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DILLINGHAM CONSTR. N.A. v. COUNTY OF SONOMA

December 11, 1991

DILLINGHAM CONSTRUCTION N.A., Inc., a California corporation, and Manuel J. Arceo, d/b/a SOUND SYSTEMS MEDIA, Plaintiffs,
v.
COUNTY OF SONOMA; DEPARTMENT OF INDUSTRIAL RELATIONS, DIVISION OF LABOR STANDARDS ENFORCEMENT and DIVISION OF APPRENTICESHIP STANDARDS, administrative agencies of the State of California; GAIL W. JESSWEIN, in his official capacity as Chief of the Division of Apprenticeship; and JAMES CURRY, in his official capacity as Labor Commissioner, Defendant.



The opinion of the court was delivered by: FERN M. SMITH

 INTRODUCTION

 At issue in this case is the State of California's authority to establish and enforce minimum employment standards for apprentices. The State of California (the "State") requires that public works contractors who employ apprentices employ only those apprentices who participate in apprenticeship programs with state-approved standards. Defendants in this case include two state agencies which enforce apprenticeship standards; the head of each of those agencies; and the County of Sonoma. All defendants maintain that the State has the authority to establish and enforce minimum employment standards. Based on this authority, defendants have withheld money from plaintiffs for non-compliance with prevailing wage requirements that relate to apprentice status. Defendants have moved for summary judgment.

 The plaintiffs, Dillingham Construction and Manuel J. Arceo, d/b/a Sound Systems Media ("Sound Systems"), argue that the State may not interfere in the collective bargaining process by trying to define apprentices. Plaintiffs claim that defendants' reasons for withholding the money are preempted by the Employee Retirement Income and Security Act of 1974, as amended, 29 U.S.C. §§ 1001-1381 ("ERISA") and/or the National Labor Relations Act, 29 U.S.C. § 151 et seq. ("NLRA"). Plaintiffs have also moved for summary judgment.

 For the reasons set forth below, defendants' Motion for Summary Judgment is GRANTED, and plaintiffs' Motion for Summary Judgment is DENIED.

 BACKGROUND

 Defendant County of Sonoma requested bids for the construction of a detention facility, known as the Sonoma County Main Adult Detention Facility (the "Project"). In the Spring of 1987, plaintiff Dillingham Construction won the construction contract and became the general contractor for the Project. The electronic installation work was subcontracted to co-plaintiff Manuel J. Arceo, d.b.a. Sound Systems Media ("Sound Systems").

 Sound Systems asked Sonoma County for a determination of the appropriate prevailing rates applicable to all work on the Project. *fn1" Sonoma County gave Sound Systems the rate information requested, and Sound Systems claims that it paid its employees at or above the applicable prevailing rates.

 When Sound Systems began work on the Project, it was signatory to a collective bargaining agreement with International Brotherhood of Electrical Workers ("IBEW") Local 202. The collective bargaining agreement included a scale for apprentice electronic technicians and required Sound Systems to make contributions to the Northern California Sound and Communications Joint Apprenticeship Training Committee ("No. Cal. JATC"). Joint Apprentice Training Committees ("JATCs" or "JACs") are the source of apprentices and provide for their training. The No. Cal. JATC was a state-approved JATC. In May 1988, a few months after Sound Systems began working on the project, IBEW Local 202 withdrew its representation of the electronics technician employees of Sound Systems.

 In June of 1988, Sound Systems entered into a new collective bargaining agreement with the National Electronic Systems Technicians Union ("NESTU"). The NESTU agreement covered Sound Systems' electronic technicians and included a scale of wages for apprentices. NESTU was associated with a new JATC, the Electronic and Communications Systems Joint Apprenticeship and Training Committee ("E & C JATC"). The E & C JATC had not yet been approved by the state when Sound Systems began relying on it for apprentices to work on the Project. This is the transgression that created the present litigation. The E & C JATC applied for state approval in August of 1989 and received it in October 1990. The approval was not retroactive.

 On March 14, 1989, the IBEW Local 551 filed a complaint against Sound Systems with the Division of Apprenticeship Standards ("DAS") of the California Department of Industrial Relations ("DIR"), an administrative agency, alleging violations of California Labor Code section 1777.5, which concerns apprenticeship programs. Although IBEW Local 551 withdrew its complaint, defendant DAS issued a notice of noncompliance to plaintiffs Dillingham Construction and Sound Systems, and the Division of Labor Standards Enforcement issued a Notice To Withhold. The Notice directed the County of Sonoma to withhold monies from Dillingham based on Sound Systems' violations. The basis for the Notice was that plaintiffs had paid some of their workers less than prevailing wages, in violation of Labor Code section 1771. The amount of money withheld equaled the unpaid wages and penalties for failure to pay such wages.

 Plaintiffs do not dispute that Sound Systems paid some of its workers less than the prevailing wages for journeymen, but claim that those workers were apprentices and that Sound Systems was entitled to pay those individuals less than journeyman prevailing wage rates, pursuant to the NESTU collective bargaining agreement.

