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an “employee welfare benefit plan” under the ERISA, and that the state law “relate[d] to” the plan and was therefore superseded by it.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?

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.

Antonin Scalia:

What do you mean by unfunded again?

Would you clarify that?

John M. Rea:

That there is no trust fund or arrangement by which the employer or a group of employers put in money and then use that to pay for the operation of the training.

Anthony M. Kennedy:

Is it easier to get certification if you do have funding?

John M. Rea:

We frankly don’t care.

I mean, historically these plans, certainly the history of the Fitzgerald Act, these plans were being organized during the Depression, when everybody had more time than money, and single employer plans, typically there’s no reason, because apprenticeship is so closely associated with work, to go to the trouble of setting up a fund.

Anthony M. Kennedy:

Well, thank you.

That was, I thought, a preliminary that helps me before you address the points you were going to address.

John M. Rea:

One of the reasons, Justice Kennedy, why it’s not… we’ve asked ourselves the same question.

We can’t tell how many funded plans there are because we never asked the question in the registration process.

The effects of the Ninth Circuit rule that States really have no business insisting that those paid as apprentices under our public works be registered apprentices would modify and impair the Fitzgerald Act, because that act directs the Secretary of Labor to promote standards necessary to safeguard the welfare of apprentices, and to–

William H. Rehnquist:

But the Fitzgerald Act is, you know, I think precatory, isn’t it, kind of a feel-good type of thing that doesn’t really impose any specific legal requirements on anybody?

John M. Rea:

–It doesn’t impose specific legal requirements, Chief Justice, because it’s a voluntary act, but it’s not merely precatory either.

It directs the Secretary to promote and invites… and under that act he invites the States into a partnership.

If the Fitzgerald Act merely said, registered apprenticeship is a good and wonderful thing, and that’s the policy of the United States, I’d be constrained to agree with you, but it doesn’t.

It directs the Secretary to promote, and the history shows that they promote and formulate standards, and this particular definition of apprenticeship at issue here through the Fitzgerald Act and through the regulations we rely on both the act, which is somewhat general, and the rather long tail of regulations which have followed from it.

We rely on both of those for our Savings Clause argument because it covers Federal law and regulations under those laws.

The problem that–

Sandra Day O’Connor:

Is the California law applicable here?

Does it operate just as an incentive for people?

John M. Rea:

–Yes, it operates as an incentive.

Sandra Day O’Connor:

Is it… does it do any more than that?

John M. Rea:

Yes.

It’s an incentive to those out there who have a training plan which is–

Right.

John M. Rea:

–sort of organized but not approved to come up to the Fitzgerald Act standards because then they’ll be able to not only do our work, but they’ll be able to do Davis-Bacon work, but it’s also in our interest to do it, and the States owns these buildings, in this case a jail.

We’re very, very concerned with the competence of the people who do this particular one, and who do our jails in the future.

We want to have a skilled workforce available even for such things as wiring.

It’s our… and the standards under the Fitzgerald Act address those concerns very directly, because they say that the people who will be brought on as apprentices will have a commitment of at least 2,000 hours… this is not just something tinkered together for the plan… that they’ll have related and supplemental instructions so that they’ll have some theory behind what they’re doing, that they’ll be… most importantly to us, there’ll be a fixed ratio of journey-level persons to apprentices, so you don’t have two foremen and 35 people named as apprentices–

Sandra Day O’Connor:

Well, your response surprises me a little.

Sandra Day O’Connor:

I would have thought you might take the position that it is just an incentive, and therefore there’s no occasion for preemption.

John M. Rea:

–Well–

Sandra Day O’Connor:

And yet you’re trying to respond some other way.

I’m baffled.

John M. Rea:

–Well, the question is from who… I guess I’m responding from the point of view of the State.

It’s–

Sandra Day O’Connor:

Well, from the point of view of the State you want to say it’s not preempted.

John M. Rea:

–Yes.

Sandra Day O’Connor:

The California law.

John M. Rea:

But from the–

Sandra Day O’Connor:

And one way to say it is, look, this is just an incentive that we have for people.

John M. Rea:

–Well, it’s true that it is an incentive–

You don’t have to abide by it.

John M. Rea:

–No one is required to either bid on public works or–

Right.

John M. Rea:

–or to use–

Sandra Day O’Connor:

Right.

John M. Rea:

–And if they want to use unregistered apprentices they have to pay them at the journey rate.

From our point of view it’s a Good Housekeeping Seal of Approval.

It addresses a lot of concerns.

From the contractor’s point of view, or even if there’s an apprenticeship plan back there, ERISA-covered or not, it is just an incentive.

It’s not an order.

There is no law in California, or as far as I know in any other State.

Sandra Day O’Connor:

But your response to me was, oh, no, it’s not an incentive, it’s something else.

John M. Rea:

It’s an… it’s both an… from our point of view, it’s a quality guarantee.

From the point of view of–

Sandra Day O’Connor:

For anyone who opts to follow it.

John M. Rea:

–To do it, yes.

But from the point of view of an ERISA… of an apprenticeship plan, ERISA-covered or not, it is merely an incentive, and if the preemption analysis–

Ruth Bader Ginsburg:

But counsel, how do you deal with why we’re here, because Dillingham said we are having funds, our funds are being withheld from us.

Ruth Bader Ginsburg:

That’s coercive, not… it’s not that you can do this if you like, but if you don’t do it you won’t get paid.

John M. Rea:

–The coercive aspect is in the prevailing wage law.

We set a prevail… like most, almost the majority of the States we set a prevailing wage for public works for various reasons, and if you misclassify or mispay someone, we will make you pay the difference in a small penalty.

That is coercive, as here.

The reason apprenticeship is involved is because when caught with this mispayment the contractor’s response was, oh, these are apprentices, so meeting apprenticeship standards is voluntary, but when you get caught fooling us about who the apprentices are, we’ll apply the prevailing wage law, as here.

Ruth Bader Ginsburg:

You are not… going back to Justice Kennedy’s question you are not agreeing with the AFL-CIO position that the training program is different from the provision, the financial arrangement for gaining the training, so that the training program itself, as distinguished from how one pays for it, is not under ERISA.

