News

February 4, 2013 in Uncategorized

Court Rules Against Quincy’s REO

In a recent case brought by the Merit Construction Alliance (MCA), the U. S. District Court has ruled that federal law preempts a City of Quincy Responsible Employer Ordinance.  On Friday, February 1, 2013, Judge Rya Zobel ruled that the federal Employee Retirement Income Security Act (ERISA) preempted a Quincy ordinance that requires contractors working on city projects have a state approved apprenticeship program.  It was Quincy’s intention to enforce the ordinance even though the Court had struck down a similar ordinance in UCANE’s 2011 case against the City of Fall River.  Judge Zobel wrote in her decision, “Now as then, ERISA preempts mandatory apprenticeship program requirements.” 

MCA President and CEO wrote, “The court’s decisions in Fall River and Quincy should serve as a wake-up call to any municipality that enforces these types of ordinances.  They are likely violating the constitutional rights of construction workers or are violating federal law.”

With the court’s ruling, lawyers for the MCA and City of Quincy will meet to negotiate a settlement for damages which include Quincy reimbursing MCA for their legal fees.  In the Fall River case, the City was ordered to pay UCANE’s attorneys’ fees totaling $150,000.

A copy of Judge Zobel’s decision can be found on our website.

February 4, 2013 in Uncategorized

Judge Zobel’s Decision

Case 1:12-cv-10458-RWZ Document 34 Filed 02/01/13 Page 1 of 5

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

CIVIL ACTION NO. 12-10458-RWZ

MERIT CONSTRUCTION ALLIANCE, et al. v.

CITY OF QUINCY

MEMORANDUM OF DECISION February 1, 2013

ZOBEL, D.J.

The City of Quincy requires all contractors bidding on city construction projects

to maintain an apprenticeship program approved by the Massachusetts Division of

Apprentice Training. Plaintiffs challenge that requirement as preempted by the

Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. The

parties now cross-move for partial summary judgment.

I. Background

The background facts are explained in the court’s previous order on plaintiffs’

motion for a preliminary injunction. Briefly, plaintiffs are two construction companies, a

trade association of construction companies, and a construction worker. They originally

sued Quincy to challenge a number of city regulations imposing prerequisites on

bidders for public works projects. Most of those claims are being settled, leaving only

the present dispute over Quincy’s apprenticeship requirement.

II. Legal Standard

Summary judgment will be granted if there is no genuine dispute as to any

material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P.

56(a). The court must view the record in the light most favorable to the nonmovant and

draw all justifiable inferences in that party’s favor. Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 255 (1986). Where the parties cross-move for summary judgment, the court

applies this standard to each motion. See Atlantic Fish Spotters Ass’n v. Evans, 321 F.3d 220, 224 (1st Cir. 2003).

III. Analysis

ERISA preempts all state laws “insofar as they may now or hereafter relate to

any employee benefit plan.” 29 U.S.C. § 1144. The term “employee benefit plan”

includes employer-administered apprenticeship programs. 29 U.S.C. § 1002(1).

However, ERISA only covers benefit programs that the employer finances through a

separate fund; “an employee benefit program not funded through a separate fund is not

an ERISA plan.” Cal. Div. of Labor Standards Enforcement v. Dillingham Constr., 519 U.S. 316, 326 (1997).

A state law “relates to” an ERISA plan (and so is preempted) if it “has a

connection with or reference to such a plan.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85,

97 (1983). This standard sets a two-prong test: the state law is preempted either if it

has a “reference” to an ERISA plan, or if it has a “connection with” such a plan. A state

law has reference to an ERISA plan if it “acts immediately and exclusively upon ERISA

plans,” or if “the existence of ERISA plans is essential to the law’s operation.”

Dillingham, 519 U.S. at 325. Separately, a state law has a connection with ERISA plans

if it “mandate[s] employee benefit structures or their administration.” Id. at 328 (quoting

N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514

U.S. 645, 658 (1995)).

The parties agree that Quincy’s apprenticeship requirement has no reference to

an ERISA plan, because it applies to both ERISA and non-ERISA apprenticeship

programs (that is, both separately-funded and non-separately-funded programs). See

id. at 325 (finding no reference where “approved apprenticeship programs need not

necessarily be ERISA plans”). Therefore, the only question is whether Quincy’s

apprenticeship requirement has a “connection with” ERISA apprenticeship programs.

