Court Opinion

ID: 8975995
Source: CourtListenerOpinion
Date Created: 2022-11-27 10:56:31.764471+00
Date Added: 2024-06-11T17:10:32.879429
License: Public Domain

GEORGE C. PRATT, Circuit Judge,
dissenting:
Federal preemption under ERISA does not sweep so broadly that it invalidates a state law governing labor costs that neither purports to regulate employee benefits plans nor affects, directly or indirectly, a plan’s primary administrative functions. Because the majority both overstates the impact of New York’s prevailing wage law and breaks stride with our prior decisions in this area, I respectfully dissent from the majority’s opinion insofar as it holds that § 220 is preempted by ERISA.
In our latest and perhaps most thorough discussion of ERISA preemption, we compared the types of laws that have been struck down under § 514 with those that have withstood preemption challenge. See Aetna Life Ins. Co. v. Borges, 869 F.2d 142, 145-47 (2d Cir.), cert. denied, — U.S. —, 110 S.Ct. 57, 107 L.Ed.2d 25 (1989). We found the types of statutes that have been held preempted were “those that provide an alternative cause of action to employees to collect benefits protected by ERISA, refer specifically to ERISA plans and apply solely to them, or interfere with the calculation of benefits owed to an employee.” The types of statutes that have survived preemption analysis were typically laws of general application, “often traditional exercises of state power or regulatory authority”, whose economic and administrative effects on benefits plans were incidental to their primary objectives. Id. at 146. Generalizing from these cases, we concluded that “[wjhat triggers ERISA preemption is not just any indirect effect on administrative procedures but rather an effect on the primary administrative functions of benefits plans, such as determining an employee’s eligibility for a benefit and the amount of that benefit.” Id. at 146-47.
New York’s prevailing wage law does none of these things. It does not interfere with any of the primary administrative functions of ERISA plans; it does not affect the structure or administration of benefits plans; it does not determine an employee’s eligibility for benefits; nor does it control the type or level of benefits provided. Rather, the law seeks to equalize the minimum labor costs for employers bidding on public works contracts. It accomplishes this goal, in part, by requiring contractors to give their employees the cash equivalent of what it would cost them to provide the wage “supplements” (that is all fringe benefits, regardless of whether they are covered by ERISA) prevailing in the locality where the work is to be performed. Action Elec. Contractors Co. v. Goldin, 64 N.Y.2d 213, 485 N.Y.S.2d 241, 474 N.E.2d 601 (1984). If it chooses, a contractor may instead provide a combination of cash and benefits, or simply benefits alone, but nothing in the law forces employers to take either of these options; indeed, considerations of efficiency would encourage most employers to provide the cash payments rather than alter their benefits plans.
Regulation of labor costs in public works projects is surely a valid exercise of the state’s traditional regulatory authority. As we have previously emphasized, where a law claimed to be superseded by ERISA “is an exercise of a State’s police powers,” the law should not be held preempted “unless this conclusion is unavoidable.” Rebaldo v. Cuomo, 749 F.2d 133, 138 (2d Cir.1984), cert. denied, 472 U.S. 1008, 105 S.Ct. 2702, 86 L.Ed.2d 718 (1985). While preemption may be an unavoidable conclusion where a state law explicitly singles out ERISA plans for different treatment, see Mackey v. Lanier Collections Agency, 486 *31U.S. 825, 108 S.Ct. 2182, 100 L.Ed.2d 836 (1988), or directly alters the calculation or payment of benefits under ERISA-covered pension plans, see Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981); Stone & Webster Engineering Corp. v. Ilsley, 690 F.2d 323 (2d Cir.1982), aff'd mem., 463 U.S. 1220, 103 S.Ct. 3564, 77 L.Ed.2d 1405 (1983), or creates a cause of action to enforce a right granted by ERISA, see Gilbert v. Burlington Indus., Inc., 765 F.2d 320 (2d Cir.1985), aff'd mem., 477 U.S. 901, 106 S.Ct. 3267, 91 L.Ed.2d 558 (1986), no such problem is presented by the statute before us. The fact that employers may choose to comply with the law by providing a different benefits plan or a combination of benefits and cash rather than by simply paying the additional costs as wages, does not render the statute preempted. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 108, 103 S.Ct. 2890, 2905, 77 L.Ed.2d 490 (1983) (while a state may not require employers to alter their ERISA plans, it is not preempted from giving them that option as a means of complying with state law).
The incidental administrative burdens this law places on benefits plans are comparable to, and certainly no worse than, the burdens involved in Rebaldo and Aetna Life. The state statute in Rebaldo prescribed what hospitals could charge for inpatient care, thus precluding ERISA plans from negotiating their own discount rates with hospitals and forcing the plans to operate differently and more expensively in that state. In Aetna Life, compliance with a state escheat law required ERISA plans to undertake record-keeping and other administrative duties different from its responsibilities in other states. In both cases, compliance with the state law had both an administrative and an economic impact on ERISA plans, but in neither case did we conclude that such effects required preemption.
Similarly, New York’s prevailing wage law requires an employer to satisfy certain administrative responsibilities, such as making its books and records available for inspection. As in Rebaldo and Aetna Life, these requirements may make an employer’s benefits plan somewhat more expensive to operate. Yet these requirements are merely incidental to the law’s primary goal of equalizing the labor costs of local and ex-locality contractors, and they impose no greater expense or burden than the laws upheld in Rebaldo and Aetna Life. Indeed, we expressly noted in Rebaldo that the very type of law at issue here — a state law governing labor costs — was not the sort of statute that congress intended to preempt, despite its impact on the cost and administration of pension plans. 749 F.2d at 138 (ERISA does not preempt “State labor laws that govern working conditions and labor costs” even though compliance with such laws may increase the cost of operating benefits plans); accord Aetna Life, 869 F.2d at 145.
The majority does not attempt to distinguish Rebaldo or Aetna Life, nor, in my view, could it sensibly do so. Like the statutes we upheld in those decisions, New York’s prevailing wage statute is a law of general application whose tangential effects on employee benefits plans are negligible and wholly incidental to the law’s primary purpose. Since the majority opinion departs from the wise path charted by our prior decisions, I dissent. New York’s prevailing wage law is not preempted by ERISA, and the order of the district court should be affirmed.