Associated Bldrs. & Contractors v. Perry

• Decision Date: 21 November 1994
• Docket Number: No. 93-CV-10016-BC.,93-CV-10016-BC.
• Citation: 869 F. Supp. 1239
• Parties: ASSOCIATED BUILDERS AND CONTRACTORS, SAGINAW VALLEY AREA CHAPTER, Plaintiff, v. Lowell W. PERRY, Director of Department of Labor, State of Michigan, Defendant, and Michigan State Building and Construction Trades Council, AFL-CIO, Intervenor.
• Court: U.S. District Court — Western District of Michigan

869 F. Supp. 1239

ASSOCIATED BUILDERS AND CONTRACTORS, SAGINAW VALLEY AREA CHAPTER, Plaintiff, v. Lowell W. PERRY, Director of Department of Labor, State of Michigan, Defendant and Michigan State Building and Construction Trades Council, AFL-CIO, Intervenor.

No. 93-CV-10016-BC.

United States District Court, E.D. Michigan, Northern Division.

November 21, 1994.

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David J. Masud, Saginaw, MI, for plaintiff.

Christine A. Derdarian, Gregory T. Taylor, Asst. Attys. Gen., Lansing, MI, for defendant.

Donald J. Prebenda, John Canzano, Southfield, MI, Terry R. Yellig, Sherman Dunn Cohen, Washington, DC, for intervenor.

MEMORANDUM OPINION AND ORDER

CLELAND, District Judge.

I. Introduction

This case is before the court on Associated Builders and Contractors' motion for partial summary judgment, which argues that the Employee Retirement Income Security Act of 1974 ("ERISA") preempts the Michigan Prevailing Wage Act, M.C.L. § 408.551 et. seq. Both Defendant Lowell W. Perry and Intervenor Michigan State Building and Construction Trades Council, AFL-CIO have responded to the motion, and replies thereto have been filed. Oral argument was held before this court on July 7, 1994. For the reasons stated herein,

IT IS ORDERED that the motion for partial summary judgment is granted.

II. Background

Plaintiff Associated Builders and Contractors, Saginaw Valley Chapter ("ABC"), alleges that enforcement of the Michigan Prevailing Wage Act ("Act"), M.C.L. § 408.551 et seq., is preempted by ERISA, 29 U.S.C. § 1001 et seq.¹ Defendant Lowell W. Perry is the Director of the Michigan Department of Labor ("MDOL"), which is the state agency charged with enforcing the Act as well as the policies and procedures established by it. The intervenor is the Michigan State Building and Construction Trades Council, AFL-CIO ("Council" or "Intervenor"), a voluntary unincorporated association and a labor organization whose membership is comprised of various labor unions representing building and construction trade workers in the State of Michigan.

The Act essentially requires non-union construction companies to pay union wages (designated the "prevailing wage" in the statute) when working on projects financed in any part by the state. Stipulation of Facts, ("SOF") 7.² The prevailing wage is determined by MDOL and includes the value of fringe benefits, such as health and welfare benefits, vacation benefits, pension plans and apprenticeship training programs. (SOF 29). Section 4 of the Act provides as follows:

The commissioner shall establish prevailing wages and fringe benefits at the same rate that prevails on projects of a similar character in the locality under collective agreements or understandings between bona fide organizations of construction mechanics and their employers.

M.C.L. § 408.554; (SOF 8).

The MDOL determines the required prevailing rates for wages and fringe benefits by sending survey requests to local construction unions throughout the state. (SOF 15). The surveys ask each union to list the hourly wage and fringe benefits rates, including benefits covered by ERISA. The MDOL relies exclusively upon the reported union information to establish the prevailing wage and fringe benefit requirements on state-funded projects. (SOF 30). The Act's adoption of local union agreement rates as the prevailing rates necessarily results in the incorporation of the local union job classification system. (SOF 16). Virtually all collective bargaining agreements categorize the construction work force by union trade jurisdiction, and further subdivide employees by job classification. For example, an equipment operator (engineer) working in Bay City on a fork truck with a 19-foot lift earns a combined rate (wages plus benefits) of $24.00 per hour while an equipment operator on the same project using a fork truck with a 21-foot lift must be paid $25.92 per hour. (SOF 30). ABC employers generally do not use a contractual job classification system; they use a more flexible system, in which employees perform work which crosses several union job classifications. As a result, when ABC employers work on prevailing wage projects, they must alter their procedures and closely monitor each specific task performed to assure that each employee is compensated at the proper state-mandated wage and fringe benefit rate applicable to each task. ABC employers can avoid this administrative scheme and accompanying close monitoring only by paying the highest prevailing rate for all hours worked during the course of a day.