It does. Quincy’s regulation requires bidders to “maintain or participate in a bona

fide apprentice training program . . . that is approved by the [Massachusetts] Division of

Apprentice Training.” Docket # 26, Ex. B, at 1.1 First, then, Quincy requires its bidders

to have an apprenticeship program. But cf. Simas v. Quaker Fabric Corp. of Fall River,

6 F.3d 849, 852 (1st Cir. 1993) (“[A] state statute that obligates an employer to

establish an employee benefit plan is itself preempted even though ERISA itself neither

mandates nor forbids the creation of plans.”) Second, Quincy requires bidders’

apprenticeship programs to be approved by the Massachusetts Division of Apprentice

Training. That necessitates compliance with a number of state regulations, including

substantive training standards, program performance standards, and recordkeeping

____________________

1 This version of the regulation, proffered in the original complaint and as an

exhibit to Quincy’s motion from summary judgment, dates to 2000. The record also

reflects an updated version of the regulation from 2010 with slightly different wording.

See Docket # 23, Ex. A. The differences are insignificant.

____________________

standards. See 453 Mass. Code Regs. § 7.01 et seq. So Quincy’s regulation effectively

makes Massachusetts standards mandatory for its bidders’ apprenticeship programs,

including any ERISA apprenticeship programs. By setting compulsory standards that

apply to ERISA apprenticeship programs, Quincy’s regulation “mandate[s] employee

benefit structures [and] their administration.” Dillingham, 519 U.S. at 328 (quoting

Travelers, 514 U.S. at 658). It is therefore preempted for its “connection with” ERISA plans.

The contrast between this case and Dillingham is instructive. In Dillingham, the

Supreme Court considered a California statute allowing contractors to pay a lower

wage to workers in approved apprenticeship programs but not unapproved

apprenticeship programs. The Court found ERISA did not preempt the California statute

because the statute only gave employers an economic incentive to use approved

apprenticeship programs; its strictures were not mandatory. See id. at 330-34. The

Court emphasized in upholding the statute that “[n]o apprenticeship program is

required by California law to meet California’s standards.” Id. at 332.

Here, on the other hand, Quincy’s regulation requires every bidder to have an

apprenticeship program meeting Massachusetts standards. The regulation thus has a

connection with the ERISA apprenticeship programs it governs. See Minn. Chapter of

Associated Builders & Contractors v. Minn. Dep’t of Pub. Safety, 267 F.3d 807, 814-18

(8th Cir. 2001); Simas, 6 F.3d at 852 (“By preventing states from imposing divergent

obligations, ERISA allows each employer to create its own uniform plan . . . capable of

applying uniformly in all jurisdictions where the employer might operate.”); Utility

Contractors Ass’n of New Eng. v. City of Fall River, Civil Action No. 10-10994-RWZ,

2011 WL 4710875 at *7 (D. Mass. Oct. 4, 2011) (“Fall River . . . not only requires

bidders and contractors to operate such a program, but also requires approval by the

state . . . . Such an apprenticeship program mandate is preempted by ERISA.”).

Quincy emphasizes that neither of the construction companies appearing as

plaintiffs actually operates an ERISA apprenticeship program. The plaintiffs finance

their apprenticeship programs from their general assets, not from separate funds. But

the test for ERISA preemption is not whether the regulation has a connection with

ERISA plans operated by these plaintiffs, but whether it has a connection with ERISA

plans generally. Because the regulation sets mandatory standards that apply to ERISA

programs as well as non-ERISA programs, it is preempted.

Quincy’s apprenticeship requirement is substantively identical to the one this

court struck down sixteen months ago. See Fall River, 2011 WL 4710875 at *7. Now as

then, ERISA preempts mandatory apprenticeship program requirements.

IV. Conclusion

Plaintiffs’ motion for partial summary judgment (Docket # 23) is ALLOWED.

Quincy’s motion for partial summary judgment (Docket # 21) is DENIED. The parties

shall prepare an order for final judgment.

February 1, 2013                                                   /s/Rya W. ZobelDATE

Date                                                                        RYA W. ZOBEL

UNITED STATES DISTRICT JUDGE