No. __________ __________________________________________________ In The Supreme Court of the United States October Term, 1995 ____________________ STATE OF CALIFORNIA, DIVISION OF LABOR STANDARDS ENFORCEMENT, DIVISION OF APPRENTICESHIP STANDARDS, DEPARTMENT OF INDUSTRIAL RELATIONS; COUNTY OF SONOMA, Petitioners, v. DILLINGHAM CONSTRUCTION, N.A., INC.; MANUEL. J ARCEO, dba SOUND SYSTEMS MEDIA, Respondents. ____________________ Petition For Writ Of Certiorari To The United States Court Of Appeals For The Ninth Circuit ____________________ PETITION FOR WRIT OF CERTIORARI ____________________ JOHN M. REA, Chief Counsel, H. THOMAS CADELL, JR., (Counsel of Record) Chief Counsel, VANESSA L. HOLTON, RAMON YUEN-GARCIA, Asst. Chief Counsel, Counsel, FRED D. LONSDALE, Sr. Counsel, JAMES D. FISHER, Counsel, SARAH COHEN, Counsel, State of California State of California Department of Industrial Division of Labor Relations Standards Enforcement Office of the Director 45 Fremont Street, Legal Unit Suite 3220 45 Fremont Street, Suite 450 San Francisco, CA 94105 San Francisco, CA 94105 (Mailing Address: (Mailing Address: P.O. Box 420603, P.O. Box 420603, San Francisco, CA 94142) San Francisco, CA 94142) (415) 975-2060 (415) 972-8900 Counsel for State Petitioners Counsel for State Petitioners Department of Industrial Division of Labor Standards Relations Division of Enforcement and County of Apprenticeship Standards Sonoma Petitioners State of California, encompassing its Department of Industrial Relations, Division of Labor Standards Enforcement and Division of Apprenticeship Standards and the County of Sonoma respectfully pray that a writ of certiorari issue to review the judgment of the United States Court of Appeals for the Ninth Circuit, entered in the above action on June 7, 1995. OPINIONS BELOW The opinion of the United States Court of Appeals for the Ninth Circuit is reported at 57 F.3d 712 (9th Cir. 1995) and is reprinted in the appendix to this certiorari petition ("App.") at App. 1-22. The Order of the Court of Appeals denying California's Petition for Rehearing and Suggestion for Rehearing En Banc is reprinted at App. 53-54. The opinion of the United States District Court for the Northern District of California granting California's Motion for Summary Judgment is reported at 778 F. Supp. 1522 (N.D. Cal. 1995) and is reprinted at App. 23-52. JURISDICTION The Ninth Circuit issued its decision and judgment herein on June 7, 1995. A timely Petition for Rehearing and Suggestion for Rehearing En Banc was denied on July 19, 1995. An Application for Extension of Time to File Petition for Writ of Certiorari was filed September 28, 1995 and Justice Sandra Day O'Connor extended the time to file to and including November 16, 1995. This Court has jurisdiction under 28 U.S.C. Section 1254(1). STATUTES INVOLVED The relevant statutes are reproduced in the appendix at App. 55-63. The relevant federal statutory provisions are Section 514(a) and (d), 29 U.S.C. Sections 1144(a) and 1144(d) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. Section 1001 et seq., and the National Apprenticeship ("Fitzgerald") Act 29 U.S.C. Section 50. The relevant California statutory provision is California Labor Code Section 1777.5. STATEMENT OF THE CASE California has a prevailing wage law which sets the minimum wages on a trade by trade basis that must be paid to workers on public works projects in the state. This law is modeled after and was passed in the same year as the Davis- Bacon Act, 29 U.S.C. Section 276a, which sets the minimum wages that must be paid on federal public works projects. O.G. Sansone Co. v. Dept. of Transportation, 55 Cal. App. 3d 434, 448, 127 Cal. Rptr. 799 (1976). Like the Davis-Bacon Act, the California law allows a lower minimum wage for registered apprentices in apprenticeship programs approved as meeting the standards of the federal Fitzgerald Act. Under California law, as under the Davis-Bacon Act, the specific prevailing wage for apprentices is set at less than that for fully trained workers in the trade and varies with the apprentices' level of progress through the multi-year apprenticeship program. Cal. Lab. Code Section 1777.5. The County of Sonoma requested bids for the construction of its County Male Adult Detention Facility, a public works project for which state, but not federal, prevailing wages were required under the California Labor Code. In early 1987 Dillingham was awarded the construction project and became the general contractor for the detention facility. Dillingham eventually subcontracted the audio security wiring work to Sound Systems Media. After it began work on the detention facility in January, 1988, Sound Systems' employees changed their collective bargaining representative and Sound Systems entered a new employer group. Sound Systems entered into a collective bargaining agreement with the new union in which it agreed to use apprentices to be provided by the nascent Joint Apprenticeship and Training Committee (hereinafter "the Committee") established by that union and employer group. That Committee, however, had no working apprenticeship training program. The Committee sought approval of its proposed standards to set up a new program from the California Apprenticeship Council, the agency recognized by the federal Bureau of Apprenticeship and Training as the body with authority to approve apprenticeship programs in California for federal purposes, including the Davis-Bacon Act. 29 C.F.R. Section 29.12. The program's approval was pending when Sound Systems began working on this project for the County of Sonoma. Notwithstanding the fact the Committee's standards had not been approved, beginning in June, 1988, Sound Systems began paying certain employees, whom it would later call "apprentices," what it designated an apprentice wage rate. This was contrary to the California law which restricted the apprentice wage rate on public works to registered apprentices in approved training programs. It is undisputed that Sound Systems employed no registered apprentices and in fact it had no apprentice agreements for these employees in its possession during the job. Payroll records filed with the California Division of Labor Standards