You seem not to… you and the Government both seem to reject that argument.

John M. Rea:

That’s correct, Justice Ginsburg.

Ruth Bader Ginsburg:

And why?

John M. Rea:

The reason we’re taking that position is because, although it provides a neat answer in this case, it addresses more… it addresses larger issues of ERISA jurisprudence than we need to answer, particularly because you’d have the same question about funded-unfunded in day-care centers and legal services plans and we think we’ve bitten off enough without trying to answer those.

The funding-un… nonfunded distinction in the Department of Labor’s definition seems to us to make sense in apprenticeship, without trying to make a broader rule, because apprentice–

Sandra Day O’Connor:

Well, didn’t this Court speak to the issue in part in Massachusetts v. Morash, holding that a State law impacting solely benefits may relate to an ERISA plan, if they’re financed by a separate fund?

John M. Rea:

–Yes, and vacation fund is fairly close to this case.

Sandra Day O’Connor:

And that would be pretty much contrary to the AFL-CIO view.

John M. Rea:

Yes.

It’s–

Sandra Day O’Connor:

I thought we’d spoken to that.

John M. Rea:

–Well, you hadn’t spoken to apprenticeship and the verbal formulation of apprenticeship is a little different.

I mean, we’re not saying that the AFL-CIO’s argument is impossible based on pure language it’s certainly possible.

It just doesn’t have any legislative history or serve to explain other sections, and that’s why we’d say it’s not proven.

Ruth Bader Ginsburg:

Are there other cases that involve services?

And what’s peculiar about this, it’s like you mention day care.

It’s not, you get paid a pension or you get provided with a health insurance package, but it’s–

John M. Rea:

It’s ordinary work.

Ruth Bader Ginsburg:

–Is there any other case that addresses that like… the intera–

John M. Rea:

There’s no other case.

The only things in ERISA which are in the list of possible benefits provided by an ERISA-covered arrangement that are similar to this are vacations, because they’re so much like ordinary work, but apprenticeship or other training, and other training is clearly covered in the same phrase, are, showing up to work, getting assignments from your supervisor, doing those, learning as you go, and that’s why it’s so closely tied to work.

I believe the reasons stated by the Department of Labor and the Federal Register section quoted in the United States brief for using funding was because of the great difficulty in separating out apprenticeship or other training from ordinary work.

It’s not like the pension that you get after work, or health benefits that you buy in a package and are handed.

It’s very much integrated, and the only way they really had to keep from federalizing vast areas of American employment law was by saying, well, when it’s funded, we’ll look at the special ERISA-related problems that funding brings.

William H. Rehnquist:

–Because that section 1002.1, when it defines an employee welfare benefit plan, does include in terms apprenticeship or other training programs.

There’s no way to get around that, is there.

John M. Rea:

There’s no way to get around that, and certainly we think it deserves the same treatment as the issue of vacations, that there is a definitional problem that this Court recognized in Morash, and you have to resolve it with the purpose of what Congress wanted to cover in benefit provision arrangements, and the Secretary has I think made the best effort at that.

The problems that we have in operation of the Dillingham law touch each of the groups mentioned in the Fitzgerald Act.

As to the contractors, those who join programs that meet the Federal standards, they invest in their apprentices, and… especially in the early years.

That raises their labor costs.

Every time that they lose a job to someone like Sound Systems, Inc. who’s just using temporary installers and calling them apprentices, that discourages their participation in plans.

Nothing discourages contractors as much as losing bids.

As to the apprentices, the second effect on State jobs where the temporary installers work is, those are jobs on which the apprentices and registered programs can’t earn any money and can’t learn anything.

The biggest problem with keeping apprentices working is getting them enough apprentice work.

Those that drop out are unavailable for a contractor bidding on a Federal jail that needs wiring.

Those that manage to hang on in spite of not having jobs are just a lot less trained than they would be otherwise.

This really discourages the use… shrinking the pool discourages the use of apprentices on Federal projects.

The third problem is that having wildly different kinds of work experience called apprenticeship by two different levels of Government, and under the Dillingham rule there will be State apprenticeship, which can be pulling wires and hanging speakers, and somebody telling you to go to school, and then registered apprenticeship, where you, you know, engage and commit to this long course of study.

That confuses the private sector that we rely on to make the system work.

The contractors, the schools that train apprentices, and people thinking of going into apprenticeship.

The fourth bad effect of the Dillingham rule is admittedly a prediction.

For nearly 60 years, the States have been willing to engage in this partnership for high quality standards.

We use the definition of apprentice, the Federal Davis-Bacon uses it, all of these Federal laws use it, other laws of ours, like minimum wage, use it.

If we can’t use that definition, if we’re forced to take people like temporary installers as our apprentices, the States will give the job back to the Feds.

Antonin Scalia:

Mr. Rea, come back to the preemption question.

I don’t understand why the Federal Government cannot continue to cooperate with the States, whether or not this particular law of California is held to be preempted.

All that the act requires is that the Secretary of Labor is directed to cooperate with State agencies engaged in the formulation and promotion of standards of apprenticeship.

It seems to me California agencies could continue to set forth standards of apprenticeship.

The only question is whether California can consistently, with ERISA, enforce those standards by excluding ERISA plan apprentices from State contracts.

John M. Rea:

Well, we’re… you’ve asked two questions, and let me take them in reverse order.

We’re not excluding ERISA-covered apprentices.

We’re excluding apprentices who don’t meet the Fitzgerald Act standards, and we’re indifferent to whether they’re ERISA-covered or not.

But the problem you’ve put your finger on is, if we preach to the contractors, the apprentices, the people who own buildings, that the way to go is to meet these high Federal standards of apprenticeship and don’t practice what we preach, it’s a… preaching is much hindered by hypocrisy.

Antonin Scalia:

Well, it seems to me you can formulate and promote standards by simply, for instance, prohibiting any company from calling something a, quote apprenticeship program unless it meets certain requirements, which is a good deal short of this.

