Training v. Cal. Dep't of Indus. Relations

Decision Date18 September 2013
Docket NumberNo. 11–17763.,11–17763.
Citation730 F.3d 1024
CourtU.S. Court of Appeals — Ninth Circuit
PartiesINDEPENDENT TRAINING AND APPRENTICESHIP PROGRAM, a California corporation; Brandin Moyer; Harold E. Nutter, Inc., a California corporation, Plaintiffs–Appellants, v. CALIFORNIA DEPARTMENT OF INDUSTRIAL RELATIONS, an agency of the State of California; Christine Baker, in her official capacity as Acting Director of the California Department of Industrial Relations; Division of Apprenticeship Standards; Glen Forman, in his official capacity as Acting Chief, Division of Labor Standards Enforcement; Julie Su, in her official capacity as Labor Commissioner, Defendants–Appellees.

OPINION TEXT STARTS HERE

Charles L. Post (argued), Zachary Smith, and Brendan J. Begley, Weintraub Genshlea Chediak Tobin & Tobin, Sacramento, CA, for PlaintiffsAppellants.

Fred Lonsdale (argued), Counsel; Katherine Zalewski, Chief Counsel; Steven McGinty, Assistant Chief Counsel; Gary O'Mara, Counsel, Department of Industrial Relations, State of California, Oakland, CA, for DefendantsAppellees.

M. Patricia Smith, Solicitor of Labor; Steven J. Mandel, Deputy Solicitor for National Operations; Edward D. Sieger, Senior Attorney, United States Department of Labor, Washington, D.C.; Stuart F. Delery, Principal Deputy Assistant Attorney General; Michael Jay Singer and Abby C. Wright, Appellate Staff, United States Department of Justice, Civil Division, Washington, D.C., for the Acting Secretary of Labor, as amicus curiae.

Appeal from the United States District Court for the Eastern District of California, Garland E. Burrell, Senior District Judge, Presiding. D.C. No. 2:11–cv–01047–GEB–DAD.

Before: MICHAEL DALY HAWKINS, A. WALLACE TASHIMA, and MARY H. MURGUIA, Circuit Judges.

OPINION

TASHIMA, Circuit Judge:

Pursuant to the National Apprenticeship Act of 1937 (also known as the “Fitzgerald Act), federal regulations govern the employment of apprentices on public works projects qualifying as “Federal purposes,” a term that is defined under the regulations. Plaintiff Independent Training and Apprenticeship Program (I–TAP) is registered with the Department of Labor (“DOL”) as an approved apprenticeship program for such Federal purposes. I–TAP is not, however, recognized by California as a state-approved apprenticeship program. Consequently, I–TAP enrollees may not be employed as bona fide apprentices on public works projects in California that do not fall within the scope of Federal purposes. In 2010, the California Department of Industrial Relations (CDIR) sent letters to two contractors asserting that they were not in compliance with California law and threatening to impose fines because the contractors were using I–TAP enrollees on public works projects that the CDIR asserted were not for Federal purposes. Plaintiffs filed suit seeking declaratory and injunctive relief, principally on the ground that the CDIR's actions were inconsistent with the federal regulations and hence preempted. The district court denied Plaintiffs' motion for injunctive relief.

On appeal, we are called upon to determine the meaning of “Federal purposes” under 29 C.F.R. § 29.2. Because this is a question of first impression, following oral argument, we invited the Secretary of Labor (the “Secretary”) to express her views as to the appropriate understanding of the term in the context of this case. In her amicus brief, the Secretary informed us that the DOL recently had withdrawn its two previous opinion letters that had interpreted the term, and she advanced a new interpretation that does not encompass the public works projects at issue here. For the reasons set forth below, we decline to afford controlling deference to the DOL's new interpretation under Auer v. Robbins, 519 U.S. 452, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997), but we nevertheless adopt that interpretation as the most persuasive construction of the regulation at issue. Accordingly, we affirm.

I.
A.

The Fitzgerald Act does not delineate substantive standards for the regulation of apprenticeship programs. Rather, it authorizes and directs the Secretary:

to formulate and promote the furtherance of labor standards necessary to safeguard the welfare of apprentices, to extend the application of such standards by encouraging the inclusion thereof in contracts of apprenticeship, to bring together employers and labor for the formulation of programs of apprenticeship, to cooperate with State agencies engaged in the formulation and promotion of standards of apprenticeship, and to cooperate with the Secretary of Education in accordance with section 17 of Title 20.

