be said 

of any wage regulation. For example, the Supreme Court upheld a 

Massachusetts statute that required employers to pay employees 

for all unused vacation time upon discharge, because the law was 

an instance of wage regulation and did not relate to employee 

benefit plans. Morash, 490 U.S. 107. And the Maine statute 

upheld in Fort Halifax required employers to give a severance 

payment of one week's salary for every year an employee had 

worked in the event of a plant closing. 482 U.S. at 3-4. The 

severance payment represented "a one-time obligation . . . 

creat[ing] no need for an ongoing administrative program for 

processing claims and paying benefits," and hence did not relate 

to an ERISA plan. Id. at 12. Both laws constrained employers' 

choices regarding wages and non-ERISA benefits, and could 

indirectly affect their decisions as to what ERISA benefits to 

offer employees. However, wage laws are among the "many forms of 

state regulation under the police power which result in increases 

in the cost of doing business," United Wire, 995 F.2d at 1196, 

and this incidental effect does not create a preemptible relation 

(..continued) 

this choice, and may require all or, as here, part of a minimum 

wage to be paid in cash. 
to ERISA plans.18 ERISA's preemption clause aims "to ensure 

 

18. While state regulations may affect the cost of doing 

business in a state, they may not, consistent with ERISA, place 

administrative burdens and costs on ERISA plans that make it 

impractical for an employer to provide a nationwide plan. Thus, 

the Fort Halifax Court stated, "Faced with the difficulty or 

impossibility of structuring administrative practices according 

to a set of uniform guidelines, an employer may decide to reduce 

benefits or simply not to pay them at all."). 482 U.S. at 13. 

Similarly, the Holliday Court stated, "To require plan providers 

to design their programs in an environment of differing state 

regulations would complicate the administration of nationwide 

plans, producing inefficiencies that employers might offset with 

decreased benefits." 498 U.S. at 60. 

 State regulation may also be preempted for imposing 

costs directly on core functions of ERISA plans. For example, in 

E-Systems, Inc. v. Pogue, 929 F.2d 1100 (5th Cir. 1991), cert. 

denied, 112 S. Ct. 585 (1991), the court held ERISA preempted a 

state tax on fees for services to ERISA plans and benefits paid 

by ERISA plans. The Second Circuit went farther in Travelers 

Ins. Co. v. Cuomo, 14 F.3d 708 (2d Cir. 1993) (criticizing 

Rebaldo v. Cuomo, 749 F.2d 133 (2d Cir. 1984), cert. denied, 472 

U.S. 1008 (1985)), where it overturned a New York law that added 

various surcharges to hospital bills of patients covered by 

commercial insurance carriers and health maintenance 

organizations. Because the surcharges imposed "a significant 

economic burden on commercial insurers and HMOs," the court found 

they had "an impermissible impact on ERISA plan structure and 

administration." Id. at 721. 

 It is not clear whether Travelers Ins. directly 

conflicts with United Wire. See Travelers Ins., 14 F.3d at 721 

n.3 (arguing United Wire interprets preemption clause too 

narrowly). Unlike the statute in Travelers Ins., the New Jersey 

law in United Wire imposed a surcharge on all payors, not just 

commercial insurers and HMOs, and gave discounts only for 

"quantifiable economic benefits rendered to the institution or to 

the health care delivery system taken as a whole." United Wire, 

995 F.2d at 1189 (citation omitted). Thus, the law might more 

legitimately be regarded as one of general application rather 

than one specifically affecting ERISA plans; it may also have had 

a less significant economic effect on such plans. As we stated 

in United Wire, general legislation under a state's police power 

may raise the cost of doing business for ERISA plans without 

triggering preemption. But in any event, the Prevailing Wage Act 

has a far less direct economic impact on ERISA plans than either 

of the hospital rate laws: because in essence the Act imposes 

only a wage requirement, it changes employers' wage costs, not 

ERISA plan costs. 
benefit plans will be governed by only a single set of 

regulations," FMC Corp. v. Holliday, 498 U.S. 52, 60 (1990), not 

to bestow on employers a uniform regulatory and economic 

environment for all their activities across the country. Because 

states enact their own wage and non-ERISA benefits regulations, 

Morash, 490 U.S. 107; Fort Halifax, 482 U.S. 1; Shaw 463 U.S. 85, 

collection laws, Mackey, 486 U.S. 825, and controls on hospital 

charges, United Wire, 995 F.2d 1179, employers must adjust their 

operations according to locale. This administrative and 

financial burden arises from the "patchwork scheme" of our 

federal system, a system whose "separate spheres of governmental 

authority," Alessi, 451 U.S. at 522, were not preempted by ERISA. 