Antonin Scalia:

That would promote genuine apprenticeship programs so that somebody doesn’t enroll in a program which really doesn’t do the job.

John M. Rea:

I suppose it would, but our interest is not only truth in advertising and promotion but also the State’s interest, because… in really getting apprenticeship back for that wage rate, because those are our youth, those are our trainees, and, frankly, that’s our jail.

The other point I would like to address is, the Dillingham rule really interferes with the interest in uniformity that motivated much of ERISA.

What we have is a rule that makes the definition of apprentice on State public works the same as Federal, and ERISA’s theory about the need for uniformity was that uniformity promotes the furtherance of benefits.

The Dillingham rule does the opposite, because the sound system apprentices here, for example, could not work on a Davis-Bacon job in California, Oregon, Nevada or anywhere else.

I would like to reserve the rest of my time if there are no more questions.

William H. Rehnquist:

Very well, Mr. Rea.

Mr. Feldman, we’ll hear from you.

James A. Feldman:

Mr. Chief Justice, and may it please the Court:

It’s the position of the United States that the judgment in this case should be reversed, both because the State’s prevailing wage law does not relate to ERISA plans and because, if it did, it would be saved under the section 114040… 1144(d) savings clause.

With regard to the relates-to issue, our position is that the general principle is that where a State is regulating an activity, that an employer may carry out through an ERISA plan or may carry out through a non-ERISA plan, and where the State’s regulation neither encourages nor discourages, nor prohibits nor requires the employer from doing it by means of the ERISA plan, that the State regulation is not preempted.

In that case, it would be most natural to say that the State’s regulation relates to the activity at issue, here training programs, and not to ERISA plans.

Now, in Shaw v. Delta Airlines, if you look at the last few pages, the last issue that the Court dealt with in its opinion in that case concerned a New York State regulation of disability insurance.

It was clear that disability insurance could be offered either by an employer through an ERISA plan, or it could be offered through a non-ERISA plan.

The Court held that even for those employees who choose to offer it through an ERISA plan, that that doesn’t render… they can’t thereby immunize themselves from the State’s regulation.

The State’s regulation related to disability laws, not to ERISA plans, and therefore the State could continue to enforce those regulations.

Antonin Scalia:

Now, this argument requires you to establish, however, that not all apprenticeship programs are ERISA plans.

Is there some basis for that, other than the funding-nonfunding distinction?

James A. Feldman:

No.

I think… well, the basis is this Court’s decision in Massachusetts v. Morash, and the Secretary of Labor’s regulations on which that was based.

Apprenticeship… apprenticeship, it’s not just apprenticeship, it’s apprenticeship and other training programs, and those are ubiquitous in the workplace.

Training goes on every day at all degrees of formality, from totally informal to very formal programs in every workplace in the country.

Congress did not intend, when it enacted ERISA, as the Court recognizes in Massachusetts v. Morash, it didn’t intend to oust the States from their very traditional jurisdiction over their basic employment relationship.

That is, the employer gives money to the employee, and the employee does what the employer tells the employee to do, and if that’s get trained, then the employee gets trained.

If it’s do some work and get some training and go attend some courses, then that’s what the employee does.

ERISA was not intended to oust the States from their kind of very basic and traditional regulatory authority over that.

Where a fund is introduced, it introduces a separate risk, as this Court said in Morash, and those cases where separate risk is introduced, then ERISA takes effect, and if an employee–

Sandra Day O’Connor:

You mean by Federal funding or assistance?

James A. Feldman:

–No.

I–

Sandra Day O’Connor:

What are you talking about?

James A. Feldman:

–No.

What I mean is, where the employer… where it’s not just a question of the employer paying the employee money and the employee goes and gets training or does what the employer says to do, but the employer sets aside a fund and says, I’m setting aside this fund for the benefit of the employees to accomplish such-and-such goals, training, so on, maybe with other… in concert with other employees.

Sandra Day O’Connor:

But you say if the employer pays out of his own general funds it’s not?

James A. Feldman:

It’s not, and that’s–

Sandra Day O’Connor:

What’s the difference?

James A. Feldman:

–The difference is that as the Court… that was exactly the difference that the Court relied on in Massachusetts v. Morash, and the difference is, where it’s just the… it’s impossible to distinguish what’s going on from the normal payment of compensation to a worker in return for the worker’s normal taking care of his job in the case where the compensation just comes out of the employer’s pocket, and moreover–

Antonin Scalia:

Well, that’s a good idea, but where do you get that out of the language of the statute?

I mean, are we just giving up on the term relates-to, and–

James A. Feldman:

–It doesn’t… I–

Antonin Scalia:

–just devising distinctions that we think are useful?

James A. Feldman:

–No.

I… actually, I don’t think that… it doesn’t really have anything to do with relates-to.

What the Court said in Morash was that it has to do with the entire term, plan, fund or program for the purpose of giving vacation benefits.

Similarly, in this case it really has to do with the entire meaning of the whole phrase there in section 1002, plan, fund or program for the purpose of providing apprenticeship or other training benefits.

It’s really the exact… an exact parallel, and let me give an example that’s not really that far from this case.

Imagine that a hospital–

Antonin Scalia:

Excuse me.

You’re saying, even though they use different terms, plan, fund, or program, if it’s an apprenticeship or training program, it also has to be a fund?

James A. Feldman:

–In order to be a… it has… the Secretary of Labor has determined that in order to distinguish between normal workplace, what goes on normally in the workplace and the kind of benefit programs that ERISA was designed to regulate, that the distinction in the case of apprenticeship and other training programs is between funded programs which are benefits of the sort ERISA is intended to regulate and nonfunded programs, which is just the employer hiring the employee.

Anthony M. Kennedy:

But the statute refers to programs.

That statute refers to apprentice programs.

James A. Feldman:

That’s correct.

Antonin Scalia:

It not only refers to programs, it refers to funds separately.

James A. Feldman:

That’s right, but also–

Antonin Scalia:

Fund or program.