Enforcement, and sworn to by Sound Systems, listed no employees designated as "apprentices." App. 5-6, 28 n.3. Moreover, Sound Systems volunteered at the trial level that these individuals designated as "apprentices" received no training. This "apprentice" wage paid by appellant was lower than the journey level specified in the prevailing wage determination issued by the Department for this public work. As a result, the Department issued a "Notice to Withhold" directing Sonoma County to withhold monies from Dillingham based on Sound Systems' failure to pay the prevailing wage in accord with California Labor Code Section 1771 because an alleged apprentice rate was paid to non apprentices. The contractors filed this action May 1, 1990 in the district court seeking declaratory relief and the recovery of monies withheld. Cross motions for summary judgment were filed before the district court. The district court rejected appellants' Employee Retirement Income Security Act (ERISA) and National Labor Relations Act, 29 U.S.C. Section 151 (NLRA) preemption arguments, 1 dismissed their motion for summary judgment and granted defendants' motion, App. 39-40, 48. The district court held that, because California's regulation of apprenticeship programs is part of a cooperative state- federal effort for the formulation and promotion of apprenticeship programs, it is saved from preemption by the federal Fitzgerald Act, 29 U.S.C. Section 50, as incorporated in ERISA's Savings Clause, 29 U.S.C. Section 1144(d). On June 7, 1995, the Ninth Circuit reversed the district court, holding that the restriction of the apprentice prevailing wage to workers were registered apprentices was preempted by ERISA. The Ninth Circuit based its holding on the following grounds: 1) California's application of its prevailing wage law to allow payment of the lower apprentice rate only to employees in "approved" programs had the effect and possibly the aim of encouraging participation in state approved ERISA plans while discouraging participation in unapproved ERISA plans. 2) California law was not saved from preemption by the ERISA Savings Clause because, while the Fitzgerald Act does provide for state approval of apprenticeship programs, it does not depend on state law for enforcement, does not mandate apprenticeship programs and does not seek to discourage other types of training programs. In the view of the Ninth Circuit the Fitzgerald Act would not be impaired by the preemption of this California law. On June 21, 1995 California filed a timely Petition for Rehearing and Suggestion for Rehearing En Banc asking the court of appeals to consider the conflict between its decision and the decision of the Eighth Circuit in Minnesota Chapter ABC v. Minnesota, 47 F.3d 975 (8th Cir. 1995). The petition also asked the court to consider the conflict between its decision and the California Supreme Court's decision in Southern California ABC v. California Apprenticeship Council, 4 Cal. 4th 422, 14 Cal. Rptr. 491 (1992), which upheld the state approval process from an ERISA preemption challenge inso far as that process did not impose standards not found in the federal Fitzgerald Act and which was based in part on the district court decision just reversed. Finally, the court was asked to consider the effect of this Court's then very recent decision New York State Conference of Blue Cross and Blue Shield Plans, et al. v. Travelers, ___ U.S. ___, 115 S. Ct. 1671 (1995) which had not been briefed. The court denied the Petition for Rehearing and Suggestion for Rehearing En Banc on July 19, 1995. REASONS FOR GRANTING THE WRIT For over 39 years before ERISA, California had adopted as a precondition for a lower apprentice wage on public works the same requirements - state approval of the apprenticeship program and state registration of apprentices - used by the federal government as the precondition for lower apprentice wages on federal public works. Like the federal government, California recognized that unless an apprenticeship program is actually providing effective training to beginning workers, there is no justification for paying those workers less than the legally required minimum prevailing wage. Reduced to its essence, the Ninth Circuit held that a state may not, under ERISA, craft its use of its state prevailing wage law so that it will be consistent with the federal goal of encouraging apprenticeship program standards which meet federal standards. Dillingham results in workers being paid a wage rate, which is set lower than the prevailing journey rate, as if they were also receiving training meeting federal standards, on a state-funded public work without any obligation that these workers receive any training. The same wage payment at the apprentice rate by the same contractor on a federally funded public work to workers not registered in an apprentice plan approved by the state as meeting federal standards would bring civil, and possible criminal, sanctions. This petition seeks certiorari on the question of whether ERISA preempts California's long standing policy of restricting the prevailing apprentice wage rate on state public works to registered apprentices, just as the comparable federal DavisBacon prevailing wage rules do for the same apprentices in the same trades in the same labor market on federal public works. Dillingham's conclusion that ERISA requires this change in long standing rules governing prevailing wages on public works is in error. First, ERISA's Savings Clause protects this state law from preemption as in furtherance of the Fitzgerald Act's articulated purpose. Second, ERISA's Preemption Clause does not reach state regulation of apprentices' wages because such wage laws concern wages paid by contractors to apprentices and do not directly "relate to" apprenticeship plans, only some of which are covered by ERISA. I. Conflict Exists Within The Circuits On The Breadth Of The Savings Clause Of ERISA. There is a direct conflict between the decision of the Ninth Circuit in this case and the Eighth Circuit decision in Minnesota Chapter ABC v. Minnesota, 47 F.3d 975 (8th Cir. 1995). That conflict concerns an important question of national significance as to whether the Savings Clause of