Nat. Metalcrafters, a Div. of Keystone v. McNeil

• Decision Date: 29 January 1985
• Docket Number: No. 84 C 2190.,84 C 2190.
• Citation: 602 F. Supp. 232
• Parties: NATIONAL METALCRAFTERS, A DIVISION OF KEYSTONE CONSOLIDATED INDUSTRIES, a Delaware corporation, Plaintiff-Counterdefendant, v. Donald J. McNEIL, Superintendent, Wage Claims Division, Illinois Department of Labor, Defendant, and Betty Johnson, et al., Intervenors-Defendants-Counterplaintiffs.
• Court: U.S. District Court — Northern District of Illinois

602 F. Supp. 232

NATIONAL METALCRAFTERS, A DIVISION OF KEYSTONE CONSOLIDATED INDUSTRIES, a Delaware corporation, Plaintiff-Counterdefendant, v. Donald J. McNEIL, Superintendent, Wage Claims Division, Illinois Department of Labor, Defendant and Betty Johnson, et al., Intervenors-Defendants-Counterplaintiffs.

No. 84 C 2190.

United States District Court, N.D. Illinois, E.D.

January 29, 1985.

Philip V. Carter, Mark A. Casciari, Robert C. Long, J. Stephen Poor, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, Ill., for plaintiff-counterdefendant.

Irving M. Friedman, Ann C. Hodges, Stanley Eisenstein, Katz, Friedman, Schur & Eagle, Chicago, Ill., for defendant and intervenors-defendants-counterplaintiffs.

Richard J. Puchalski, Sp. Asst. Atty. Gen., Chicago, Ill., for defendant.

Memorandum

LEIGHTON, District Judge.

This is a lawsuit seeking to enjoin the Illinois Department of Labor from commencing proceedings to enforce a determination made against plaintiff pursuant to state law. Specifically, the Department, through defendant McNeil, found that plaintiff violated Illinois law by willfully refusing to pay claimants (intervenors here) vacation pay due under collective bargaining agreements.

The crux of plaintiff's cause of action is that Illinois law, as it relates to the vacation pay sought by intervenors, is pre-empted by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., and by the National Labor Relations Act (NLRA), 29 U.S.C. § 151 et seq. According to plaintiff, therefore, state court action or intervention to enforce the Department's demand for payment is improper. Defendant and intervenors, however, contend that federal pre-emption is inapplicable to what are essentially contract claims under collective bargaining agreements. In their view, a state court can fully adjudicate these claims.

The cause is before the court on the motions of plaintiff, defendant, and intervenors, pursuant to Fed.R.Civ.P. 56, for summary judgment on plaintiff's complaint. The parties do not dispute any material facts, and each moves for judgment as a matter of law, based on their pre-emption positions. Oral and written presentations having been submitted to the court, the only issue to be resolved is whether the Department's exercise of jurisdiction conflicts with any federal statute, specifically, whether it is pre-empted by either ERISA or the NLRA. That issue arises out of the following facts.

I

Plaintiff, National Metalcrafters, a division of Keystone Consolidated Industries, a Delaware corporation with its principal place of business in Dallas, Texas, operates manufacturing facilities in Rockford, Illinois. Employees at plaintiff's Rockford plant traditionally have been represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America and its local Union No. 449 (the "Union"). Over the years the company and the Union entered into a number of consecutive collective bargaining agreements covering the employment terms of Union employees. The most recent agreement began on April 14, 1980, and expired on April 16, 1983. Section 6.1 of the agreement, entitled "Amount of Vacation & Vacation Pay," obligated the company to pay vacation benefits to Union employees based on length of service with the company.

Defendant Donald J. McNeil is Superintendent of the Wage Claims Division of the Illinois Department of Labor. He administers the provisions of the Illinois Wage Payment & Collection Act, Ill.Rev.Stat., ch. 48 § 39m-1, m-11 (the "Act"), a statute enacted to ensure that employers pay employees what is due under the terms of collective bargaining agreements. An employer who refuses to pay wages or final compensation earned under a Union contract violates the Act.

Prior to expiration of the 1980 bargaining agreement, plaintiff and the Union engaged in negotiations for a new agreement. As part of the new contract, plaintiff proposed a reduction in vacation benefits, the stated reason being to equalize Union employees' and salaried employees' vacation benefits. Plaintiff and the Union reached a bargaining impasse and when the 1980 agreement expired on April 16, 1983, the Union began a strike against the company which continues to the present day.