James A. Feldman:

–That’s right, but also the statute throughout and in the pre… in section 1001 which talks about the purposes of the statute and elsewhere throughout the statute talks… it’s quite clear that the statute is directed towards benefits.

It’s not directed toward just an employer who decides to get… to pay an employee and says go and learn how to–

William H. Rehnquist:

But 1002.1 defines employee welfare benefit fund.

Where does the Secretary get the statutory authority in that section to make his distinction?

James A. Feldman:

–Well, the Secretary does have statutory authority in 29 U.S.C. 1135.

William H. Rehnquist:

What basis in 1002.1 does the Secretary rely on for making that distinction, because it does seem that the definition covers any plan, fund, or program.

James A. Feldman:

The basis in… the basis is that that term, that entire phrase, plan, fund, or program for the purposes of providing apprenticeship or other training programs itself has to be… that itself… that it’s really a definition of that whole term, and I will admit that the distinction between funding and unfunded in this case, as in Massachusetts v. Morash, that that’s not something you’re going to find in Black’s Law Dictionary if you look up any of those individual words.

William H. Rehnquist:

Or in the statute.

James A. Feldman:

No, but it is.

It is, I think, in the statute, because throughout the statute… I mean, if you look at section 1001, if you look up even 1144, what the statute talks about is benefit programs, not the basic employ… payment of wages in return for work.

Anthony M. Kennedy:

Are you saying that you must give a different meaning to the word program in the first part of the clause than in the second part of the clause?

James A. Feldman:

No.

I don’t think I’m saying that.

I think I’m saying that the entire clause has to be understood with some limitation.

If not, it would take over the entire role of just what goes on in the everyday workplace, and that was not Congress’ intent.

If you look at the wording throughout the statute where it talks about employee benefit programs, and the example I wanted to give was, if you take a–

No, I didn’t mean–

James A. Feldman:

–If you take an internship at a hospital, which is very much like an apprenticeship program, and it’s certainly a training program, according to the Ninth Circuit’s rule in this case… and an internship could be organized with a separate, as an ERISA plan, and in our view it could be organized as a non-ERISA training program.

Under the rule that California… that the Ninth Circuit adopted in this case, the State would be entirely disabled from regulating how many interns… how many doctors you need to supervise interns in a hospital, under what circumstances an intern may… can assist in surgery, all kinds of things like that.

Now, that perhaps is one extreme case, but that’s a training program just like the training program in this case, and the need–

David H. Souter:

–Would you agree that if you were simply looking at the phrase, plan, fund, or program, you really couldn’t make this argument.

And your argument depends on saying you’ve got to read the statute whole.

James A. Feldman:

–That’s right.

David H. Souter:

And Morash recognized that, and if you don’t read it whole this way, in effect you are going to federalize a vast area of State activity which in fact has nothing to do with the… with kind of the gut notion of administering trust funds.

James A. Feldman:

That’s exactly right, and if you… in the Morash opinion the Court says, you could construe all vacation plans to be ERISA plans.

That was clear.

You could do that.

David H. Souter:

Just as you could–

James A. Feldman:

But you have to look at it in the context of the whole statute and what Congress was trying to accomplish here.

Stephen G. Breyer:

–So if that’s so, and… the fact that an employer sets aside a trust fund to buy vacations for his employees does not make all the travel agencies and hotels involved ERISA plans, right?

James A. Feldman:

That’s correct.

Stephen G. Breyer:

All right.

Why isn’t the same thing true with a trust fund set up to buy apprenticeship programs?

Why, in other words, take the other side of it?

James A. Feldman:

Well–

Stephen G. Breyer:

Why is it if you do have a trust fund, pension fund, et cet… or ERISA plan set up to fund apprenticeship programs, why does that make the program itself an ERISA program, any more than with vacations?

James A. Feldman:

–Because… I think because the training program itself as something that the employer has set up is not going to some outside provider.

Stephen G. Breyer:

Well, in other words, if the vacation travel agent happens to be somebody who does the employer’s vacation planning, the travel business becomes an ERISA program?

James A. Feldman:

No, I don’t think that’s right, but I do think that raises a… it would be a slightly different question as why various State regulations of the travel agent wouldn’t be preempted, and that–

Stephen G. Breyer:

Why isn’t it a fairly clear line to say that… oh.

James A. Feldman:

–Thank you.

William H. Rehnquist:

Thank you, Mr. Feldman.

Mr. Hill, we’ll hear from you.

Richard N. Hill:

Mr. Chief Justice, and may it please the Court:

If this Court were to affirm the Ninth Circuit in this case, it would not mean the end of apprenticeship as we know it.

The parade of horrors laid out by the State is overstated, and I believe it ignores economic reality.

David H. Souter:

Well, wouldn’t it mean that in any case like this, for example, in which the employer in effect wanted to exempt himself from the apprenticeship obligations and the wage differential that that implies, he would have a perfect way to do it simply by agreeing to the apprenticeship scheme as part of his contract, then funding his apprenticeship scheme with a trust fund like this, them claiming on your theory that all of the State regulations on apprenticeships relate to the plan and becoming free of the regulations?

Why wouldn’t it be a perfect ticket to an exemption from what he had agreed to if he thought in this particular instance it was in his interest to do that?

Richard N. Hill:

Well, I think there are many ways to take care of those abuses like that.

I think the first question is–

David H. Souter:

Under existing law?

Richard N. Hill:

–Under existing law.

I think, for example, the payroll practice regulation deals with a situation where the employer simply agrees to provide training in exchange for payment without establishing any program or plan, and where there is no plan or program, certainly that may fall within the payroll practice regulation.

David H. Souter:

Would that, then, leave your client in the same position that the client is in if the State prevails here, except that he would be in that position as a result of the enforcement of the different statute, the payroll differential statute as opposed to the apprenticeship scheme under the contract?

Richard N. Hill:

Well, I think the difference between my client’s situation and the one I just outlined is that my client has established a formal plan and program with written standards, with supplemental training, with a wage progression that corresponds to periods of training, and–

David H. Souter:

But he’s doing it for the purpose, in effect, of honoring State law or State regulation with respect to apprentices which he now says is unenforceable against him because he’s funding his obligation by an ERISA plan.