ERISA, 29 U.S.C. Section 1144(d), protects from preemption a prevailing wage law that provides tailored wage rates only for registered apprentices in apprenticeship programs approved as meeting the standards of the Fitzgerald Act. Unless this Court resolves this conflict, contractors, apprentices and state and local public agencies in different states with similar state statutes2 will face uncertainty and conflicting directives concerning the use of apprentices on public works projects. The states of California and Minnesota have regulated apprenticeship since 1852 and 1939, respectively. Under the current Secretary of Labor regulations promulgated in 1977 and through the present, both states have been approved by the Bureau of Apprenticeship and Training of the Department of Labor ("BAT") as State Apprenticeship Council ("SAC") states.3 State Apprenticeship Council states are, under BAT regulations, authorized to approve apprenticeship programs for "federal purposes," to register apprentices, and to work to encourage inclusion of federal minimum standards in programs under the Fitzgerald Act, 29 U.S.C. Section 50, and its regulations, 29 C.F.R. Section 29.1 et seq. "Federal purposes" include determining whether a worker may be paid at an apprentice rate on federal public works. 29 C.F.R. Section 5.5(a)(4). Those regulations restrict approval of training programs to those that are extensive, sophisticated and formal enough to be "apprenticeship." The prevailing wage laws of California and Minnesota provide that all contractors on public works pay their workers the prescribed minimum wage deemed prevailing at the journey (fully trained) level in the location and for the trade or craft in which the work is performed. These laws parallel the federal DavisBacon law, which similarly sets the craft specific minimum wages paid on federal public works projects. One of the purposes of such prevailing wage laws is to assure that on public works projects that are awarded to the lowest bidder the contractors will not compete by reducing the wages and quality of labor on the project. Universities Research Ass'n, Inc. v. Contu, 450 U.S. 754 (1981); Lusardi Const. Co. v. Aubry, 1 Cal. 4th 976, 4 Cal. Rptr. 2d 837 (1992). The prevailing wage laws of both California and Minnesota provide as well that workers who are registered as apprentices and are receiving training in apprenticeship programs registered with the respective state in accord with federal law may be paid a specially tailored apprentice wage. This apprentice specific rate parallels the exception to the federal Davis-Bacon Act's requirement of journey level wages likewise limited to apprentices registered in state4 approved apprenticeship programs. The apprentice specific rate lowers the prevailing wage to a percentage of the journey level rate which is appropriate to the apprentice's training level. The apprentice rate is denied for workers receiving training, even informal apprenticeship, when the training program will not commit to the state to deliver the training at the level set by the federal standards, or to the apprentice by registering him or her as such in a program. Both commitments were lacking in Dillingham. In Minnesota ABC, the Eighth Circuit held that the apprentice specific rate in the Minnesota prevailing wage law, allowing contractors to pay apprentices in approved programs at less than the prevailing wage, was "saved" from preemption under ERISA, 29 U.S.C Section 1144(d), because preemption of that law would impair the Fitzgerald Act. The Fitzgerald Act provides that: [t]he Secretary of Labor is authorized and directed to formulate and promote the furtherance of labor standards necessary to safeguard the welfare of apprentices, to extend the application of such standards by encouraging the inclusion thereof in contracts of apprenticeship, to bring together employers and labor for the formulation of programs of apprenticeship, to cooperate with State agencies engaged in the formulation and promotion of standards of apprenticeship.... Section 514(d) of ERISA, 29 U.S.C. Section 1144(d) provides that "[n]othing in this subchapter shall be construed to alter, amend, modify, invalidate, impair or supersede any of the laws of the United States...or any rule or regulation issued under such law." The Eighth Circuit reasoned that preemption of Minnesota's regulation, MINN. R. 5200.1070 (1993 and Supp. I 1994) would "impair" the cooperative state jurisdiction over apprenticeship programs envisioned by the Act. One purpose the Act is to promote and encourage apprenticeship, and labor standards in apprenticeship, in cooperation with the states. Consistent with this purpose, the federal Bureau of Apprenticeship and Training has promulgated federal apprenticeship regulations under the Act to provide national standards for apprentice agreements and program approval. As the Eighth Circuit recognized in Minnesota ABC, the purpose of the Act and regulations would be impaired if a state were not permitted to set an appropriate wage to be paid by contractors employing apprentices on state funded public works. Such an apprentice specific wage rate may in fact be essential for contractors to be able to use apprentices economically on public works because apprentices lack the training to be as productive as journey level workers whose wage they would otherwise receive. The failure to recognize the costs to contractors who voluntarily assume training responsibilities at the higher, and more costly, level of apprenticeship meeting the federal standards will, in the public construction sector, where lowest bidder rules universally apply, result in contractors avoiding the commitment to multi-year apprenticeship meeting the federal standard, fearing that any added costs will cost them work because they will be at a disadvantage in bidding on public works. The Ninth Circuit in Dillingham, unlike the Eighth Circuit, took an extraordinarily narrow view of both the Fitzgerald Act and the Savings Clause of ERISA, holding that the preemption of California Labor Code Section 1777.5's restriction of an apprentice specific wage to registered apprentices on state- sponsored publicworks, as applied, would not impair the