WSB Elec., Inc. v. Curry

Decision Date05 July 1996
Docket NumberNos. 94-16613,94-16646,s. 94-16613
Citation88 F.3d 788
Parties, 20 Employee Benefits Cas. 1592, 3 Wage & Hour Cas.2d (BNA) 641, 97 Cal. Daily Op. Serv. 5077, 96 Daily Journal D.A.R. 8149, Pens. Plan Guide P 23922V WSB ELECTRIC, INC. and J.R. Roberts Corporation, Plaintiffs-Appellants, v. James CURRY, in his official capacity as the Labor Commissioner of the State of California; Ronald Rinaldi, Director of Industrial Relations for the State of California, Defendants-Appellees. J.R. ROBERTS CORPORATION, Plaintiff-Appellant, v. James CURRY, Labor Commissioner of the State of California; Ronald Rinaldi, Director of Industrial Relations for the State of California, Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Mark R. Thierman and George P. Parisotto, Thierman Law Partnership, San Francisco, California, for plaintiffs-appellants.

John M. Rea, Chief Counsel, Vanessa L. Holton, Asst. Chief Counsel, James D. Fisher, Counsel, Department of Industrial Relations, San Francisco, California, for defendants-appellees.

Marsha S. Berzon, Altshuler, Berzon, Nussbaum, Berzon & Rubin, San Francisco, California, for intervenor-appellee.

Appeals from the United States District Court for the Northern District of California; Claudia Wilken, District Judge, Presiding. D.C. Nos. CV-90-00771-CW, CV-90-01109-CW.

Before: BROWNING, CANBY and HALL, Circuit Judges.


Appellants WSB Electric and J.R. Roberts are licensed contractors who perform public works contracts in the state of California. They brought suit against the California Department of Industrial Relations ("DIR") and its officers challenging the state's enforcement of its prevailing wage law for public works contracts, Cal. Labor Code § 1770 et seq. They claim that the state law is preempted by the Employee Retirement Income Security Act of 1974 ("ERISA") because California's prevailing wage rate is measured by reference to the prevailing cash wage plus the prevailing benefits contributions of employers in a given locality.

The district court found that ERISA does not preempt the prevailing wage statute, and appellants filed a timely appeal. We affirm.


This case originally began in 1989, when both contractors filed separate actions to enjoin the DIR from enforcing California's prevailing wage law for state public works projects. The state's prevailing wage law requires that public works contractors pay their employees a minimum wage, called the "prevailing rate of per diem wages." Cal. Labor Code §§ 1771 & 1773. This prevailing wage is determined on a county-by-county basis, and is calculated by adding the basic hourly rate paid to the majority of workers in a particular job classification plus the prevailing cost to employers of fringe benefits provided in that locality. In 1989, DIR enforced the prevailing wage law according to the "line-by-line" method. Under this approach, the total prevailing wages consisted of a base cash wage plus set amounts for specific fringe benefits (i.e., $2.50 per hour for health, $0.50 for pension, etc.). To comply with the law, a public works contractor had to either pay the entire prevailing wage in cash, or pay the base cash wage and receive credit for the balance based on contributions for specific fringe benefits. The employer could not, however, take credit for fringe benefit contributions that exceeded the stated amount for each specific benefit.

The district court found that this scheme was preempted by ERISA. Subsequently, the DIR adopted the current system, a "two-tier" approach, and we vacated the district court's decision and remanded for further proceedings as to whether ERISA also preempts the "two-tier" approach. On remand, the district court granted the DIR's motion for summary judgment, holding that ERISA does not preempt the two-tier approach. The contractors appealed, and that is the case before us now.

Under the two-tier approach, the employer must pay employees the prevailing wage, and it may do so through a combination of cash and benefits. To calculate the wage, the employer adds the hourly cash wage paid plus the total amount of employer contributions to benefits plans, no longer considering each benefit separately. If this sum falls short of the prevailing wage, then the employer must make up the difference in cash. However, as before, the Labor Code also prescribes a minimum amount of cash wage that must be paid. Therefore, an "excess benefit cap" applies, whereby employers may not credit more than a fixed amount of benefits contributions toward the prevailing wage. If the employer contributes more than the fixed amount for benefits, it is not credited in the prevailing wage calculation and the employer must make up any shortfall in cash.


The district court's decision regarding preemption is reviewed de novo. Aloha Airlines, Inc. v. Ahue, 12 F.3d 1498, 1500 (9th Cir.1993). A grant of summary judgment is reviewed de novo. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir.1995). We must determine, viewing the evidence in the light most favorable to the nonmoving party, whether the district court correctly applied the relevant substantive law. Id. In this case, both sides concede that there are no disputed issues of fact; therefore, the only inquiry is whether the district court correctly applied the substantive law.

