MATTER OF BELTRONE CONSTRUCTION COMPANY, INC. v. McGowan

• Decision Date: 22 April 1999
• Citation: 688 N.Y.S.2d 783,260 A.D.2d 870
• Parties: In the Matter of BELTRONE CONSTRUCTION COMPANY, INC., Petitioner,<BR>v.<BR>JAMES J. McGOWAN, as Commissioner of the New York State Department of Labor, Respondent.
• Court: New York Supreme Court — Appellate Division

260 A.D.2d 870

688 N.Y.S.2d 783

In the Matter of BELTRONE CONSTRUCTION COMPANY, INC., Petitioner,

v.JAMES J. McGOWAN, as Commissioner of the New York State Department of Labor, Respondent.

Decided April 22, 1999.

Cardona, P. J., Mikoll, Spain and Graffeo, JJ., concur.

Crew III, J.

In June 1990, petitioner entered into a public works contract with the Office of General Services for work to be performed at Mohawk Correctional Facility in the City of Rome, Oneida County. Annexed to and made a part of the contract was a prevailing wage rate schedule setting forth the prevailing rate of wages and supplements to be paid for the workers employed on the project. Significantly, the supplemental benefits were listed item by item and provided the amount that the employer must pay its workers for each enumerated benefit.^[1] Petitioner also entered into a subcontract with Northeastern Painting, Inc. for certain paint work to be done on the project. The subcontract provided, inter alia, that Northeastern would comply with the conditions of the prime contract, including the prevailing wage rate and supplement requirements.

In 1993, after the project had been completed, certain of Northeastern's employees filed claims with the Department of Labor for unpaid wages and/or supplements for the work performed on the project. As a consequence, the Department conducted an investigation, as the result of which it was determined that Northeastern underpaid supplements to nine employees who had worked on the project. Following a hearing, it was determined that Northeastern had willfully underpaid said employees and that petitioner was responsible for such underpayments pursuant to Labor Law § 223. Thereafter, petitioner commenced this proceeding challenging respondent's determination on the ground that, inter alia, the Department is preempted from collecting supplemental benefits under the Labor Law by reason of the Employee Retirement Income Security Act of 1974 (hereinafter ERISA) (29 USC § 1001 et seq.).

Labor Law § 220 was enacted to ensure that employees on public works projects are paid wages equivalent to the prevailing rate of similarly employed workers in the locality where the contract is to be performed and authorizes respondent to ascertain said prevailing wage rate, as well as the prevailing "supplements" paid in the locality (see, Labor Law § 220 [3]). Wage supplements include, inter alia, payments that are not wages, such as health, welfare, nonoccupational disability, retirement and vacation benefits (see, Labor Law § 220 [5] [b]). Whether respondent's enforcement of the provisions of the Labor Law governing the payment of supplements is preempted by ERISA, as claimed by petitioner, is dependent upon how such wage supplements are treated by the Department.

A State law will be considered repugnant to and therefore preempted by ERISA wherever it "`purports to regulate, directly or indirectly, the terms and conditions of employee benefits plans'" (Stone & Webster Eng'g Corp. v Ilsley, 690 F2d 323, 329, quoting 29 USC § 1144 [c] [2], affd sub nom. Arcudi v Stone & Webster Eng'g Corp., 463 US 1220). This is so because ERISA contemplates that private parties, not the government, control the level of benefits for retirement plans (see, Alessi v Raybestos-Manhatten, Inc., 451 US 504, 511). Thus, in General Elec. Co. v New York State Dept. of Labor (891 F2d 25, cert denied 496 US 912), it was held that a "line-item" approach to establishing wage supplements, wherein the Commissioner of Labor prescribed the benefit levels for each individual type of wage supplement, was impermissible and preempted by ERISA because the Commissioner, not the contractor, determined the kind and amount of supplements to be provided. Conversely, in Burgio & Campofelice v New York State Dept. of Labor (107 F3d 1000), it was held that a "total package" approach to determining wage supplements would not violate the tenets of ERISA. Under the total package approach, the Commissioner determines the prevailing supplements paid in the locality, totals them and prescribes a lump sum in the schedule. The employer may then provide supplemental benefits in any form or combination, so long as the total is not less than the total of the locally prevailing benefits.

Here, it is uncontested that respondent established wage supplements by...