operation of the Fitzgerald Act. The Ninth Circuit reasoned that because the Act, unlike Title VII, does not preserve non-conflicting state laws and "does not contemplate enforcement mechanisms," preemption of California Labor Code Section 1777.5 does not impair this federal law. App. at 17. In so holding, the Ninth Circuit adopted and quoted from the Tenth Circuit opinion in National Elevator Industry, Inc. v. Calhoon, 957 F.2d 1555 (10th Cir. 1992), which stated that "[The Fitzgerald Act] merely seeks to facilitate development of apprenticeship programs - it does not mandate apprenticeship programs or seek to discourage other training programs." Id. at 1562. The Ninth Circuit erred by construing the Savings Clause of ERISA too narrowly. The Ninth Circuit said, in essence, that because the Fitzgerald Act does not mandate contractors to participate in apprenticeship, and does not order states to foster apprenticeship it is not the kind of "law of the United States ... or any rule or regulation" to be saved. This holding is premised on a top down view of federalism which presumes that cooperative partnerships between the states and the federal government are not worth saving. The Ninth Circuit restricts the state laws which can be saved to those which either are themselves coerced by the federal government, or which offer to deputize the state in a joint venture to coerce the private sector. Such a restrictive interpretation of the Savings Clause puts at risk the general run of laws in broad areas of benefits and health touched by ERISA, where cooperative federalism is increasingly the federal goal and where congressional reforms and block grants should allow the private sector and the state to voluntarily enter into partnerships.5 There is nothing in the ERISA Savings Clause that suggests that only certain kinds of federal statutory schemes are to be saved. Section 1144(d) says that ERISA "shall not be construed to alter, amend, modify, invalidate, impair, or supersede any laws of the United States..." (emphasis added). Although the leading case protecting a state law under this section dealt with a law that was coercive, Shaw v. Delta Air Lines, 463 U.S. 63, 100-106 (1983), in neither that opinion nor in the text of ERISA is there a proviso restricting this clause to coercive laws. The federal government cannot effectively encourage states to promote apprenticeship standards, meeting federal basic standards, if ERISA is read as preempting states when they voluntarily adopt those standards as their definition of "apprentice" on state public works. Aside from misreading ERISA's federal law Savings Clause, the Ninth Circuit narrowly and selectively read the congressional intent set out expressly in the text of the Fitzgerald Act. While the Ninth Circuit recognized that Congress noted and approved of a cooperative state-federal venture in the Fitzgerald Act, it missed an expression of intent equally worth saving: The promotion and the furtherance of labor standards necessary to safeguard the welfare of apprentices and the extension of "the application of such standards by encouraging the inclusion thereof in contracts of apprenticeship." The Ninth Circuit's narrow reading of the congressional mandate does not square with the fact that "contracts of apprenticeship" are, by the Secretary of Labor's own definition,6 multi-year educational endeavors, encompassing the apprentices' work on private, state- funded and federally funded work in a trade or craft, and not a transient arrangement entered into for one federal public works job, and then discarded. It is paradoxical that the only role Dillingham saves for the state under the Act is to extend labor standards on federal projects by reviewing and approving programs for BAT, and registering those programs' apprentices for BAT, so that federal public works can preserve apprentices' labor standards on federal jobs, in precisely the ways that the state may not on its own. Indeed, many states may no longer choose to volunteer for such a job, and instead may wash their hands of any so limited a role in promoting apprenticeship. The Ninth Circuit's holding sets in motion a labor market distortion ruinous to the congressional goals of the Fitzgerald Act. The Ninth Circuit's rule creates an economic disincentive for contractors to enter into apprenticeship agreements that meet the federal standards for training. If any worker can be paid the lower apprentice wage on public works just because the worker is ensconced in a generic unapproved program which is less costly because it has no objective training standards, is thrown together for a single contract, lacks outside schooling or safety training, and allows an unlimited number of apprentices to work regardless of whether journey level workers are present to provide on-the- job training - but is covered by ERISA7 - then contractors have an economic incentive to move to such cheaper programs and away from federally approved apprenticeship. By restricting the apprentice wage to apprentices in programs approved as meeting the federal standards for apprenticeship, the federal goal of minimum apprenticeship standards is protected. States will also pull back from apprenticeship because they will be concerned that the lack of any objective standards for who can be paid an apprentice wage rate will undercut the prevailing wage law completely. Cf. Building and Const. Trades v. Donovan, 712 F.2d 611, 625 (D.C. Cir. 1983) (prevailing wage laws can be subverted by arbitrary classifications). Restricting the reduced apprenticeship wage to registered apprentices in approved plans is needed to protect the regulation of the journeylevel prevailing wage for the same reasons that the Davis-Bacon regulations restrict the availability of apprentice wages on federal public works to registered apprentices in plans approved by the state. The real (non ERISA related) problem is that if the state allows anyone to be called an "apprentice" at the contractor's option, then there is no longer a prevailing wage which can be enforced at the journey level. Ethical contractors will lose bids to those willing to style all workers "apprentices" and pay the lowest wage, getting around the