Isn’t that his argument?

Richard N. Hill:

–Well, I think the reason that this contract–

David H. Souter:

Isn’t that your argument?

Richard N. Hill:

–I’m not sure… I think the reason that this apprenticeship program was established was that we have this Federal system of creating incentives to comply with apprenticeship programs–

David H. Souter:

No, but why did your client establish the ERISA plan?

The ERISA plan was established to fund, in effect, his apprenticeship obligations, and by virtue of having done it by an ERISA plan he now claims that because of the relating-to language there is a preemption which exempts him from the State law that he established the fund to honor.

Isn’t that his argument?

Richard N. Hill:

–I think I would put it slightly differently.

Richard N. Hill:

I think the reason this plan was established was–

I would, too–

[Laughter]

Richard N. Hill:

–to comply with Federal standards.

The incentive, the carrot, as it were, under the Federal system of apprenticeship is, you get people to go out and create apprenticeship programs and people want to comply with the Federal Fitzgerald Act standards so that they can bid on Federal public works projects and other Federal projects having a Federal purpose.

And it’s this voluntary system created by the Fitzgerald Act that we want people to go out… we want to encourage people to go out and encourage apprenticeship programs and plans, and the carrot is that if you do that, and you comply with the Federal standards, then you can bid work for Federal public works projects, you can pay the apprentice rates on Federal projects.

David H. Souter:

Yes, and he does all that, and after he’s done it, for whatever reason, he says, this isn’t such a hot idea.

I don’t think I want to honor the apprentice journeyman wage differential for whatever reason, and I can get out of it by claiming an ERISA preemption.

That may not be such a great thing for me in the long run, but at least it gets me out of the situation that I’m in now that I don’t like.

Richard N. Hill:

I don’t think that happened in this particular case, because we had the program and the plan in effect.

The standards were in place, as conceded by Mr. Rea, when the work was being performed.

We had a little difficulty create… getting the supplemental instruction set up, so the plan was in place when the work was being performed, and the apprentices were being paid in accordance with the plan.

They were being paid in accordance with the collective bargaining agreement, and all that happened in this case was that we didn’t get the approval from the State until some later point in time, but my client was, I believe, in all respects complying with the plan.

David H. Souter:

But you would be in the same position if the reason you hadn’t gotten the approval from the State was, or if the reason for the withholding in this case was that you simply hadn’t followed the plan.

You’d be in the same position you’re in right now, and you would be claiming preemption, and for that reason you would be claiming the illegality of withholding the wages.

Richard N. Hill:

Well, if we had not followed the plan, that I think would create a whole different set of problems.

Antonin Scalia:

No, but I’m saying if you win this case that’s the option that you’re going to have, or that others… I don’t mean that your client is going to do it, but that’s an option that other contractors would have.

Isn’t that correct?

Richard N. Hill:

Well, I think there are several safeguards in place.

You have to–

David H. Souter:

Before you tell me about the safeguards–

Richard N. Hill:

–Okay.

David H. Souter:

–as a general proposition that is correct, isn’t it?

Richard N. Hill:

I don’t think that is… I don’t think that affirming this case is really going to open the floodgates.

Antonin Scalia:

Well, but of course it’s correct, what he said.

Not whether it’s going to open the floodgates, but is it correct?

It seems to me it is.

Isn’t your response that you could create such a hypothetical with respect to any provision that could be preempted by ERISA?

You could always create a hypothetical that somebody does not want to abide by the State law in question, which would be preempted, need only set up an ERISA plan.

Isn’t that your response?

Richard N. Hill:

I think my answer is yes, as long as you set up an apprenticeship plan that meets the ERISA standard, and that may be very different from the State standard of what an apprenticeship training program ought to be.

Ruth Bader Ginsburg:

But does ERISA have any standards for the training program as distinguished from the funding of it?

Does it have standards for the quality of the trainers, the number of hours, the… ERISA doesn’t regulate training, does it?

Richard N. Hill:

Well, ERISA does not regulate training because I think ERISA really leaves it to employers to… it doesn’t set a minimum set of benefits, so it’s really up to the employers to create their own diverse set of training programs.

The real safeguards in Federal law are the Fitzgerald Act regulations which–

Ruth Bader Ginsburg:

But they… the State regulated training of apprentices long before there was a Fitzgerald Act, and it’s very old kind of State regulation, isn’t it?

Richard N. Hill:

–Well, it… certainly within the last 30 or 40 years there was some regulation of apprenticeship, but it’s this conjunction of regulation of apprenticeship and prevailing wage legislation that has only come into existence within the last 20, 30 years.

Ruth Bader Ginsburg:

The definitions section mentions along with apprentice programs day-care centers and prepaid legal services.

Training programs and day-care centers, the fact that it’s an ERISA program wouldn’t mean that the quality standards imposed on day care by the State are removed, would it?

Richard N. Hill:

That’s a hard question.

I don’t think it would.

Ruth Bader Ginsburg:

Well then, that’s what… I’m struggling with this statute that lists them in a row, training programs, day-care centers, prepaid legal services, and at least it seems incredible to me to believe that you could set up a day-care center and escape all the State regulations, quality controls on that, if you put it under the head of ERISA, so why should it be different for training?

Richard N. Hill:

Well, I guess one of the things that’s different about apprenticeship is that we have this system, this voluntary system that the Federal Fitzgerald Act regulations set up the standards that one must meet in order to gain Federal approval, and I think it’s that.

It’s the incentive of complying with that system that makes this case… makes apprenticeship unique among employee welfare benefit plans.

David H. Souter:

Why isn’t it easier to make a different kind of classification and in effect respond to the problem that Justice Scalia raised that in theory you could oust any State regulation by forming an ERISA plan?

And the answer to the classification I have in mind is, if the ERISA plan is in fact funding what is a requirement of a traditional area of State regulation, which I dare say apprenticeship is, the regulation of day-care centers is, and so on, just as the regulation of hospital rates could be, then the fact that there is an ERISA plan does not so connect the plan to the area of regulation as to require preemption.