 Defendants' basic argument is that there were no apprentices working for Sound Systems because there were no "apprentices" listed on Sound Systems' payroll worksheets; more importantly, there was no approved JAC from which Sound Systems could hire "apprentices". Since there were no true "apprentices", *fn2" all employees should have been paid the prevailing wage for journeymen. *fn3"

 California's administrative framework for regulating apprenticeships is complex. Rules and regulations establishing minimum standards of wages, hours, and working conditions for apprentices are created by the California Apprenticeship Council ("CAC") under the authority of California Labor Code section 3071 and promulgated at title 8 of the California Code of Regulations (§§ 200 et seq.) The CAC is located within the DAS. Section 212 of the regulations provides that "apprenticeship programs shall be established by written standards approved by the Chief of DAS" and sets forth a detailed list of program standards that must be covered before the program is approved. Cal. Code Regs tit. 8, § 212.

 The CAC exercises approval authority over apprenticeship programs pursuant to the Fitzgerald Act, 29 U.S.C. § 50, and its implementing regulations, 29 C.F.R. §§ 29.1 - 29.13. The federal regulations establish criteria under which the Bureau of Apprenticeship and Training (BAT) of the United States Department of Labor may recognize a State agency as the appropriate agency for registering local apprenticeship programs for federal purposes. 29 C.F.R. § 29.12. The CAC has at all times relevant to this action been formally recognized by the BAT as authorized to register and approve apprenticeship programs pursuant to the Fitzgerald Act and its regulations. *fn4"

 Plaintiffs assert that California's prevailing wage and apprenticeship standards are preempted by ERISA and the NLRA. This Court finds that the wage and apprenticeship standards at issue here, and the DAS's enforcement of them, are not preempted by either of these statutes.

 PROCEDURAL POSTURE

 This Court has jurisdiction under 28 U.S.C. § 1331. Federal courts have jurisdiction over suits to enjoin state officials from interfering with federal rights. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 88 n. 14, 77 L. Ed. 2d 490, 103 S. Ct. 2890 (1983) citing Ex parte Young, 209 U.S. 123, 160-62, 52 L. Ed. 714, 28 S. Ct. 441 (1908); see also Hydrostorage Inc. v. Northern California Boilermakers, 891 F.2d 719, 724-25 (9th Cir. 1989), cert. denied, 111 S. Ct. 72, 112 L. Ed. 2d 46 (1990).

 The issue before the Court is the requirement that public works contractors who use apprentices use only those from state approved apprenticeship programs. The legality or illegality of the approval requirement in the face of the preemption arguments is dispositive.

 Although the parties disagree as to whether or not plaintiffs employed "apprentices," they do agree that plaintiffs did not employ apprentices from a State approved program. There being no material facts in dispute, summary judgment is appropriate. Fed. R. Civ. P. 56(c).

 ANALYSIS

 Plaintiffs base their motion for summary judgment on two theories: 1) apprenticeship standards constitute an employee welfare benefit plan; as such, state laws regulating such standards are preempted by the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001-1381 ("ERISA"); and 2) state mandated prevailing wage rates in excess of collectively bargained-for wage rates are not true minimums and, therefore, are preempted by the National Labor Relations Act, 29 U.S.C. § 151 et seq. ("NLRA").

 A. ERISA Preemption

 Plaintiffs present a rather simple syllogism in support of their ERISA preemption argument: 1) ERISA preempts all state laws relating to employee welfare benefit plans; 2) California's apprenticeship standards are employee welfare benefit plans; 3) ERISA, therefore, preempts California laws relating to apprenticeship standards. In support of this argument, plaintiffs cite Hydrostorage, Inc. v. Northern California Boilermakers, 891 F.2d 719 at 728. The Court finds that Hydrostorage settles the two premises of this analysis, but does not dictate the proffered conclusion.

 The plaintiff in Hydrostorage was awarded a public works contract to construct a water storage tank for a county water district. Plaintiff neither applied to the relevant Joint Apprenticeship Committee (JAC) for certificate of approval nor employed any apprentices on the project. Hydrostorage, 891 F.2d at 722-23. Investigating a complaint, the Director determined that a violation had occurred. The determination was appealed to, and affirmed by, the CAC, which agreed that plaintiff had violated section 1777.5.

 According to Cal. Lab. Code section 1777.5, California contractors working on public works contracts, with certain exceptions not relevant here, must:

 
(1) "apply to the joint apprenticeship committee administering the apprenticeship standards of the craft or trade in the area of the site of the public work for a certificate approving the contractor or subcontractor under the apprenticeship standards for the employment and training of apprentices in the area or industry affected"; (2) employ apprentices in a ratio of no less than one apprentice for every five journeymen; and (3) contribute to the fund or funds in each craft or trade in which [the contractor] employs journeymen or apprentices on the public work. . . .

 Hydrostorage, 891 F.2d at 722, citing Cal. Lab. Code § 1777.5. Hydrostorage violated section 1777.5 by failing to apply for a certificate of approval, failing to employ apprentices, and failing to contribute to the appropriate fund. Hydrostorage, 891 F.2d at 722-23. The DAS, as affirmed by the CAC, issued an administrative order barring Hydrostorage from future public works contracts. The district court found enforcement of the order preempted by ERISA. The Ninth Circuit affirmed.

 The Ninth Circuit's three-part analysis of ERISA preemption in Hydrostorage is instructive. That court considered: (1) whether the standards at issue fell within ERISA's regulatory scope; (2) whether ERISA's preemption clause reached state laws relating to the same standards; and (3) whether ERISA's ...


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