 b. Benefits component

 Unlike the cash component, the benefits component of 

the prevailing minimum wage plainly has some connection to 

employee benefits, and thus to benefits plans, but we find no 

grounds for preemption here, either. Contracts for public works 

must either provide benefits contributions at the level 

determined in the prevailing wage or the monetary equivalent 

thereof. 34 Pa. Code § 9.106. Appellees suggest this provision 

creates a preemptible relation to ERISA plans merely by providing 

the option of complying with part of the minimum wage through 

benefits contributions. We disagree. The provision does not 

require or encourage an employer to provide certain benefits, to 

alter the manner in which it provides benefits, or even to 

provide any benefits at all. The benefits component only relates 

to ERISA plans when an employer decides to satisfy it through 
contributions to ERISA plans instead of cash payments or 

contributions to non-ERISA benefits. Where a legal requirement 

may be easily satisfied through means unconnected to ERISA plans, 

and only relates to ERISA plans at the election of an employer, 

it "affect[s] employee benefit plans in too tenuous, remote, or 

peripheral a manner to warrant a finding that the law `relates 

to' the plan." Shaw, 463 U.S. at 100 n.21. 

 We are guided by Shaw, where the Court held ERISA did 

not preempt a New York law requiring employers to pay sick-leave 

benefits to employees unable to work because of pregnancy. 

Section 4(b)(3) of ERISA exempts from the statute any plan 

"maintained solely for the purpose of complying with applicable . 

. . disability insurance laws," 29 U.S.C. § 1003(b)(3); such 

plans may therefore be regulated by the state. The Court held § 

4(b)(3) only saved from preemption plans solely devoted to 

disability benefits and did not exempt a plan that included 

provisions for benefits subject to ERISA along with provisions 

intended to comply with state disability laws. Id. at 106-07. 

However, the Court held that because § 4(b)(3) allowed New York 

to require employers to provide certain benefits in a non-ERISA 

plan -- one solely devoted to disability benefits -- it could 

also offer them the option of providing those benefits along with 

non-disability benefits in an ERISA plan. Thus, 

 while the State may not require an employer 

to alter its ERISA plan, it may force the 

employer to choose between providing 

disability benefits in a separately 

administered plan and including the statemandated benefits in its ERISA plan. If the 

State is not satisfied that the ERISA plan 
comports with the requirements of its 

disability insurance law, it may compel the 

employer to maintain a separate plan that 

does comply. 

Id. at 108. The benefits component of the prevailing minimum 

wage extends to employers a similar choice. A state requirement 

that an employer pay a minimum cash wage does not relate to ERISA 

plans. The benefits component represents a sum of money an 

employer may pay either through cash wages or through benefits 

contributions, some of which may be toward ERISA plans. To 

paraphrase Shaw, if the state is not satisfied that the amount of 

benefits contributions satisfies the total wage requirement, it 

compels the employer to pay greater cash wages. 

 Thus, when Appellees complain the Prevailing Wage Act 

impermissibly subjects their ERISA plans to different regulations 

in Pennsylvania than elsewhere, they are speaking of a law 

requiring only that when their benefits contributions fall short 

of the prevailing minimum, they may make up the difference with 

cash.19 Like 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. Unless the employer chooses 

otherwise, the benefits component imposes a cash wage 

requirement, and it is of no consequence that this requirement is 

particular to Pennsylvania public works projects -- as discussed 

above, ERISA does not preempt a state's power to set a minimum 

cash wage. See supra at II(C)(2)(a). 

 

19. They also admit they could simply decline to participate in 

public works contracts. 
 Some of Appellees' objections are levelled at the lineitem approach to the Prevailing Wage Act, which was in effect for 

all benefits before the Declaratory Order was issued, and 

continued for non-ERISA benefits thereafter. We acknowledge this 

would be a different case if the Act required line-item 

specification in the benefits component.20 We believe a state 

can set a minimum cash wage, and allow an employer the option of 

paying part of that in benefits. We doubt, however, a state 

could also specify that only particular benefits could be given 

in lieu of cash payments without relating to ERISA plans, since 

that would favor certain benefits plans over others.21 Line-item 

specification would effectively create a cash incentive to award 

the predetermined benefits and not others, and to award certain 

amounts of those benefits and no more. As the Court of Appeals 

for the Tenth Circuit said: 

 We accept, as a general proposition, the 

state's right to regulate wages. But a wage 

law that provides an option favoring certain 

ERISA plans and benefits . . . over other 

ERISA plans and benefits . . . is not a law 

of "general application" and may be used to 

effect change in the administration, 

structure and benefits of an ERISA plan. 