29 U.S.C. § 50.

The DOL promulgated implementing regulations for the Fitzgerald Act in 1977. 1See42 Fed.Reg. 10138 (Feb. 18, 1977) (to be codified at 29 C.F.R. pt. 29). These regulations prescribe the policies and procedures for the registration of apprenticeship programs for “certain Federal purposes.” 29 C.F.R. § 29.1(b). In turn, “Federal purposes” is defined as:

any Federal contract, grant, agreement or arrangement dealing with apprenticeship; and any Federal financial or other assistance, benefit, privilege, contribution, allowance, exemption, preference or right pertaining to apprenticeship.

29 C.F.R. § 29.2.

The DOL may approve an apprenticeship program for Federal purposes if the program meets certain minimum standards established under the regulations. See id. §§ 29.3(a)-(b). The DOL may also “recognize” a State Apprenticeship Agency (“SAA”), providing the SAA with concurrent authority to approve apprenticeship programs for Federal purposes.2See id. § 29.13. The DOL will only recognize a SAA if the state's apprenticeship laws are deemed consistent with federal policies and requirements, and the DOL can “derecognize” an SAA if the SAA fails to operate in conformity with the federal regulations. Id. §§ 29.13, 29.14.

In California, apprenticeship training is administered by the Division of Apprenticeship Standards, a component of the CDIR. See S. Cal. Chap. of Associated Builders & Contractors, Inc. v. Cal. Apprenticeship Council, 4 Cal.4th 422, 14 Cal.Rptr.2d 491, 841 P.2d 1011, 1016 (1992). The California Apprenticeship Council (“CAC”) is a 17–member body within the Division of Apprenticeship Standards that issues rules and regulations pertaining to apprenticeship and hears appeals of apprenticeship registration disputes. See id.; see alsoCal. Labor Code § 3070.

California provides public works contractors with an economic incentive to hire apprentices enrolled in state-approved programs. Specifically, Labor Code § 1777.5 permits contractors to pay registered apprentices a wage rate that is lower than the “journeyman” rate otherwise required under California's prevailing wage law. SeeCal. Labor Code §§ 1777.5(b)-(c). Public works contractors are also able to deduct from the fringe training contributions that must be made to the CAC any payments made to an approved apprenticeship program. See id. § 1777.5(m)(1).

In 1978, the DOL recognized the CDIR and the CAC as the collective SAA for California for purposes of the Fitzgerald Act. That recognition continued unfettered until 1999, when California enacted a controversial amendment to its apprenticeship laws that imposed stringent criteria, referred to as the “needs test,” for the approval of new apprenticeship programs in the building and construction trades. Under the needs test, a new apprenticeship program in these trades may only be approved if: (1) “There is no existing apprenticeship program ... serving the same craft or trade and geographic area”; (2) “Existing apprenticeship programs ... that serve the same craft or trade and geographic area do not have the capacity, or neglect or refuse, to dispatch sufficient apprentices to qualified employers at a public works site who are willing to abide by the applicable apprenticeship standards”; or (3) “Existing apprenticeship programs ... that serve the same trade and geographic area have been identified by the [CAC] as deficient in meeting their obligations.” Id. § 3075(b).

The DOL contended that the needs test frustrated the primary purposes of the Fitzgerald Act of expanding apprenticeship opportunities and promoting the entry of workers into skilled trades. Ultimately, the DOL derecognized the California SAAs. This determination was upheld in administrative review proceedings, and the CDIR and CAC were officially derecognized as of March 2, 2007. See72 Fed.Reg. 9590 (Mar. 2, 2007). Thus, California no longer has the authority to register or oversee apprenticeship programs on public works projects in the State that qualify as Federal purposes. See id.

B.

I–TAP is a California corporation that is registered with the DOL as an approved apprenticeship program for Federal purposes.3 Gray Electric Company (“Gray Electric”) is an electrical contractor that employed I–TAP apprentices on two construction projects relevant to this suit—a construction project at the Chicago Park Elementary School (“Chicago Park Project”) and a construction project at Marysville High School (“Marysville Project”). Plaintiff Harold E. Nutter, Inc. (Nutter Electric) is an electrical contractor that also employed I–TAP apprentices on various constructions projects, including a project at the Joint–Use Gymnasium at Williams Brotherhood Park/Merlos Institute in Stockton, California (“Stockton Project”).

The funding structure of these projects is central to the instant dispute. The Marysville Project was funded through the sale of traditional municipal bonds, the interest payments on which are exempt from federal taxes. See26 U.S.C. § 103(a) (exempting the receipt of interest payments on State or local bonds from gross income for federal income tax purposes). The Chicago Park Project and the Stockton Project were each funded in part with “Build America Bonds.” Build America Bonds are taxable bonds created in 2009 pursuant to the American Recovery and Reinvestment Act...

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