prevailing wage law. The most logical way out of the dilemma is to restrict the apprentice-specific wage to those to whom the nation-wide definition, in the Secretary of Labor's regulations, applies - apprentices registered in programs which meet the federal standards, and have the approval to show it. Contractors must be able to bid on public works without concern that a competitor will have an unfair advantage in the bid process by using phony apprentices. The Ninth Circuit also creates another disincentive for states to promote apprenticeship. Although apprentices registered in state approved programs are, by definition, less skilled than the journey level workers, they are at least overseen by journey level workers on the state job and participate in ongoing classroom instruction, 29 C.F.R. Section 29.5(b)(9). This is not true for "apprentices" in ad hoc informal programs. If the apprentice wage is not restricted to registered apprentices in programs with some minimum guarantee of standards, the states have lost an important guarantee of adequate quality of craft8 work on public works projects. For the state to encourage apprenticeship and allow less skilled workers on public works projects, the state must be convinced that the apprentices are workers whom the contractor has a self-interest in teaching to work up to high standards because the contractor must live with the consequences of his teaching beyond this one job which happens to be public works. A rule like the Ninth Circuit's which commands states to allow apprentice wages to those not registered in programs that are approved as meeting federal standards, while state approval continues to be required on federal Davis-Bacon construction in the same state, runs against Congress's intent in ERISA of protecting employers from "conflicting and inconsistent state and local regulation" of such plans, to the degree that the apprenticeship programs are covered by ERISA. Travelers, at 1677-1678. Since federal Davis-Bacon rules restrict the wage break to registered apprentices in approved programs, a different rule for state projects would create the absurd situation that ERISA, in the name of simplicity and uniformity, creates one set of rules for a contractor working on a federal courthouse or jail and another set of rules when that same contractor goes across the street to wire the sound security system in the county jail, as here. The Ninth Circuit has taken an unnecessarily narrow view of the ERISA Savings Clause which, as discussed above, leads to results which are counter to the intent of Congress in passing ERISA and the Fitzgerald Act. The Eighth Circuit's Minnesota ABC contrary view creates no such anomalies. This Court should grant certiorari in order to resolve this direct conflict between the Circuits and, as will be discussed below, effectuate the intent of Congress which this Court has recently emphasized is the touchstone for understanding the limits of ERISA preemption. II. The Ninth Circuit's Conclusion That Congress Invalidated California's Longstanding System Of Setting Prevailing Wages For Apprentices On Public Projects When It Enacted ERISA Is Based On The "Unhelpful" Approach To ERISA Preemption Specifically Disapproved In New York State Conference of Blue Cross and Blue Shield et al. v. Travelers, 115 S. Ct. 1671 (1995). The Ninth Circuit in this case erred not only in its application of ERISA's Savings Clause but also in disregarding entirely an opinion, New York State Conference of Blue Cross and Blue Shield et al. v. Travelers, 115 S. Ct. 1671 (1995), decided two months before Dillingham in which this Court "recognize[d] that our prior attempt to construe the phrase 'relate to' does not give ... much help," 115 S. Ct. at 1677, and announced a new orientation in determining the reach of ERISA preemption.9 Specifically, the Ninth Circuit's decision concluded that Section 514(a) of ERISA, declaring preempted "all state laws insofar as they ... relate to any employee benefit plan," is applicable here even though the statute preempted is a law of general application which applies without regard to whether the apprenticeship program in question is an ERISA-covered plan or not; even though the statute applies to contractors, not plans; even though assuring effective apprenticeship training of young people has long been understood to be a traditional concern of state governments; and even though the statute, which governs only contracting by state entities, does not effect any employer who does not choose to do business with the state or its subdivisions. App. 15. In ruling that the law "relates to" ERISA plans the Ninth Circuit made no attempt to inquire into whether its ruling serves the overall purposes of ERISA and of ERISA preemption, nor did the court below inquire into whether there was any indication that Congress in 1974 had intended to displace states from their traditional role of assuring both adequate training and fair labor standards for apprentices working on state-funded projects. Just last term, however, in Travelers this Court rejected such "uncritical literalism" in applying Section 514(a) of ERISA. 115 S. Ct. at 1677. First, Travelers noted that "[i]f 'relate to' were taken to the furthest reaches of indeterminacy, then for all practical purposes preemption would never run its course." Id. At the same time, Travelers recognized that it is apparent both from statutory terms of limitation and "the presumption against preemption," id., that ERISA does not displace states' authority to legislate whenever there is some impact on an employee benefit plan. Because of "the unhelpful text [of Section 514(a)] and the frustrating difficulty of defining its key term," id., Travelers superseded this Court's "prior attempt to construe the phrase 'relate to'" with a new mode of analysis based on "looking ... to the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive." Id. Because the Ninth Circuit's text-centered approach to ERISA preemption is in tension with Travelers, this case presents the opportunity to spell out the implications of the objective intent-oriented approach to ERISA preemption beyond the narrow health-cost containment context there presented. Like