The MDOL has established detailed policies and procedures for enforcement of the Act. The MDOL's enforcement scheme is applicable to all construction employers, but the Act specifically exempts those employers who are already bound by union agreements to compensate their employees at the prevailing local rates. M.C.L. § 408.552. Thus, ABC argues, the enforcement policies and procedures are enforced almost exclusively against non-union employers.

The MDOL's enforcement scheme creates several on-going administrative requirements for construction employers working on covered projects. For example, on each project, employers who do not normally pay the prevailing union wage and fringe benefit rates must enter into a binding contract assuring the state that their employees' wage and fringe benefit rates will be altered for the duration of the project to comply with the Act's requirements. M.C.L. § 408.552; (SOF 7). Additionally, an hourly calculation is required by the MDOL if the employer wishes to obtain credit for existing fringe benefits paid on an other-than-hourly basis toward the prevailing fringe benefits obligation. (SOF 33). ABC argues that its employers are thus forced to change from the annual or monthly method they normally use to calculate employee fringe benefit costs to the fluctuating hourly basis generally found in union collective bargaining agreements. Furthermore, the MDOL applies an "excess benefits cap," which precludes employers from receiving credit for any fringe benefits that exceed the prevailing union fringe benefit rates. (SOF 25). Finally, pursuant to the Act and the policies enforcing it, contracting employers are required to maintain "accurate records showing the name and occupation of and actual wages and benefits paid to each construction mechanic employed by them in connection with a contract for a state project," M.C.L. § 408.555, and, further, to make contributions or costs for fringe benefits "in writing." MDOL's Wage Hour Administration Policy, C 3.04(1). Contracting employers are also required to post, at the construction site, a copy of all prevailing wage and fringe benefit rates. M.C.L. § 408.555. Persons or corporations found to have violated the administrative requirements described above are guilty of a misdemeanor, punishable by up to 90 days in prison. M.C.L. § 408.557; (SOF 11).

III. Standard

To grant a motion for summary judgment, the court must find that the pleadings, together with the depositions, interrogatories and affidavits on file, establish that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. A party seeking summary judgment bears the initial burdens of specifying the basis upon which it contends judgment should be granted and of identifying that portion of the record which, in its opinion, demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Thus, "the burden on the moving party may be discharged by `showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Id. 325, 106 S.Ct. at 2553. The non-moving party must thereafter produce specific facts demonstrating a genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-248, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986).

The parties have supplied a stipulated statement of facts, and there is no disputed issue of material fact.

IV. Discussion

The issue this court must decide is whether the Michigan Prevailing Wage Act, M.C.L. § 408.551 et seq., or any portion thereof, "relates to" employee benefit plans within the meaning of § 514 of ERISA and, if so, whether any exception in ERISA saves those sections from pre-emption.³ Plaintiff argues that the Act "relates to" employee benefit plans and, therefore, should be preempted, in its entirety, by ERISA. Both Defendant Lowell Perry and Intervenor Michigan State Building and Construction Trades Council, AFL-CIO, argue that the Act does not relate to employee benefit plans and that preemption is inappropriate.

The scope of ERISA's preemption clause is governed by the relationship that the state law, or any portion thereof, has to an employee benefit plan. Moore v. Philip Morris Companies, Inc., 8 F.3d 335, 341 (6th Cir.1993). Specifically, ERISA's preemption clause provides that "the provisions of this subchapter ... shall supersede any and all State laws⁴ insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). Thus, whether any portions of the Act are preempted by ERISA depends on whether those sections "relate to" one of Plaintiff's employee benefit plans, not on the nature of the Act itself. As consistently stated by the Supreme Court, "the words `relate to' should be construed expansively: `a law "relates to" an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan.'" Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 8, 107 S.Ct. 2211, 2215, 96 L.Ed.2d 1 (1987) (quoting Shaw v. Delta Airlines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2899-2900, 77 L.Ed.2d 490 (1983)). "Under this `broad common-sense meaning,' a state law may `relate to' a benefit plan, and thereby...