Tri-m Group LLC v. Sharp
| Decision Date | 14 April 2010 |
| Docket Number | Civ. No. 06-556-SLR. |
| Citation | 705 F.Supp.2d 335 |
| Parties | TRI-M GROUP, LLC, Plaintiff,v.Thomas B. SHARP, Secretary, Delaware Department of Labor, Defendant. |
| Court | U.S. District Court — District of Delaware |
COPYRIGHT MATERIAL OMITTED
M. Duncan Grant, Esquire and Maria L. Panichelli, Esquire of Pepper Hamilton LLP, Wilmington, DE, Of Counsel: Stephen J. Sundheim, Esquire of Pepper Hamilton LLP, Philadelphia, PA, for Plaintiff.
Linda M. Carmichael, Esquire, Deputy Attorney General, State of Delaware Department of Justice, Wilmington, DE, for Defendant.
I. INTRODUCTION
Plaintiff Tri-M Group, LLC (“plaintiff”) brought this action for declaratory and injunctive relief against defendant Thomas B. Sharp (“defendant”), then Secretary of the State of Delaware Department of Labor (“DDOL”), alleging that the DDOL has discriminated against plaintiff and other out-of-state contractors by refusing to recognize their out-of-state registered apprentices for purposes of the Delaware Prevailing Wage Law, thereby burdening interstate commerce without justification in violation of the Commerce Clause of the United States Constitution. (D.I. 1) In lieu of a response, defendant moved to dismiss for lack of subject matter jurisdiction and for failure to state a claim under Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6). Following oral argument on the motion, the court allowed defendant to supplement the record with evidence of legislative history and states with regulations similar to the prevailing wage regulations at issue. (D.I. 39) The court subsequently denied defendant's motion. (D.I. 44) Discovery proceeded and has now closed. Presently before the court are cross-motions for summary judgment. (D.I. 71; D.I. 72) The court has jurisdiction over this action pursuant to 28 U.S.C. §§ 1331 and 1343(3). For the reasons that follow, the court grants plaintiff's motion and denies defendant's motion.
II. BACKGROUNDA. The Parties
The case at bar addresses the constitutionality of Delaware's statutory scheme as it relates to the applicable rates of pay for Delaware and non-Delaware-registered trade apprentices working on state-funded projects. Plaintiff is a Pennsylvania-based electrical contracting company that has performed, and plans to continue to perform, work on state-funded construction projects in Delaware. Plaintiff maintains an apprenticeship program that is registered with the Pennsylvania Apprenticeship and Training Council of the Pennsylvania Department of Labor and Industry (“PATC”) under standards approved by PATC and the Federal Committee on Apprenticeship. (D.I. 74, ex. 2) Plaintiff employs apprentice electricians who participate in plaintiff's apprenticeship program and who are individually registered with PATC in that apprenticeship program pursuant to individual apprenticeship agreements. Neither plaintiff nor its apprentices are registered in Delaware.
B. The DDOL's Investigation
Plaintiff was the successful bidder on a contract for electrical and building automation work at the Delaware State Veterans Home (“the Project”), a construction project in Milford, Delaware, that is funded in part by Delaware state funds. Nason Construction, Inc. was the general contractor; plaintiff was the electrical subcontractor. Plaintiff began work on the Project in August 2005; plaintiff employed Pennsylvania-registered apprentices for the project and initially paid them apprentice wage rates based on DDOL's prevailing wage determination for the Project. The DDOL is charged with administering and enforcing the Delaware Prevailing Wage Law, 29 Del. C. § 6960 et seq. (hereinafter, the “PWL”), in connection with such projects. See 19 Del. C. § 105(a)(1). As a subcontractor, plaintiff was subject to the PWL.
On March 26, 2009, Daniel Nelson (“Nelson”), a Labor Law Enforcement Officer with the Office of Labor Law Enforcement of the DDOL, conducted an on-site inspection at the Project site. During his inspection, Nelson spoke with several of plaintiff's employees and sought to identify those working as apprentices. On April 7, 2006, Nelson wrote a letter to plaintiff stating that a case had been opened to verify its compliance with the PWL. Nelson asked plaintiff for copies of all daily logs as well as certified sworn payroll reports for employees working on the Project to demonstrate its compliance with the law; plaintiff timely supplied the requested information, which demonstrated that plaintiff paid its (Pennsylvania-registered) apprentices the Delaware apprentice rate.