Travelers, this is not a case in which the ERISA preemption question can be answered simply on the basis that the state law in question expressly makes a "reference to" ERISA plans. See Travelers, 115 S. Ct. at 1677. The only requirement for taking advantage of the sub-journey level apprentice wage on California public works projects is that the apprentice in question be registered with the state through a recognized apprenticeship program meeting federally- specified criteria. Apprenticeship programs, both as commonly understood, and as described in 29 C.F.R. Section29.3-29.6, do not pay prevailing wages to any workers employed on public works. Contractors do. Thus, laws that set prevailing wages for public works projects do not deal with the administrative or financial workings of benefit plans at all. It is true, of course, that providing for a lower apprenticeship wage on public works projects only for registered apprentices may have the effect of encouraging employers to employ registered apprentices so that they will be able to save money. But Travelers makes clear, at the least, that as the form of state involvement becomes one not of mandating a preference for one employee benefit plan over another, but of creating economic incentives that may affect employer preferences, the presumption against preemption becomes stronger. Although the Ninth Circuit apparently assumed that all the state-certified apprenticeship programs are ERISA-covered plans, and that the reference in the state law to such programs is therefore a reference to ERISA plans, in fact no such identity exists. Rather, as the United States Secretary of Labor previously explained to this Court in another case holding a state law preempted by ERISA because of ERISA's coverage of "apprenticeship or other training programs," Section 3(1)(A), 29 U.S.C. Section 1002(1)(A), Department of Labor regulations make clear that "neither on-the-job training nor classroom training paid for out of an employer's general assets is an ERISA plan." Lennes v. Boise Cascade Corp., No. 91- 707, Brief for the UnitedStates as Amicus Curiae on the Petition for Writ of Certiorari at 9, citing 29 C.F.R. Section 2510.3-1(b)(3)(iv); 40 Fed. Reg. 24, 643; 29 C.F.R. Section 2510.3-1(b); 29 C.F.R.Section 2510.3-1(k); ERISA Advisory Opinions Nos. 76-01 and 83-32A; and Massachusetts v. Morash, 490 U.S. 107 (1989).10 Consequently, it is "not the case" that "any law relating to apprenticeship or training necessarily relates to covered plans only." Id. at 15. Rather, a state law that refers to apprenticeship plans generally "affects many programs not subject to ERISA," Id., and therefore cannot be deemed preempted as a law that singles out ERISA plans for special treatment. Compare Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 829 (1988). The question, here, as in Travelers, is whether the available legislative and historical materials as a whole indicate that the California apprentice prevailing wage provisions, typical of the majority of states, are within the "scope of state law that Congress understood would survive." Travelers, 115 S. Ct. at 1677. There are at least two reasons, which the Ninth Circuit did not look at here, and will not look at in the future under its analytical model for preemption, for finding that the law invalidated below is not a statute of the kind Congress intended to preempt. First, as Travelers recognized, Congress's basic objective in enacting ERISA's preemption provision was to eliminate conflicting regulation of pension and welfare benefit plans, not to supersede the historic powers of the states beyond the degree necessary to accomplish that uniformity. 115 S. Ct. at 1680 ("nothing in the language of the Act or the context of its passage indicates that Congress chose to displace general health care regulation, which historically has been a matter of local concern"). Nothing in ERISA regulates substantively either wages (prevailing or otherwise) or the operative aspects of apprenticeship programs (such as the content of the training provided, the number of years apprentices serve, the ratio of journeypersons to apprentices, the procedural rules governing discharge from apprenticeship programs, etc.). On the other hand, like health care, both wages and the supervision and support of apprenticeship programs have been "historically ... matter[s] of local concern," in the sense that state and local involvement in these areas was, at the time ERISA was passed, widespread and detailed. In this instance, voiding California's authority to limit the application of special apprenticeship wages to registered apprentices not only interferes with the state's wage-setting authority on public works projects with respect to apprentices, but also eliminates any meaningful ability to establish wages for any workers on public works projects. See p. 17, supra, (explaining that under the decision below, contractors can successfully evade the prevailing wage laws entirely by designating any workers they please as apprentices). Like both general wage regulation and the state's own public works, the governance of the substantive aspects of apprenticeship, has always been an area in which the states have been heavily involved11. Education generally, has always been largely the province of state law, and apprenticeship programs developed initially as simply one way among many to provide young people with the training to succeed in the adult world of work. The history of apprenticeship particularly demonstrates that the states had long regulated both the wages and the working and training conditions of apprentices. As we have seen,12 the federal Fitzgerald Act, enacted in 1937, was intended to build upon this major state role in delineating apprenticeship training and labor standards. Given this historical, statutory, and regulatory background, neither Section514(a) nor ERISA's lack of substantive attention to apprenticeship can sensibly be understood as evidencing an Congressional intention to preclude states from attending to and supporting effective and successful on-the-job training of youngpeople13. Rather, the more appropriate conclusion is that Congress assumed that ERISA was not disturbing the