 

20. See supra note Error! Bookmark not defined.. 

21. For example, a predetermination for Common Heavy & Highway 

Laborers reproduced in the joint appendix gives hourly prevailing 

minimums for health and welfare benefits, pension benefits, and 

education, but nothing for the other eight categories, such as 

apprenticeship and training, vacation, or legal services. Under 

the line-item approach, the contractor hiring a Common Highway 

Laborer would get a wage offset by paying him up to $2.62 an hour 

in health benefits, but no offset for health benefits beyond 

that, and no offset for payments for apprenticeship and training. 
National Elevator Indus., 957 F.2d at 1561 (holding ERISA 

preempted an Oklahoma law that reduced the minimum wage for 

employees only in a specified apprenticeship program, which was 

an ERISA plan). Pursuant to its power to set minimum level of 

remuneration to workers, a state may allow part of a minimum wage 

to be satisfied by benefits contributions. But the state asserts 

an additional power, the power to determine what benefits workers 

should receive, when it gives preferred status to some benefits 

over others in a minimum wage scheme. This power is not left to 

the states under ERISA.22

 c. Administration

 Finally, we must consider whether the Prevailing Wage 

Act and the accompanying regulations "dictate or restrict the 

choices of ERISA plans with regard to their . . . reporting and 

administration." United Wire, 995 F.2d at 1193. Administrative 

simplicity is one of the purposes of ERISA, and "Congress 

 

22. Other courts have found states may not favor one benefits 

plan, or one type of benefits plan, over another. In General 

Electric Co. v. New York State Dep't of Labor, 891 F.2d 25 (2d 

Cir. 1989), cert. denied, 496 U.S. 912 (1990), the court ruled 

ERISA preempted New York's prevailing wage law, which required 

benefits contributions in particular categories and amounts or 

their cash equivalents. The court found the law objectionable 

for a number of reasons, including the fact that the law 

effectively prescribed "the type and amount of an employer's 

contributions to a plan," and "the nature and amount of benefits 

thereunder." Id., 891 F.2d at 29. (The General Electric court 

also objected to the administrative burden imposed on employers 

by the New York law. Id. It is not clear whether the court 

would have found the law acceptable if line-item compliance in 

the benefits package had not been required.) See also Local 

Union 598 v. J.A. Jones Constr. Co., 846 F.2d 1213 (9th Cir.), 

aff'd 488 U.S. 881 (1988) (discussed supra at 29). 
intended pre-emption to afford employers the advantages of a 

uniform set of administrative procedures governed by a single set 

of regulations." Fort Halifax, 482 U.S. at 11. But state laws 

are not necessarily preempted because they impose some 

administrative burden on ERISA plans. The Mackey Court was not 

moved by petitioners' argument that subjecting ERISA plans to 

state law garnishment by creditors of plan participants would 

also create "substantial administrative burdens and costs" when 

"plan trustees are served with a garnishment summons, become 

parties to a suit, and must respond and deposit the demanded 

funds due the beneficiary-debtor." Mackey, 486 U.S. at 831. We 

think preemption is not required where a state law places 

administrative requirements on ERISA plans so slight that the law 

"creates no impediment to an employer's adoption of a uniform 

benefit administration scheme." Fort Halifax, 482 U.S. at 14. 

See also Aetna Life Ins. Co. v. Borges, 869 F.2d 142, 146-47 (2d 

Cir.) ("What triggers ERISA preemption is not just any indirect 

effect on administrative procedures but rather an effect on the 

primary administrative functions of benefit plans, such as 

determining an employee's eligibility for a benefit and the 

amount of that benefit."), cert. denied, 493 U.S. 811 (1989). 

 Here, the bulk of administrative burdens placed on 

employers by the Prevailing Wage Act do not relate to ERISA plans 

at all. The law requires that each contractor and subcontractor 

"shall keep an accurate record showing the name, craft and the 

actual hourly rate of wage paid to each workman employed by him 

in connection with public work," that the record be preserved for 
two years from the date of payment, and that it be open for 

inspection. 43 P.S.A. § 165-6. The regulations expand on this, 

requiring recording of personal information regarding the worker, 

specification of the hours worked each day, and the preservation 

of time cards and indentures and approvals regarding 

apprenticeships. 34 Pa. Code § 9.109. None of these records 

relates to employee benefit plans; rather, they are general 

employment data a state would require even if it were merely 

regulating cash wages. 

