IR # 97-11
Tuesday, February 18, 1997

Louis Bonsignore
(415) 972-8835

U.S. Supreme Court Ruling Restores Protection of California Apprentices

SAN FRANCISCO-- Lloyd W. Aubry Jr., Director of the California Department of Industrial Relations (DIR), today applauded the U.S. Supreme Court decision upholding California's policy requiring that workers paid as apprentices on public works projects be enrolled in apprenticeship programs approved by the California Apprenticeship Council. The ruling, which was sought by DIR in an effort to protect the integrity of apprenticeship programs, will have nationwide impact, allowing states to enforce approved apprenticeship standards on state public works, just as the federal government does on its public works.

The high court decision came in a case that was initially brought by Dillingham Construction. The ruling affects how construction companies will use apprentices and how they will bid for publicly-funded projects, such as schools, government buildings, highways and hospitals.

"This Department is committed to protecting the welfare of all California's working men and women. Today's decision protects California's workers from phony apprenticeship programs and insures that those declared apprentices get real, valuable training," said Director Aubry.

"The high court has effectively restored to the California Department of Industrial Relations and to other State certification bodies, the right to determine who is an apprentice on a public works job," Aubry said. "The lower court ruling, which this Department appealed, removed any state authority to do that on state-funded or jointly-funded jobs. Today's decision reversing the appeals court, gives back to California and all states, that authority and enables us to once again insure that our workers are paid a fair and appropriate wage and to ensure that these apprentices receive real training."

Had the appeals court ruling stood it would have pit California's prevailing wage laws against the federal Employee Retirement Income Security Act (ERISA). At issue was whether states could have restricted apprentices, for prevailing wage purposes, to only those in recognized programs. Initially the Department of Industrial Relations won a decision in a San Francisco trial court against Dillingham Construction that a contractor cannot pay a lower rate to apprentices unless the apprentice program is registered--the same rule that is followed on federal public works. The decision was overturned by the 9th Circuit Court of Appeals.

In the case, Dillingham Construction was a general contractor on a public works project. An audit of a subcontractor's payroll found it was paying some workers below the mandated prevailing wage. Caught paying the lower rate, the subcontractor quickly deemed the underpaid workers "apprentices." At the time, the subcontractor was not participating in a California Apprenticeship Council (CAC) approved apprenticeship program. State law allows contractors to pay below the journeymen's prevailing wage rate to apprentices only after the apprenticeship program gets CAC approval.

To get such CAC approval, apprentice programs commit to provide training in a skilled trade or occupation which requires 2,000 hours--and more typically up to 6,000 hours--of on-the-job training. Additionally, apprenticeship programs require related and supplemental instruction and are multi-year programs. In testimony by the subcontractor at trial, these "installer apprentices receive no formal training and engaged in cable pulling tasks such as speaker hanging."

Dillingham argued that its subcontractor's right to declare who is an apprentice was established by the federal benefit-protection law under the broad Employee Retirement Income Security Act. The argument, adopted by the circuit court, was that the federal statute's mention of "apprenticeship" supersedes State control over who is an apprentice.

The Department argued that, at most, its law had an indirect effect on ERISA plans and that ERISA was not intended to do away with DIR's long-standing policy which limits the apprentice wage to apprentices in programs approved under the National Apprenticeship Act. The Supreme Court agreed.