Court Opinion

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Opinions of the United
1994 Decisions                                                                                                             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Precedential or Non-Precedential: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
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               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 cross-

appeals.

           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 health-
and-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 non-

local 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 pre-

emption 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 non-

ERISA 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 state-
          mandated 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 line-

item 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.