Why isn’t that the answer here?

Richard N. Hill:

Well, I guess my response to that is that the connection in a case like this is that the employers have set up a plan and a program that… with a detailed set of standards and wage progressions, and what the State is attempting to do is to regulate that and tell the employers they may not comply with the plan that they have set up, and once that plan has been interfered with in that way, you are interfering with the congressional–

David H. Souter:

No, but you’re not interfering with the plan if the object of the plan is to fund whatever you are required or permitted to do by or consistent with the traditional State regulation.

It seems to me that your argument is circular, and both Justice Ginsburg’s question and my question are basically saying, there’s got to be a limit to what is connected to or related, and that limit is established by looking for certain areas of traditional State regulation, and if the effect on the ERISA plan is incidental to that regulation, as it would be when a plan is set up simply to fund the regulation, then you don’t have preemption.

Why isn’t that the answer?

Why isn’t that the key to this case?

Richard N. Hill:

–I think there are a couple of responses.

First of all, as I read the cases, if ERISA preemption is express, as I believe it is in this case, then we don’t need–

David H. Souter:

Well, how can you say it’s express in this case unless you… maybe you do… say that there cannot be such a thing as an unfunded plan which does not fall under ERISA?

I take it that is your position.

Every plan, even unfunded plans, is an ERISA plan within the meaning of the statute.

Richard N. Hill:

–I… well, I think my position, although you may not need to reach this in order to get a result in this case, my position is that every plan or program to create apprenticeship is covered by ERISA whether it’s funded or unfunded.

David H. Souter:

Right.

That’s what I meant, and don’t you have trouble under Morash?

Richard N. Hill:

I don’t believe I have trouble under Morash.

As I read that case it was limited to the situation where a single employer was paying vacation out of its own general assets, and I believe the Court said that we would have a different situation if a group of employers had set up a separate trust fund to pay vacation benefits for a larger group of employees.

John Paul Stevens:

But under your analysis, as I understand it, you could have a single employer setting up a… an apprentice program with its own standards.

That would be an ERISA plan, and it would preempt.

Richard N. Hill:

I believe that’s possible as long–

John Paul Stevens:

That’s your… I think that’s your theory, is it not?

Richard N. Hill:

–That is my theory.

As long as there is a genuine plan or program and not something that’s simply–

John Paul Stevens:

Well, it’s genuine.

It just provides standards that differ from those that California and the Secretary of Labor would require.

Richard N. Hill:

–That’s right, and I–

John Paul Stevens:

And it still would preempt.

Richard N. Hill:

–I… that is my theory.

William H. Rehnquist:

Yes.

What would be the reason for Congress wanting to regulate under ERISA an unfunded apprenticeship plan?

Richard N. Hill:

Well, I think that we can imagine an unfunded… I guess in Morash I think the Court dealt with by saying that where there is a risk different than simply the risk of employment, and one can imagine a apprenticeship program or plan which has detailed standards, detailed training requirements and those sorts of things which happens to be unfunded, and I believe that the congressional intent is to regulate those sorts of–

William H. Rehnquist:

Well, wasn’t Congress’ concern in ERISA, granted, you repair to the statute to determine that in the first instance, the insolvency and failure to put together enough financing for these various plans?

Richard N. Hill:

–I think that is one of the risks that we are concerned about when you have these multiemployer funded plans.

You also have the risk of, or have the concerns with the administration of detailed plans, and I think that risk, the desire for administrative integrity, would attach to some unfunded plans.

Disclosure requirements can apply to unfunded plans as well as funded plans.

William H. Rehnquist:

What would you disclose about an unfunded plan?

Richard N. Hill:

Well, there may be very limited disclosure requirements, but you may have to disclose who is administering the plan, what the relationships of those people are to the participating employers, what the standards are, how one gets training, what kinds of things, what a person must do to complete the apprenticeship, so the disclosure may be limited, but there may be some disclosure.

David H. Souter:

Mr. Hill, you heard counsel for the State say that there are without question unfunded plans out there.

They don’t happen to have the number.

But I take it, then, you’re willing to accept the consequence that if you’re right, ERISA regulation is due for a potentially very significant expansion, because they’re not… ERISA isn’t regulating any of these plans now.

Richard N. Hill:

The logical extension of my position is that ERISA will protect many different varieties of training and apprenticeship programs, other than the type of program we have here before… in this case.

David H. Souter:

So you’re… I mean, ERISA has not been doing what it should have been doing on your theory.

Richard N. Hill:

And… I think that’s partly correct.

I would agree with that, and I would say that this is inherent in the structure of ERISA and the Fitzgerald Act, because–

Ruth Bader Ginsburg:

What about a training program that the employer would offer, say, that we need to have a healthy workforce so we’re going to have this gym facility, this health club, and that’s… and then could they then say because it’s under ERISA we want to be relieved of all these State requirements that… these safety, and enough space, and all that, we don’t have to worry about that because it’s an ERISA plan and its State regulation is preempted?

Richard N. Hill:

–Well, this sounds very close to what the Department of Labor is attempting to prevent through their payroll practice regulation, because if a single employer just says, I’m going to establish a health plan, and I pay for it out of my general assets–

Ruth Bader Ginsburg:

Well, let’s say a group of employers do it.

They get together and they say, we’re going to have this facility, and all our workers will use it, and we’re going to fund it out of a plan, and so State, please don’t tell us about how much space we need between machines, and the quality of what… the equipment.

Richard N. Hill:

–That is a difficult question, I concede, because if you take that to the logical extent, I suppose a program, a plan could be created for that purpose, and it’s probably unlikely to happen in the real world because employers don’t want to go–

Ruth Bader Ginsburg:

But it could happen, certainly, with the day care, which is in that same string.

Richard N. Hill:

–I think that is to some extent a risk, and I think it’s perhaps inherent in Congress’–

Ruth Bader Ginsburg:

How about legal services?

