California Division of Labor Standards Enforcement v. Dillingham Construction, N.A.

PETITIONER: California Division of Labor Standards Enforcement
RESPONDENT: Dillingham Construction, N.A.
LOCATION: City Hall

DOCKET NO.: 95-789
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 519 US 316 (1997)
ARGUED: Nov 05, 1996
DECIDED: Feb 18, 1997

ADVOCATES:
James Feldman - for U.S. as amicus curiae, by special leave of the Court
James A. Feldman - Department of Justice, on behalf of the United States, as amicus curia, supporting the petitioners
John Rea - for petitioners
John M. Rea - California Department of Industrial Relations, argued the cause for the petitioners
Richard N. Hill - Argued the cause for the respondents

Facts of the case

California requires public works project contractors to pay its workers the prevailing wage in the project's locale, but allows payment of a lower wage to participants in state approved apprenticeship programs. Dillingham Construction subcontracted some of the work on its state contract to respondent Arceo, doing business as Sound Systems Media (SSM). SSM entered a collective bargaining agreement with Dillingham that included an apprenticeship wage scale and provided for affiliation with an apprenticeship committee that ran an unapproved program. SSM used that committee for its apprentices, to whom it paid the apprentice wage. The California Division of Apprenticeship Standards (the Division) issued a notice of noncompliance to both Dillingham and SSM, charging that paying the apprentice wage, rather than the prevailing journeyman wage, to apprentices from an unapproved program violated the state's prevailing wage law. Dillingham sued to prevent the Division from interfering with payment under the subcontract. Dillingham alleged that the Employee Retirement Income Security Act of 1974 (ERISA) preempted enforcement of the state law. The District Court ruled in favor of the Division. In reversing, the Court of Appeals held that the apprenticeship program was an "employee welfare benefit plan" under the ERISA, and that the state law "relate[d] to" the plan and was therefore superseded by it.

Question

Does the Employee Retirement Income Security Act of 1974 preempt California's prevailing wage law to the extent that the law prohibits payment of an apprentice wage to an apprentice trained in an unapproved program?

Media for California Division of Labor Standards Enforcement v. Dillingham Construction, N.A.

Audio Transcription for Oral Argument - November 05, 1996 in California Division of Labor Standards Enforcement v. Dillingham Construction, N.A.

William H. Rehnquist:

We'll hear argument now in Number 95-789, the California Division of Labor Standards Enforcement v. Dillingham Construction and Michael Arceo.

Mr. Rea.

John M. Rea:

Mr. Chief Justice and may it please the Court:

California seeks reversal of Dillingham because our California law does not relate to ERISA plans.

Even if it did, the relationship is one which is under another Federal statute and regulation, the Fitzgerald Act, which ERISA may not modify and impair.

I would like to begin with the second argument, because it allows me to talk about the practical effects on apprenticeship of the Dillingham rule.

Anthony M. Kennedy:

But before you do that, could you tell me, counsel, it seemed to be conceded by both sides, certainly by Dillingham, that this is a plan.

John M. Rea:

The answer, Justice Kennedy, depends on which this.

The plan set up by the NESTU union and the employers was an apprenticeship plan under ERISA, and then at the point it got approved it became a registered apprenticeship plan under the Fitzgerald Act.

Have I answered your question?

Anthony M. Kennedy:

Well, are there apprenticeship programs that are clearly not ERISA plans?

John M. Rea:

Yes, Your Honor.

Anthony M. Kennedy:

And do those exist, or is this... is that just a hypothetical?

John M. Rea:

No, that's not a hypothetical.

Of course, the State doesn't know much about them if they don't come to us for registration.

One of the... well, there are a couple of answers in this record.

One of the research studies by the Bureau of Apprenticeship Training estimated that about half of apprenticeship going on was not registered.

Secondly, historic under the Solicitor... under the Department of Labor Regulations any unfunded apprenticeship plan is not covered by ERISA.

And finally, historically, apprenticeship was around a long time before ERISA and before there were any--

Anthony M. Kennedy:

Well, let me just ask this further question.

Are there approved and registered--

John M. Rea:

--Yes.

Anthony M. Kennedy:

--apprentice programs that are not ERISA plans?

John M. Rea:

Yes, Your Honor.

We are... our law is indifferent as to whether they're covered by ERISA, and the Fitzgerald Act has nothing to say about the areas of ERISA concern, funding, money in or money out.

David H. Souter:

But those are the ones that you meant by unfunded?

You spoke of unfunded plans a moment ago.

John M. Rea:

Yes.

The Secretary of Labor's definition, we use unfunded as shorthand, and our law... if someone comes to us and wants to register a plan or have an apprentice work on public works we don't inquire whether they're ERISA-covered or not.

We'll approve him if they meet the Fitzgerald Act standards, which we've incorporated in our State law.