Opinion ID: 782606
Heading Depth: 3
Heading Rank: 1

Heading: Minimum Substantive Labor Standards and the Legislative Goals of the NLRA

Text: 23 As the Supreme Court made clear in Metropolitan Life, [t]he framework established in the NLRA was merely a means to allow the parties to reach ... agreement fairly. 471 U.S. at 754, 105 S.Ct. 2380. The NLRA is concerned primarily with establishing an equitable process for determining terms and conditions of employment, and not with particular substantive terms of the bargain that is struck when the parties are negotiating from relatively equal positions. Id. at 753, 105 S.Ct. 2380. In Metropolitan Life, the Supreme Court held that [m]inimum state labor standards affect union and nonunion employees equally, and neither encourage nor discourage the collective-bargaining processes that are the subject of the NLRA. Id. at 755, 105 S.Ct. 2380. The Court found that such minimum labor standards have only the most indirect effect on the right of self-organization established in the Act. Id. Unlike the NLRA, mandated-benefit laws are not laws designed to encourage or discourage employees in the promotion of their interests collectively; rather, they are in part `designed to give specific minimum protections to individual workers and to ensure that each employee covered by the Act would receive' the mandated [benefit]. Id. (emphasis original, internal citations omitted). The Court found that these laws do not even inadvertently affect the interests implicated in the NLRA. Id. 24 Rondout argues that the annualization regulation in effect injects the State improperly into the bargaining process by dictating the employee supplements that Rondout must pay on private construction projects. Rondout argues that the mere fact that the employer may opt to pay the prevailing supplement in cash instead of into a benefit plan does not alleviate the conflict between the annualization regulation and the Machinists doctrine. A non-union contractor can avoid annualization supplements by paying the public work employee in cash, but to do so, Rondout argues, requires the employer to incur additional social security taxes and higher insurance premiums on the added payroll. 2 Additionally, Rondout argues that the employee must pay payroll taxes on the cash payments, which dilutes the real value of the supplements and deprives the employee of the long-term advantages of a tax-deferred benefit plan. 3 DOL responds that while the cash option may increase the cost of Rondout doing business, the additional costs are insufficient to invoke NLRA preemption. 4 25 While the annualization regulation may impose an additional cost on non-union employers through indirect taxes on the cash payment option, this increase does not affect the bargaining process that is the subject of the NLRA. As the Supreme Court has held, the mere fact that a state statute pertains to matters over which the parties are free to bargain cannot support a claim of pre-emption, for `there is nothing in the NLRA.... which expressly forecloses all state regulatory power with respect to those issues ... that may be the subject of collective bargaining.' Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 21, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987) (alteration in original) (quoting Malone v. White Motor Corp., 435 U.S. 497, 504-05, 98 S.Ct. 1185, 55 L.Ed.2d 443 (1978)). Machinists preemption prohibits state regulation of bargaining conduct that Congress intended to be left to the free play of economic forces. Machinists, 427 U.S. at 150-51, 96 S.Ct. 2548. Unlike the NLRA, the annualization regulation is not designed to encourage or discourage employees in the promotion of their interests collectively. Metro. Life, 471 U.S. at 755, 105 S.Ct. 2380. Without some connection between the prevailing wage supplement and labor/management bargaining, the annualization regulation fails to come within the sphere of Machinists preemption under the NLRA. 26 In support of its argument that the annualization regulation affects the labor/management bargaining process that is protected under the NLRA, Rondout relies on a Ninth Circuit case, Chamber of Commerce v. Bragdon, 64 F.3d 497, 501 (9th Cir.1995). Rondout relies on Bragdon for the proposition that substantive labor requirements can be so restrictive or intrusive that they effectively thrust the state into the private bargaining process and dictate the results of the contract. Bragdon can be easily distinguished from the present case, however. In Bragdon, the Ninth Circuit found a California ordinance that required employers to pay prevailing wages to their employees on certain types of private industrial construction projects costing over $500,000 to be preempted by the NLRA. Here, we have a prevailing wage concept, which was developed for use by government entities when they are acting as proprietors and participants in the marketplace, being imposed to regulate the wages paid on private construction projects. Id. Unlike the California ordinance, New York's annualization regulation does not require prevailing wages or benefits for any employee who works on a private contract. The only time the prevailing wage standard is imposed is when an employee works on a public project. Having distinguished Bragdon, we have no need to decide whether Bragdon was correctly decided on its own facts. 27 Even if Bragdon were controlling authority, Rondout fails to establish how the annualization regulation would affect the bargaining process itself. Although the tax implications may have an indirect economic impact on the bidding process, 5 it does not bind an employer or employee to a particular choice or eliminate particular bargaining tools. Thus, it is not preempted under the Machinists doctrine. In New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 659, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995), the Supreme Court examined a similar, indirect economic impact in a case involving alleged preemption under ERISA. In that case, the Court stated that: 28 [a]n indirect economic influence, however, does not bind plan administrators to any particular choice and thus function as a regulation of an ERISA plan itself.... It simply bears on the costs of benefits and the relative costs of competing insurance to provide them. It is an influence that can affect a plan's shopping decisions, but it does not affect the fact that any plan will shop for the best deal it can get, surcharges or no surcharges. 29 Id. at 659-60, 115 S.Ct. 1671. Likewise, in this case, the additional taxes on the cash payment option may factor into the business decision of the non-union employer when taking a public job. However, employees remain free to negotiate contracts under which they never work on public work projects, or only do so on the condition that they receive their supplement in benefits, thus avoiding the additional payroll tax. Employers remain free to require employees to take the cash supplement, thereby avoiding the pooling disincentive. Nothing in the regulation imposes a specific choice on either the employer and employee. Thus, the annualization regulation does not fall within the scope of the NLRA and is not preempted by it. 6