As part of his case investigation, Nelson asked the Delaware Apprenticeship and Training Department whether plaintiff's apprentices were registered in Delaware. Nelson was informed that plaintiff did not have an apprentice program registered in Delaware. This necessarily meant that plaintiff's apprentices were not registered in Delaware's Apprenticeship and Training program. On May 9, 2006, plaintiff's Chief Financial Officer Robert Gose (“Gose”) spoke with Nelson and informed him that all of plaintiff's apprentices working on the Project were registered in Pennsylvania. Gose asked Nelson how plaintiff could register its apprentices in Delaware. Nelson informed Gose that Delaware requires an apprentice program sponsor to maintain a permanent place of business in Delaware. This was also confirmed by a conversation between Mark Weaber (“Weaber”), plaintiff's Safety and Health Specialist, and Kevin Calio (“Calio”) of Delaware's Apprenticeship and Training Department.
After his conversation with Gose, Nelson wrote to plaintiff advising that, upon review of the records supplied by plaintiff, it appeared that plaintiff was “in violation of Delaware's Prevailing Wage Law (29 Del. C. § 6960) and Prevailing Wage Regulation III.D.a. for failure to pay the applicable prevailing wage rates prescribed for th[e Project] to [its] journeymen [ 1] and apprentices.” (D.I. 74, ex. 6) Nelson's letter informed plaintiff that it was required to either perform a self-audit and pay any prevailing wage deficiencies to its Pennsylvania-registered apprentices who plaintiff paid the Delaware apprentice (rather than journeyman) wage, or submit to further investigation by DDOL's Office of Labor Law Enforcement and face potential legal action and civil penalties, ( Id.) Plaintiff chose the former direction. As a result of the self-audit, plaintiff was informed that six Pennsylvania-registered apprentices working on the Project were not recognized as apprentices under Delaware law and, therefore, had to be paid the higher journeyman rate of pay. On May 18, 2006, plaintiff supplied documentation to Nelson regarding its self-audit, including the amount needed to bring each employee's pay up to the Delaware Prevailing Wage rate and checks for each employee payment. On June 1, 2006, Nelson informed Gose that the DDOL determined that plaintiff was in violation of the PWL and the Regulations but, having demonstrated that plaintiff brought the apprentices' pay up to journeyperson rates, plaintiff now appears to be in compliance with these rules. (D.I. 74, ex. 8)
C. The Challenged Regulatory Scheme
It is plaintiff's position that the PWL and the DDOL's regulations work in concert to permit in-state contractors on public works projects to pay reduced wage rates to their apprentices while denying out-of-state contractors the same right. (D.I. 74 at 3) This places plaintiff and other out-of-state public works contractors at a competitive disadvantage, insofar as their project bids must incorporate higher apprentice salaries.2
29 Del. C. § 6960(a). The PWL imposes a financial penalty on employers who knowingly fail or refuse to pay the prevailing wage rates, and bars employers judicially determined to have violated the PWL from bidding on public construction contracts for a period of three years from the judgment. 29 Del. C. § 6960(e).
Pursuant to 29 Del. C. § 8503(7), the DDOL has implemented Prevailing Wage Regulations to implement the provisions of 29 Del. C. § 6960 (hereinafter, “the Regulations”).3 The Regulations define a “laborer” as including apprentices, or “persons who are indentured and employed in a bona fide apprenticeship program and individually registered by the program sponsor with the [POOL].” DPWR §§ III(C) & (D)(1)(a). The DDOL periodically publishes its prevailing wage determinations by industry, which state that “non-registered apprentices must be paid the mechanic's rate.” 4 The Regulations also provide that non-registered apprentices shall be paid the “wage rate determined by the [DDOL] for the classification of work (s)he actually performed.” DPWR § III(D)(2)(b).
Registered apprentices may be paid a percentage of the mechanic's rate corresponding to seniority in the apprenticeship program. DPWR § III(D)(2)(d). These rates are set forth in the Rules and Regulations Relating to Delaware Apprenticeship and Training Law (hereinafter, the “DATL Rules”). 5 Specifically, in a 2000-hour apprenticeship program, the minimum apprentice rate is 40% of the mechanic's rate for the first 1,000 hours and 85% for the second...
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