Bucyrus-Erie Co. v. Department of Industry, Labor and Human Relations of State of Wis.

• Decision Date: 24 May 1979
• Docket Number: No. 78-2079,BUCYRUS-ERIE,78-2079
• Citation: 599 F.2d 205
• Parties: 20 Fair Empl.Prac.Cas. 1756, 19 Empl. Prac. Dec. P 9252, 1 Employee Benefits Ca 2132 COMPANY, a corporation, Plaintiff-Appellant, v. The DEPARTMENT OF INDUSTRY, LABOR AND HUMAN RELATIONS OF the STATE OF WISCONSIN, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 205

599 F.2d 205

20 Fair Empl.Prac.Cas. 1756, 19 Empl. Prac.

Dec. P 9252,

1 Employee Benefits Ca 2132

BUCYRUS-ERIE COMPANY, a corporation, Plaintiff-Appellant, v. The DEPARTMENT OF INDUSTRY, LABOR AND HUMAN RELATIONS OF the

STATE OF WISCONSIN, et al., Defendants-Appellees.

No. 78-2079.

United States Court of Appeals,

Seventh Circuit.

Argued Feb. 14, 1979.

Decided May 24, 1979.

Joseph E. O'Leary, Chicago, Ill., for plaintiff-appellant.

David C. Rice, Asst. Atty. Gen., Wisconsin Dept. of Justice, Madison, Wis., Mary-Helen Mautner, E. E. O. C., Washington, D. C. (amicus curiae), for defendants-appellees.

Before CUMMINGS and SPRECHER, Circuit Judges, and LEIGHTON, District Judge. ^*

SPRECHER, Circuit Judge.

The plaintiff, Bucyrus-Erie Co., appeals from the district court judgment denying its request to enjoin various officers of the state of Wisconsin from exercising jurisdiction under the Wisconsin Fair Employment Act, Wis.Stat. §§ 111.31-111.37, over a complaint alleging that plaintiff's employee disability benefit plan is sex discriminatory. The primary issue presented by this appeal is whether the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001-1381, preempts the application of state fair employment laws to employee benefit plans.

I

The facts of the case are not in dispute. Bucyrus-Erie Co. is a Delaware corporation with its corporate headquarters located in Wisconsin. In October 1975, Martha Wasilik, a secretary in the employ of Bucyrus-Erie, requested a leave of absence on the basis of pregnancy. Ms. Wasilik was granted a leave of absence in accordance with company policy.

Under the terms of the company's employee medical benefits plan as then in effect, pregnant employees were only permitted leave from work on an unpaid basis. They were not entitled to utilize accumulated sick-leave benefits. Such benefits were available only for illness, excluding pregnancy. In the fall of 1975, Ms. Wasilik filed charges with the Equal Employment Opportunity Commission and the Wisconsin Department of Industry, Labor and Human Relations (DILHR) alleging that this provision of the company's disability policy was sex discriminatory.

Before the date of the state hearing, the company filed a motion to dismiss alleging that state regulation of the company's disability plan was preempted by federal law. The motion to dismiss was denied but a motion to stay was granted on February 14, 1978.

After losing the motion to dismiss before the state commission, the company promptly commenced this action in the district court seeking to enjoin the Wisconsin state officers from proceeding with the charges in violation of federal law. The lower court dismissed the plaintiff's complaint, rejecting the argument that the state of Wisconsin was engaging in impermissible regulation of the plaintiff's disability plan. We affirm the lower court's dismissal of the complaint.

II

The principal issue presented by this appeal is whether the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001-1381 preempts the application of the Wisconsin Fair Employment Act, Wis.Stat. §§ 111.31-111.37, to employee welfare benefit plans which are regulated by ERISA. ¹ Although the statute is not unambiguous, we conclude that Congress did not intend to preempt the enforcement of state fair employment laws, and we therefore affirm.

Although ERISA's substantive provisions are designed to regulate retirement benefit plans ² the Act includes other types of benefit plans within its coverage. ³ The parties are in agreement that the Bucyrus-Erie plan governing pregnancy leave is a plan subject to the applicable requirements of ERISA. The fact that the Bucyrus-Erie benefit plan is the subject of federal regulation does not of course inevitably require the preemption of concurrent state regulation.