long-standing arrangements for substantive encouragement of basic and adequate apprenticeship standards by states, which prevailed under the Fitzgerald Act.14 This conclusion is reinforced by the fact that during consideration of ERISA and after its passage, those who would be most likely to know of Congress's intent in passing ERISA continued to assume that the federal state partnership remained a key component of the federal regulation of apprenticeship under the congressional mandate found in the Fitzgerald Act, and did not assume that the Secretary of Labor's state partners had lost authority.15 Second, where states wish to have effective prevailing wage laws, they have no practical way of avoiding some impact on apprenticeship plans. As explained previously, supra, pp. 16-18, the only real choice such states have is between discouraging apprenticeship on public works by failing to provide a lower-thanjourney person wage rate; permitting employers to pay apprentice wage to anyone they please, thereby undermining the prevailing wage system entirely; or providing some basis for specifying who may be paid at the lower, apprentice wage rate - namely, workers who are receiving actual training on a long-term basis. As noted previously, this same practical situation has resulted, on federal public works projects, in provisions regarding apprenticeship wages substantially identical to those here at issue. 29 C.F.R. Section 5.5(a)(4). To the extent that the policy of simplicity and uniformity behind ERISA preemption informs the debate, that policy suggests that preemption should not result in mandating different rules regarding who is an apprentice, paid at apprenticeship wage rates, with state public works projects on one side and federal or joint federal state ones on the other. Nor is there any basis for supposing that in enacting ERISA Congress intended to preclude the states from reaching the practical solutions to public contracting issues permitted to the federal government. CONCLUSION For the reasons stated above, this Petition for a Writ of Certiorari to the United States Court of Appeals for the Ninth Circuit should be granted. Dated: November 16, 1995, San Francisco, California Respectfully submitted, JOHN M. REA, Chief Counsel, H. THOMAS CADELL, JR., (Counsel of Record) Chief Counsel, VANESSA L. HOLTON, RAMON YUEN-GARCIA, Asst. Chief Counsel, Counsel, FRED D. LONSDALE, Sr. Counsel, JAMES D. FISHER, Counsel, SARAH COHEN, Counsel, State of California State of California Department of Industrial Division of Labor Relations Standards Enforcement Office of the Director 45 Fremont Street, Legal Unit Suite 3220 45 Fremont Street, Suite 450 San Francisco, CA 94105 San Francisco, CA 94105 (Mailing Address: (Mailing Address: P.O. Box 420603, P.O. Box 420603, San Francisco, CA 94142) San Francisco, CA 94142) (415) 975-2060 (415) 972-8900 Counsel for State Petitioners Counsel for State Petitioners Department of Industrial Division of Labor Standards Relations Division of Enforcement and County of Apprenticeship Standards Sonoma ------------------------ 1 The district court ruled that since state enforcement of minimum apprenticeship standards constitute a valid "minimum employment standard" they are not preempted by the NLRA under Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724 (1985) and Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1 (1987). The Ninth Circuit did not reach this issue. 2 Thirty-two states have prevailing wage laws. Twenty-eight states with prevailing wage laws restrict their sub- journey apprentice-specific wage to apprentices in programs registered with or approved by the state or BAT. The rule for four states is unclear. Of those twenty-eight states, twenty-two states make this distinction by statute, rule or regulation. Arkansas Dep't of Labor Prevailing Wage Regulations Section 3.103 (Rev. 1994); CAL. LAB. CODE Section 1777.5 (West 1995); CONN. AGENCIES REGS. Section 31-60-8 (1995); Delaware Prevailing Wage Regulations, Section III(D)(1), (2) (Amended Sept. 15, 1995); HAW. ADMIN. RULES tit. 12, Section 22-6 (Effective July 27, 1981); KY. REV. STAT. ANN. Section 337.520(5) (Baldwin 1982); 803 KY. ADMIN. REG. 1:020 (Effective Oct. 2, 1974); MD. STATE FIN. & PROC. CODE ANN. Section 17-201(b), 205(b), 208(e) (1988); MINN. R. 5200.1070 (1995); MO. CODE REGS. tit. 8, Section 30.030; NEV. REV. STAT. Section 338.080(2) (1985); N.J. ADMIN. CODE tit. 12, Section 60-7.1, 7.3(c) (1995); New Mexico Rules & Regs. Under the Public Works Minimum Wage Act pt. VI, 6.2, 6.4 (Dep't Lab. Sept. 1989); N.Y. LAB. LAW Section 231(7)(a) (McKinney 1986); OHIO REV. CODE ANN. Section 4115.05 (Baldwin 1985); OHIO ADMIN. CODE Section 4101:9-4-16 (1995); OKLA. STAT. tit. 40, Section 196.1, 196.2(9), 196.6(A) (1991); OR. ADMIN. R. 839-16-060 (Effective Nov. 10, 1994); 34 PA. CODE Sections 9.103(9), 83.5 (1975 and 1979); Rhode Island Rules & Regs. Relating to Prevailing Wages Section 5 (1995); TENN. CODE ANN. Section 12-4-401, et seq. (1975); TENN. COMP. R. & REGS. Section 0800- 3-2-.01 (Effective April 26, 1987); WASH. REV. CODE Section 39.12.021 (1991); WIS. ADMIN. CODE & IND. 92.02 (Oct. 1990); WYO. STAT. Section 27-4- 403(c) (1977 and Supp. 1995). The remaining six states make this distinction by what ERISA's preemption clause would characterize as "other state action having the effect of law." See, e.g., Alaska Wage & Hour Admin. Pamphlet No. 600: Laborers' & Mechanics' Minimum Rates of Pay (Dep't Labor effective Dec. 1, 1995); Commonwealth of Massachusetts, Executive Office of Labor, Division of Apprentice Training, Minimum Wage Rates for Apprentices Employed on Public Works Projects (Rev. Nov. 9, 1995); Michigan Wage & Hour Division Policy Concerning Disputes Regarding Classifications: Act 166, C. 4.08 (Rev. July 1994); Montana Dep't of Labor & Industry Prevailing Wage Requirements, Section A (effective July 1, 1994). 3 The following twenty-seven states are SAC states: Arizona, California, Connecticut, Delaware, Florida, Hawaii, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Montana, Nevada, New Hampshire, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington and Wisconsin. The District of Columbia, Puerto Rico and the Virgin Islands are also SACs. U.S. Dep't of Lab., Employ. & Training Admin.: Bureau of Apprenticeship & Training, Directory (Jan. 1995). 