They’re all together, and if you’re saying that they can’t touch training because it’s under an ERISA plan, and it’s listed right in the statute as such, but so are these other things, so why would training be more untouchable than a day-care center, prepaid legal services–

Richard N. Hill:

–I’m–

Ruth Bader Ginsburg:

–my health club?

Richard N. Hill:

–I’m not sure I can draw that line.

I suppose that in the real world employers are much more likely to join together to create apprenticeship and training programs than they are to join together to create health clubs or legal–

Ruth Bader Ginsburg:

Day-care centers is not so unusual.

Richard N. Hill:

–And–

John Paul Stevens:

But the only problem I have with that argument, you say it’s the same whether it’s a single employer or a multiemployer under your reading of the statute, and if you read it literally, you’re dead right.

I mean, we said that in the vacation case, but we say you can’t read this statute literally.

It just doesn’t make any sense.

That’s the problem.

[Laughter]

Richard N. Hill:

–And–

John Paul Stevens:

It could… this… any employer could preempt all the health regulations for day care, a whole host of State regulations, if you read everything literally.

But you’re saying, well, maybe we don’t have to read it literally when we get to day-care centers, but then why do we have to read it literally with respect to–

Richard N. Hill:

–Well–

John Paul Stevens:

–apprentice programs?

Richard N. Hill:

–I concede that’s a problem, and I think it is possible to decide this case in my favor without reaching this larger issue of what… how far ERISA applies to apprenticeship programs, because this, in fact, was a multiemployer-funded apprenticeship program, and perhaps the decision can be limited to that.

David H. Souter:

Well, how?

I mean, why wouldn’t it be quite arbitrary on your theory to limit it to that?

Richard N. Hill:

Why–

David H. Souter:

Just as it seems to me it would be equally arbitrary to… in answer to Justice Ginsburg to say that we’ll draw the line before ERISA gets to the day-care centers.

If we accept your theory, we… you know, we’ve got to go the whole hog.

Richard N. Hill:

–And I think what I’m suggesting is that in this particular case it may not be necessary to draw that line.

There may be a future case–

David H. Souter:

No, but how?

How do we do it, because it seems to me the answer to Justice Ginsburg’s question on day-care centers is inevitable.

As I understand you correctly, the answer to Justice Stevens’ question, even when you get to the single employer schemes, is inevitable.

How are we going to draw this line that you want us to draw?

Richard N. Hill:

–I feel it’s a difficult line because ERISA does not define that line, the regulations do not define that line, and my best response is that in this particular case virtually all the parties, save and except the AFL-CIO, have conceded that this particular apprenticeship program is governed by ERISA.

William H. Rehnquist:

Well, some of the Government’s argument is based on the distinction between funded and unfunded and, of course, if… you would win, I take it, if we adopted that approach because your client’s plan was separately funded.

Richard N. Hill:

It was indeed, Mr. Chief Justice.

Sandra Day O’Connor:

If–

–It was separately funded?

Richard N. Hill:

Yes.

The employer–

Sandra Day O’Connor:

And yet the Government’s position is that because of that, there is no preemption.

Richard N. Hill:

–I frankly have a difficult time kind of understanding the logical… logic of that argument.

Sandra Day O’Connor:

Well, I guess they rely in part on this Court’s holding in Morash and in part on the Secretary of Labor’s regulations and determinations, is that right?

That’s how they draw the line–

Richard N. Hill:

I believe that’s their position–

Sandra Day O’Connor:

–between funded and unfunded.

Now, how do you respond to the reliance on the Secretary’s regulations and the Morash decision?

Richard N. Hill:

–Well, I think my first response is that this was… the regulation itself, the payroll practice regulation is limited to provisions of training out of an employer’s general assets, and we don’t have that situation here because we have payments into a separate trust fund and that fund is part and parcel of the larger program.

I think the second distinction between this and the Morash case is that Morash was limited to payments by a single employer out of its general assets.

We have a large group of employers in this particular case.

And in response to the larger argument made by the Government, it is that once you concede that this particular apprenticeship program is governed by ERISA, then I believe the logical conclusion is that California’s law relates to that plan because it is regulating how those apprentices are going to be paid and trained.

Sandra Day O’Connor:

So at bottom you say the statute, the ERISA statute itself does not permit drawing that distinction that the Government would draw.

Richard N. Hill:

Yes.

David H. Souter:

All right.

Let’s assume that you’re right and we don’t draw that distinction.

Let me then go to the last part of your answer to Justice O’Connor and say that it then follows that the preemption is going to occur.

Why does it follow that preemption is going to occur, whether we’re talking about funded or unfunded plans?

David H. Souter:

Why does it follow that preemption is going to occur if we are nonetheless concededly in an area of traditional State regulation which we have already held it is assumed that Congress did not intend to obliterate under the guise of ERISA?

Why does the preemption follow?

Richard N. Hill:

Well, I have several responses to that.

One is, where we have express preemption I don’t think we need to get into the question of what is traditional State regulation.

I think beyond that we need to look at the express language of the Fitzgerald Act regulations, because that goes to the question of–

Ruth Bader Ginsburg:

But without leaving out the Fitzgerald Act, it’s the related to.

It was in your colloquy before with Justice Souter.

Richard N. Hill:

–And–

Ruth Bader Ginsburg:

So let’s forget about, it’s a plan.

It’s an ERISA plan.

Is–

Richard N. Hill:

–I think there are several additional responses in that regard.

I think the California statute specifically refers to apprenticeship plans, and it… that’s one.

It attempts to regulate the substantive content of apprenticeship plans by dictating how much employers can pay people, how much… and how training is to be provided.

David H. Souter:

–Well, then it seems to me that you’re saying that there will be no end to related to, that if… that no State law is ever going to survive, whether it is a subject of traditional State regulation or not.

The same conclusion, it seems to me, would have to follow, for example… assuming there were no distinction between funded or unfunded plans, the same conclusion would have to follow with respect to hospital rate regulations, wouldn’t it?

Richard N. Hill:

Well, I didn’t read the Traveler’s decision that way.