In May, 1983, the company unilaterally implemented the vacation benefits reduction plan, and in July, 1983, paid vacation benefits based on the new plan rather than under the 1980 agreement. Subsequently, the Union filed an unfair labor practice charge with the National Labor Relations Board (NLRB) alleging that the company had violated the NLRA by, among other things, not paying vacation benefits as embodied in the terms of the 1980 agreement.¹ At about the same time, 250 Union employees brought claims before the Wage Claims Division of the Illinois Department of Labor, pursuant to the Act, for vacation wages earned and not paid by the company.

Following briefing and oral argument, defendant McNeil found that the company had withheld vacation pay from the employees in violation of the Act. He ordered it to pay claimants, within 15 days, the difference between the amounts of vacation pay actually given them in July, 1983, and the amounts they would have received had the benefits been calculated in accordance with the rates set forth in the 1980 contract between the company and the Union. In reaching his decision, defendant rejected plaintiff's arguments that the Act was pre-empted by ERISA and the NLRA, and found that he had jurisdiction over the claims. In defendant's view, ERISA did not pre-empt state intervention because the vacation provisions of the Union contract under which claimants worked did not constitute an employee benefit plan within ERISA. "Indeed," defendant stated, "it does not appear that the company believed its vacation obligations were governed by ERISA, at least until it began preparing its defense to these claims ... workers never have received ERISA-required reports." (Memorandum in Support of Demand for Payment, p. 8). Defendant also concluded that the NLRA pre-emption argument was without merit, because the case did not turn on an interpretation of federal labor law, but rather, on the provisions of the 1980 contract. Enforcement therefore would not "usurp the NLRB's authority ... interfere with the collective bargaining process or dictate the outcome of ongoing negotiations." Id. at p. 7. In summary, defendant found that the company

has wilfully refused to pay (vacation pay) as provided in the Wage Payment and Collection Act, and has falsely denied the validity of the instant claims, with intent to secure for itself an under-payment of its indebtedness to the claimants. A demand for payment will issue and the Department will take appropriate legal action to enforce said demand, absent voluntary compliance by the employer.

The company did not comply with defendant's Order. Instead, it commenced this action seeking declaratory and injunctive relief to the effect that Illinois law, as it applied to the vacation pay claims, is pre-empted by ERISA and the NLRA. After the action was commenced, Betty Johnson, who was a claimant before defendant McNeil, intervened and filed counterclaims against plaintiff, on behalf of herself and all others similarly situated.

II

Congress enacted ERISA to protect working men and women from abuses in the administration and investment of private retirement plans and employee welfare plans. Donovan v. Dillingham, 688 F.2d 1367, 1370 (11th Cir.1982). ERISA established certain minimum standards for the vesting of benefits, funding of benefits, carrying out fiduciary responsibilities, reporting to the government, and making disclosures to participants, id., so that "the private pension promise (would) become real, rather than illusory." H.R.Rep. No. 93-533, 93d Cong.2d Sess., reprinted in 1974 U.S.Code Cong. & Ad.News 4639, 4648.

Title I of ERISA applies to any employee benefit plan if it is established or maintained —

1) by any employer engaged in commerce or in any industry or activity affecting commerce; or

2) by any employee organization or organizations representing employees engaged in commerce or in any industry or activity affecting commerce; or

3) by both.

29 U.S.C. § 1003(a).

An employee benefit plan can be either an "employee welfare benefit plan" or an "employee pension benefit plan" or a plan which is both. 29 U.S.C. § 1002(3). An employee welfare benefit plan is described in the statute as

any plan, fund or program which was ... established or maintained by an employer ... to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries ... A) ... benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits ...

29 U.S.C. § 1002(1).

ERISA contemplates that such plans shall be established pursuant to a written instrument providing for fiduciaries, and that the assets of the plan shall be held in trust by trustees to manage and control the assets of the plan. 29 U.S.C. §§ 1102, 1103.

Not all employee plans can meet these statutorily specific parameters. See 29 U.S.C. § 1143(a)(1) ("there are types of plans not subject to this Act"). Additionally, the Secretary of Labor has enacted 29 C.F.R. 2510.3-1 which exempts certain practices from ERISA coverage. These include:

Payment of compensation, out of the employer's general assets, on account of periods of time during which the employee, although physically and mentally able to perform his or her duties and not absent for medical reasons (such as pregnancy, a physical examination or psychiatric treatment) performs no duties; for example —

i) Payment of compensation while an employee is on vacation or absent on a holiday, including payment of premiums to induce employees to take vacations at a time favorable to the employer for business reasons.

29 C.F.R....