4 In California, and the other SAC states listed in footnote 3. Where states do not participate under the Fitzgerald Act, the federal BAT does the approvals, under the same substantive standards. 29 C.F.R. Section 29.12, App. 84. 5 Examples of laws implicated include the Job Training Partnership Act, 29 U.S.C. Sections 1501 et seq., the Carl Perkins Vocational and Applied Technology Education Act, 20 U.S.C. Sections 2301 et seq., and School to Work Opportunities Program, 20 U.S.C. Sections 6101 et seq. which assist the states, working in partnership with private industry and others, to create "state plans" to provide financial and technical support to encourage the vocational education and training of students and workers. State participation is voluntary, like the Fitzgerald Act, and the states are free to create their own criteria to determine which programs to support. 20 U.S.C. Section 2323, 20 U.S.C. Section 6143(d). 6 29 C.F.R. Sections 29.2(e), 29.5, App. 65, 72-75. 7 Although, in order to be covered by ERISA, a plan need not even be a formal written plan, Donovan v. Dillingham, 688 F.2d 1367 (11th Cir. 1988), a one- page trust form would allow a contractor to draft a minimally adequate plan to bring the temporary "apprenticeship" arrangement under ERISA. The plan need not comply with all of ERISA's requirements. Id. Benefit levels for welfare benefits can be changed at any time. McGann v. H&H Music Co., 946 F.2d 401 (5th Cir. 1991), cert. denied, 113 S. Ct. 482 (1992). Welfare benefit plans permit employers to be their own plan trustees, and no minimum funding is required by ERISA, unlike pension plans. 8 Construction work that is unskilled is done by laborers. Workers who do the skilled craft work must be paid the journey level rate for that craft, except for apprentices. It is the opportunity to have the craft work done by the unskilled at the modest apprentice rate which will threaten the quality of the work done. 9 Petitioners specifically brought Travelers to the Ninth Circuit's attention in their Petition for Rehearing and Suggestion for Rehearing In Banc. 10 As that Brief also noted, "[c]ongress included apprenticeship programs ... in the definition of 'employee welfare benefit plan' because it was concerned with regulating trust funds established in providing training." Id. at 16. Here, the state law in question has no bearing on the financial aspects of providing apprenticeship training. 11 It is important to note that, as Morash observed, interpreting ERISA to federalize an area of traditional state concern - there vacation wages, here wages and apprenticeship regulation - is to redirect disputes arising in those areas from state to federal dispute-resolution fora. California currently asserts jurisdiction over complaints by its 40,000 to 50,000 apprentices against their apprenticeship programs, Cal. Lab. Code Section 3078(h), and accepts their wage complaints against employers under general wage dispute statutes. Cal. Lab. Code Section 229. If all aspects of apprenticeship programs, including the wages paid to apprentices, are, as the opinion below implies, governed solely by federal law, the necessary effect is "vastly [to] expand the jurisdiction of the federal courts, providing a federal forum for any employee with a vacation grievance." Morash, 490 U.S. at 118-119. 12 See, e.g., TO SAFEGUARD THE WELFARE OF APPRENTICES: HEARINGS ON H.R. 6025 BEFORE A SUBCOMM. OF THE COMM. ON LABOR, 75th Cong., 1st Sess. (1937); HOUSE COMM. ON LABOR, SAFEGUARD THE WELFARE OF APPRENTICES, H.R. Rep. No. 945, 75th Cong., 1st Sess. (1937) App. 107; 81 Cong. Rec. 6631 (1937). (Discussion between Representative Fitzgerald and Reps. Hoffman and Ditter) App. 111; G. ABBOTT, The Child and the State, Vol. I (1938). 13 Rules pertaining to public contracting, like wage and apprenticeship rules, are within an area of traditional state concern as to which it is at least unlikely the Congress intended widespread preemption. Cf. Building & Construction Trades Council v. Associated Builders & Contractors, 113 S. Ct. 1190 (1993). 14 Both Electrical Joint Apprenticeship Comm. v. MacDonald, 949 F.2d 270 (9th Cir. 1991), cert. denied, 505 U.S. 1204, 112 S. Ct. 2991 (1992) and Southern California ABC v. California Apprenticeship Council, 4 Cal. 4th 422, 14 Cal. Rptr. 491 (1992) addressed the impairment of the Fitzgerald Act's aim of promotion of apprenticeship standards in the context of state approval of apprentice program standards. In brief, both decided (So. Cal. ABC relying, in part, on the district court opinion here) that ERISA preemption of state authority to approve would impair the Fitzgerald Act, and therefore preemption is prevented by the Savings Clause, whereas preemption of state requirements in excess of the Secretary of Labor's regulations would not. In this case, no party has contended that the state laws applied in certifying the program in issue here in any way went beyond the requirements that the state was required to follow for federal recognition. Consequently, the issue of ERISA preemption's effect on state authority to impose requirements exceeding those in the federal regulations is not presented here. 15 See statements re substantive role of the states by the Secretary of Labor, charged with primary responsibility for enforcing both ERISA and the Fitzgerald Act in the Federal Register preceding the current final rule of 29 C.F.R. Section29, 38 Fed. Reg. 13,894 (1973) (to be codified at 29 C.F.R. pt. 29) (proposed May 25, 1973); 40 Fed. Reg. 11,340 (1975) (to be codified at 29 C.F.R. pt. 29) (proposed Mar. 10, 1975); 42 Fed. Reg. 10,138-10,139 (1977) (to be codified at 29 C.F.R. pt. 29), reprinted in App. 93- 106, Oversight Hearings on the National Apprenticeship Training Act, 1983: Hearings before the Subcomm. on Employment Opportunities of the Comm. on Education and Labor, H.R., 98th Cong., 1st Sess. (1984); GAO Report, Apprenticeship Training Administration, Use and Equal Opportunity (1992); Lyndon B. Johnson School of Public Affairs, Coordination of State and Federal Apprenticeship Administration, Volume 2, (1980).