 Two minor administrative requirements are placed on 

ERISA plans. Under current implementation of the Act, the state 

must certify benefits as bona fide for them to count against the 

prevailing minimum benefits contribution. This apparently 

requires simply that the contributions actually be made to fringe 

benefit programs and be held for or attributed to the exclusive 

benefit of employees. See Bitzel Declaration, Bell App. at 393. 

The other requirement is that employers keep a record of their 

benefits contributions, and certify weekly to the officer 

disbursing public funds that they have paid wages in conformity 

with the contract, or indicate what wages remain unpaid.23 34 

P.S.A. §§ 9.109, 9.110. We do not agree with amicus Chamber of 

Commerce of the United States that this entails complex, on-going 

measurements for each employee. Brief for Chamber of Commerce at 

16-17. The memo from Field Inspection Supervisor Risaliti 

 

23. Presumably, "wages in strict conformity with the contract," 

34 P.S.A. § 9.110(a), include contributions for benefits. 
indicates the Secretary approved a simple method for estimating 

hourly benefits contributions where premiums are paid monthly: 

the premium is divided by 160. Keystone App. at 80. We presume 

simple formulae are available for calculating the hourly and 

weekly value of benefits paid in other ways as well. 

 These records and reporting requirements entail only a 

slight burden. Calculating benefits paid out will not influence 

"decisions regarding the internal design and structure of benefit 

plans (e.g. who may collect, and how, and from whom)," United 

Wire, 995 F.2d at 1194 n.8, so the ease and efficiency of 

administering nationwide benefits plans will not be impeded. 

See also Minnesota Chapter, Assoc'd Builders v. Minnesota Dep't 

of Labor and Industry, Civ. No. 4-92-564, slip op. at 7, (D. 

Minn. April 27 1993) (Under Minnesota prevailing wage law, "[t]he 

requirement of calculating [the cost of benefits] falls on the 

employer itself, but does not place any administrative burden on 

the plan. The requirement of calculating costs and keeping 

records may somewhat increase the cost of the benefits plans, but 

this incidental impact on the plan need not lead to 

preemption."). We see no potential that the ability of plans to 

operate in several states will be impaired by the administrative 

requirements of the Prevailing Wage Act. 

 d. Conclusion

 We acknowledge that at some point, the quantity of a 

law's indirect effects on ERISA plans may require preemption. 

For example, as we have explained, under a line-item approach the 

Prevailing Wage Act would create incentives favoring some types 
of benefits over others, even though it would still allow 

employers to substitute cash for benefits, and this would appear 

to exceed the state's authority under ERISA. A significant, 

though indirect, economic effect on ERISA plans could also be 

grounds for preemption -- for example, though a state may set a 

minimum cash wage, if that minimum were so high that employers 

could not practically provide any benefits, the law might well be 

found to restrict the choices of ERISA plans. As we interpret 

the Prevailing Wage Act, however, it neither encourages nor 

constrains any particular kind of conduct towards ERISA plans, 

nor does it cross the line from wage regulation to benefit 

regulation -- rather, while imposing a cost on employers, as any 

wage regulation will, the Act leaves employers free to structure 

benefit plans as they wish. 

 Furthermore, the Act and regulations represent 

reasonable exercises of a state's traditional power to regulate 

wages. ERISA, and particularly the preemption clause, were 

designed to ensure fairness and consistency in employee benefit 

plans. We see no indication, however, that in enacting ERISA, 

Congress expected it would require uniformity of wage regulation 

among the states or that its preemption provision would 

eviscerate state power to regulate wages. 

III.

 The Prevailing Wage Act and its accompanying 

regulations do not relate to employee benefit plans in more than 

a tenuous, remote, and peripheral manner. They do not refer to 

ERISA plans. Rather, they establish a system of wage regulation 
that neither burdens nor influences the benefits or structure of 

employee benefit plans, nor does it interfere with the uniform 

administration of such plans. "If a State creates no prospect of 

conflict with a federal statute, there is no warrant for 

disabling it from attempting to address uniquely local social and 

economic problems." Fort Halifax, 482 U.S. at 19. 

 For these reasons, we will reverse the district court's 

judgment to the extent it held the Prevailing Wage Act and 

regulations preempted. Because the Declaratory Order singles out 

ERISA plans for special treatment, however, we will affirm the 

judgment of the district court that ERISA preempts the 

Declaratory Order.