The principles for determining whether a state law is preempted are well established. If a state and federal regulation directly conflict, the Supremacy Clause, U.S. Const., art. VI, has been interpreted to mandate preemption whenever the state action "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941). Absent a direct conflict, preemption "depends on the intent of Congress." Malone v. White Motor Corp., 435 U.S. 497, 504, 98 S.Ct. 1185, 1190, 55 L.Ed.2d 443 (1978). Congressional intent may be express or implied. Preemption may be implied when the "structure and purpose" of the federal act presuppose exclusive federal regulation. Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S.Ct. 1305, 51 L.Ed.2d 604 (1977); Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 91 L.Ed. 1447 (1947). If the intention to preempt is express, the statutory need for preemption is of no consequence.

ERISA does not include any substantive provisions prohibiting an employer from maintaining discriminatory benefit plans. For this reason, we are unable to perceive any direct conflict in the application of both ERISA and the Wisconsin fair employment laws to the Bucyrus-Erie plan. Thus it would be appropriate to require preemption of the Wisconsin statute only if Congress has clearly expressed an intention to effect such preemption.

ERISA does contain express language of preemption. Section 514 of ERISA, 29 U.S.C. § 1144, provides:

(a) Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title. This section shall take effect on January 1, 1975.

(b)(2)(A) Except as provided in subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities.

(4) Subsection (a) of this section shall not apply to any generally applicable criminal law of a State.

(c) For purposes of this section:

(1) The term "State law" includes all laws, decisions, rules, regulations, or other State action having the effect of law, of any State. . . .

(d) Nothing in this subchapter shall be construed to alter, amend, modify, invalidate, impair, or supersede any law of the United States (except as provided in section 1031 and 1137(b) of this title) or any rule or regulation issued under any such law.

The statute appears to require preemption if the Wisconsin employment law "relates" to an employee benefit plan, as Congress intended to use that term, unless preemption would "alter, amend, modify, invalidate, impair, or supersede" any other federal law, rule or regulation under § 514(d). 29 U.S.C. § 1144(d).

The initial inquiry whether the Wisconsin fair employment laws "relate" to employee benefit plans is a difficult one. The Wisconsin Fair Employment Act is a statute of general application and not specifically designed to regulate an employer's administration of welfare benefit plans. The statute prohibits discrimination in employment on the basis of "age, race, creed, color, handicap, sex, national origin or ancestry." Wis.Stat. § 111.31(3). Prohibited acts of sex discrimination may encompass an employer's refusal to hire, termination, or the grant of promotions, and determination of compensation as well as other terms and conditions of employment. § 111.32(g) (1). It is therefore clear that discrimination against pregnant women in the availability of disability benefits is a form of sex discrimination under the Wisconsin Act ⁴ and is just one of many specific actions which falls within the general reach of the statute.

In determining whether Congress intends to preempt State laws of general application, the Supreme Court recently characterized their cases in the field of labor preemption as "consistently recogniz(ing) that a congressional intent to deprive the States of their power to enforce such general laws is more difficult to infer than an intent to pre-empt laws directed specifically at concerted activity." New York Telephone Co. v. New York State Department of Labor, --- U.S. ----, ----, 99 S.Ct. 1328, 1337, 59 L.Ed.2d 553 (1979). The issue, however, remains one of intention, and section 514 strongly suggests that a statute of general applicability may nonetheless "relate" to a benefit plan.

This intention to include state laws of general applicability within the scope of preemption is readily inferred from the framework of the provisions of section 514. ⁵ Congress specifically enumerated four exceptions to the broad scope of preemption. One of those exceptions, section 514(b)(4), exempts "any Generally applicable criminal law of a State." 29 U.S.C. § 1144(b)(4). (emphasis supplied). This provision indicates an intention that the word "relate" extend even to laws of general applicability (as well as an intention to preempt criminal statutes limited in application to welfare benefit plans). The exception would otherwise have been unnecessary. Additionally, the definition of "state" contained in the Act supports this conclusion. The definition includes any instrumentality which "purports to regulate, directly or Indirectly, the terms and conditions of employee benefit plans . . . ." 29 U.S.C. § 1144(c)(2). (emphasis supplied).

It is also legitimate to inquire whether the term "relate" might properly be narrowed to preempt only those state laws which would operate to frustrate or interfere with the administration of ERISA. As discussed Supra, the State Fair Employment law does not impose requirements on employee benefit plans that are in conflict with ERISA. This narrow interpretation of the term "relate" has led some courts to conclude that state fair employment statutes do not "relate" to benefit plans within ERISA's preemptive scope. Gast v. Oregon, 18 Fair...