I think this really goes to the question of what you intended by that decision.

I read that to be a fairly limited decision which applies to a specific classes of cases where ERISA preemption is not obvious.

David H. Souter:

But I think your… the only point that I’m trying to make is, or that I’m trying to understand is that I think your theory of preemption does not accord any significance to the fact that some areas of State regulation which do not regulate trust funds as such are traditional areas of State regulation which Congress presumably did not intend to preempt, and I think your argument assumes that that really is not a distinction that we can make.

Richard N. Hill:

I think it’s very difficult to make that distinction, given the express language of ERISA.

John Paul Stevens:

May I ask another question?

This case deals with the character of the training and the compensation, whether you can pay the apprentice less than the prevailing wage and all.

Supposing we had a safety-related problem that a… that the State required wearing helmets on the construction jobs or something for apprentices, and the ERISA plan said no such thing should be required, would the preemption apply to such regulations as well, in your view, as well as economic–

Richard N. Hill:

I don’t think it necessarily would apply because that wouldn’t be inconsistent with what the apprenticeship program provides.

John Paul Stevens:

–No, but they say… the group of employers drafted an apprenticeship program that said they shall wear a different kind of safety gear, less protective of the employee that the State regulation required.

Would that preempt the State regulation, and if not, why not?

Richard N. Hill:

Well, that’s certainly a more difficult question.

John Paul Stevens:

It’s really the same question, I think.

It’s safety instead of money.

John Paul Stevens:

That’s the difference.

And I don’t know why if you preempt the prevailing wage rate you don’t preempt everything else.

Richard N. Hill:

And I suppose the only difference about safety is that that is really not an integral part of ordinary apprenticeship programs, but I’m not sure that’s–

John Paul Stevens:

No, but I don’t know why it couldn’t be.

They couldn’t say they’d have to, you know, take special care with people who are unfamiliar with the hazards of the workplace, and so forth.

Richard N. Hill:

–It is possible that apprenticeship programs will have safety standards.

William H. Rehnquist:

Does the California regulation in question here deal at all with the way the apprenticeship plan is funded?

Richard N. Hill:

I don’t believe that the labor code provision makes any distinction between funded or unfunded plans.

William H. Rehnquist:

But I mean, does it attempt to regulate the funding itself, the way the employer pays in, or the kind of reports he has to make in connection with what he pays in?

Richard N. Hill:

I don’t believe there is.

William H. Rehnquist:

Might not that be a possible distinction, that if the State regulation doesn’t deal with the funding aspect, then perhaps it doesn’t relate to?

Richard N. Hill:

Well, again, if… regardless of whether we have a funded or unfunded plan, if the State is telling the apprenticeship program they can’t comply with their own standards, in our view there is preemption, and I think that’s what happened in this particular case.

Stephen G. Breyer:

But why doesn’t that help–

–You wouldn’t let the State decide, for example, that employers shall not… shall not have vacation plans other than a certain type, would you?

Richard N. Hill:

No.

I believe that that–

Antonin Scalia:

Don’t you think that would be preempted by ERISA, and that doesn’t relate to the funding.

Richard N. Hill:

–Once you get to the point that a vacation plan is covered by ERISA as opposed to being a Morash-type payroll practice, then yes, that is my position.

Stephen G. Breyer:

Can… why doesn’t it help to cut through the morass just what the Chief Justice said, which is, we make a basic distinction between the funding mechanism, which is the heart of ERISA, and that which the funds are used to buy, and once you get into the second category, the question of whether a State statute relates to ERISA depends.

It all depends.

If it’s pensions, that’s just money that’s being paid out, and it would be harder for the State to survive.

If it’s day-care centers, or vacations, that’s at the other extreme, very, very distant, and this seems more like the other extreme.

But that basic distinction, why isn’t that really the key to this?

Richard N. Hill:

My best response to that is that the statute does not make that distinction between the funded… the funding aspects of an apprenticeship program and all the other aspects of the program.

I think that requires a judicial gloss on the statute which just isn’t apparent from the explicit words of the statute.

John Paul Stevens:

Of course, you could have said the same thing about Morash.

You don’t challenge Morash, do you?

You don’t ask us to reexamine that case, do you?

Richard N. Hill:

No.

I… my position is this is a different case because it involves many employers, it’s a funded program–

John Paul Stevens:

Yes, and involves pension… I mean, apprentice rather than vacation.

Richard N. Hill:

–And I believe it is possible to limit this decision to funded apprenticeship programs like we have in this particular case, although that is not the position that I’m advocating here.

Nevertheless, that may be a way of deciding the case.

In conclusion, I think the point that… about ERISA and the Fitzgerald Act is that it creates a voluntary system for promoting apprenticeship.

Employers are encouraged to create apprenticeship programs with the carrot of being able to participate in Federal public works projects.

When the State–

Antonin Scalia:

You could call it that, or you could call it the stick of not being able to participate in public works projects.

I mean, that’s… whether it’s a carrot or a stick is surely in the eye of the beholder, don’t you think?

Richard N. Hill:

–Thank you, Your Honor.

William H. Rehnquist:

Thank you, Mr. Hill.

Mr. Rea, you have 1 minute remaining.

John M. Rea:

Then I think I have one point and one suggestion.

The one point was, counsel referred to their plan as a genuine plan or program, and certainly after they got their act together and they found that school in February, we did approve the program.

Work went on between October and February without it.

But ERISA under the case of Donovan v. Dillingham permits preemption if you just have a plan that’s covered by ERISA.

It doesn’t have to comply with anything, and I can write an ERISA plan under the Donovan case with intended beneficiaries, no particular amount of funding, intended training, in about 5 minutes.

There’s no guarantee that things would come up as well as they finally did in this case.

The suggestion was on the issue on which you were pursuing the Solicitor, which is, what’s the sense of this funded-unfunded distinction?

Obviously, I can’t speak for the Secretary of Labor, but it seems to me that a logical line is this.

William H. Rehnquist:

Thank you, Mr. Rea.

Your time has expired.

The case is submitted.