Congress enacted ERISA, 29 U.S.C. § 1001 et seq., as a comprehensive legislative scheme "to promote the interests of employees and their beneficiaries in employee benefit plans." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90, 103 S.Ct. 2890, 2896, 77 L.Ed.2d 490 (1983). By enacting such a broad scheme, Congress also sought to protect employers by "eliminating the threat of conflicting or inconsistent State and local regulation of employee benefit plans." Id. at 99, 103 S.Ct. at 2901. To further this goal of nationwide consistency, Congress included a preemption clause, 1 section 514(a), which is "conspicuous for its breadth. It establishes as an area of exclusive federal concern the subject of every state law that 'relate[s] to' an employee benefit plan governed by ERISA." FMC Corp. v. Holliday, 498 U.S. 52, 58, 111 S.Ct. 403, 407, 112 L.Ed.2d 356 (1990). ERISA's preemption provision is not without limits, however; we "must presume that Congress did not intend to preempt areas of traditional state regulation." Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 740, 105 S.Ct. 2380, 2389, 85 L.Ed.2d 728 (1985).

A state law relates to an ERISA employee benefit plan "if it has a connection with or reference to such a plan." Shaw, 463 U.S. at 97, 103 S.Ct. at 2900; New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Co., --- U.S. ----, ----, 115 S.Ct. 1671, 1677, 131 L.Ed.2d 695 (1995). ERISA preempts state laws that relate to employee benefit plans even if they only indirectly affect those plans. Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139, 111 S.Ct. 478, 483, 112 L.Ed.2d 474 (1990). Nevertheless, "[s]ome state actions may affect employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law 'relates to' the plan." Shaw, 463 U.S. at 100 n. 21, 103 S.Ct. at 2901 n. 21; Aloha Airlines, Inc. v. Ahue, 12 F.3d 1498, 1504 (9th Cir.1993).


It is well settled that wages are a subject of traditional state concern, and are not included in ERISA's definition of "employee benefit plan." Thus, regulation of wages per se is not within ERISA's coverage. Massachusetts v. Morash, 490 U.S. 107, 118, 109 S.Ct. 1668, 1674-75, 104 L.Ed.2d 98 (1989) (holding that ERISA does not preempt a state law regulating vacation pay).

No doubt is cast on this proposition by our recent decision in Dillingham Construction v. County of Sonoma, 57 F.3d 712 (9th Cir.1995), cert. granted, --- U.S. ----, 116 S.Ct. 1415, 134 L.Ed.2d 541 (1996). In Dillingham, the plaintiffs challenged the apprenticeship program provisions of California's prevailing wage law, Cal. Labor Code § 1777.5. We held that a statute regulating wages in an apprenticeship program was preempted by ERISA because the apprenticeship program itself was an employee welfare benefit plan. Id. at 718. Therefore, the prevailing wage law apprenticeship provisions directly "related to" an ERISA plan. Id. at 718-19; see also Inland Empire Chap. of Assoc. General Contractors v. Dear, 77 F.3d 296, (9th Cir.1996) (holding that ERISA preempts Washington's prevailing wage law's apprenticeship provisions for the reasons given in Dillingham ).

Here, the prevailing wage law provisions at issue regulate wages generally, not wages that are part of a particular employee benefit plan. The question for decision, then, is whether the statute's effect on employee benefit plans is so attenuated that the statute cannot be said to "relate to" ERISA plans.


A state law relates to an ERISA employee benefit plan if it has either "a connection with" or "reference to" such a plan. Shaw, 463 U.S. at 97, 103 S.Ct. at 2900; Travelers, --- U.S. at ----, 115 S.Ct. at 1677 (1995); District of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125, 128-30, 113 S.Ct. 580, 583, 121 L.Ed.2d 513 (1992). Few cases discuss the application of the "reference to" language from the Shaw test, and some courts seem to merge the two prongs. See NYS H.M.O. Conference v. Curiale, 64 F.3d 794, 800 n. 17 (2nd Cir.1995). But in Travelers, the Supreme Court expressly applied a two-pronged analysis, holding first that the statute at issue did not "refer to" ERISA plans, and then concluding that it also did not have a sufficient "connection with" such plans to warrant preemption. Travelers, --- U.S. at ----, 115 S.Ct. at 1677.

The scope of the "reference to" language is open to varying interpretations. Some courts have found that statutes which merely make mention of ERISA plans, or allude to them obliquely,...

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