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Independent Training and v. California Department of Industrial Relations

August 15, 2011

INDEPENDENT TRAINING AND APPRENTICESHIP PROGRAM, A CALIFORNIA CORPORATION,
BRANDIN MOYER, AND HAROLD E. NUTTER, INC., A CALIFORNIA CORPORATION,
PLAINTIFFS,
v.
CALIFORNIA DEPARTMENT OF INDUSTRIAL RELATIONS, AN AGENCY OF THE STATE OF CALIFORNIA, BY AND THROUGH CHRISTINE BAKER, IN HER OFFICIAL CAPACITY AS ACTING DIRECTOR OF THE CALIFORNIA DEPARTMENT OF INDUSTRIAL RELATIONS, DIVISION OF APPRENTICESHIP STANDARDS, BY AND THROUGH GLEN FORMAN, IN HIS OFFICIAL CAPACITY AS ACTING CHIEF, DIVISION OF LABOR STANDARDS ENFORCEMENT, BY AND THROUGH JULIE SU, IN HER OFFICIAL CAPACITY AS LABOR COMMISSIONER, DEFENDANTS.



The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge

ORDER DENYING MOTION FOR PRELIMINARY INJUNCTION

Plaintiffs seek a preliminary injunction enjoining Defendants from, inter alia, enforcing California's prevailing wage and apprenticeship laws on three California public works projects.*fn1 The laws at issue are prescribed in California Labor Code sections 1771, et seq. and section 3070, et seq. Plaintiffs argue enforcement of these laws on the referenced projects violates the Supremacy Clause, Commerce Clause, Equal Protection Clause, Due Process Clause and Privileges and Immunities Clause in the United States Constitution. Defendants oppose the motion. Argument on the motion was heard on July 18, 2011.

I. LEGAL STANDARD

A preliminary injunction is "an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 22 (2008). Plaintiffs seeking a preliminary injunction must establish that "(1) they are likely to succeed on the merits; (2) they are likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in their favor; and (4) a preliminary injunction is in the public interest." Sierra Forest Legacy v. Rey, 577 F.3d 1015, 1021 (9th Cir. 2009)(citing Winter, 555 U.S. at 19). Further, the Ninth Circuit's "'serious questions' approach survives Winter when applied as part of the four-element Winter test." Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 (9th Cir. 2011). In other words, "'serious questions going to the merits' and a balance of hardships that tips sharply towards the plaintiff can support issuance of a preliminary injunction, so long as the plaintiff also shows that there is a likelihood of irreparable injury and that the injunction is in the public interest." Id.

II. BACKGROUND

A. The Fitzgerald Act, the Shelley--Maloney Act, and the De-recognition of California's State Apprenticeship Council for Federal Purposes Plaintiffs' injunctive relief request concerns the following congressional enactment act and California laws. "Congress enacted the Fitzgerald Act [, 29 U.S.C. § 50,] in 1937 for the purposes of protecting apprentices through the establishment of minimum labor standards, promoting apprenticeship as a system of training skilled workers and encouraging the federal government to cooperate with state agencies in formulating apprentice standards." Joint Apprenticeship & Training Council of Local 363, Int'l Bhd. of Teamsters, AFL-CIO v. New York State Dep't of Labor, 984 F.2d 589, 591 (2d. Cir. 1993). The Fitzgerald Act provides in relevant part:

The Secretary of Labor is authorized and directed 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....

29 U.S.C. § 50. In 1977, the Department of Labor promulgated regulations, 29 C.F.R. part 29, under the Fitzgerald Act "to establish, for certain Federal purposes, labor standards, policies and procedures for the registration, cancellation and deregistration of apprenticeship programs, and apprenticeship agreements." Apprenticeship Programs, Labor Standards for Regulation, Amendment of Regulations, 72 Fed. Reg. 71020 (Dec. 13, 2007)(summary).

The[se] regulations establish the [Office of Apprenticeship Training, Employment and Labor Services ("OATELS")], for the purpose of administering the registration and approval of apprenticeship programs and other provisions of the regulations. [OATELS] is authorized to certify apprenticeship standards and to register and approve local apprenticeship programs and apprenticeship agreements for federal purposes. The regulations also authorize [OATELS] to approve appropriate state bodies for registration and/or approval of local apprenticeship programs and agreements for federal purposes.

Elec. Joint Apprenticeship Comm. v. MacDonald, 949 F.2d 270, 273 (9th Cir. 1991)(internal quotation marks and citations omitted). Thus, 29 C.F.R. part 29 "provides for a dual system of approval and recognition so that either [OATELS] or the State Apprenticeship Council can approve an apprenticeship program for federal purposes[; h]owever, either agency is constrained in its approval to apply the requirements and standards of the federal regulations." Id.

"To be approved as a [State Apprenticeship Council ("SAC")], a state must submit proof of[, inter alia,] acceptable apprenticeship laws and regulations; . . . a description of the standards, criteria, and requirements for program registration and/or approval; and a description of the policies and operating procedures which depart from or impose requirements in addition to those in the federal regulations."

S. Cal. Chapter of Assoc. Builders & Contractors, Inc., Joint Apprenticeship Comm. v. Cal. Apprenticeship Council, 4 Cal. 4th 422, 433 (1992)(internal citations omitted). "If a state does not continue to meet the federal requirements, it may be 'derecognized.'" Id. (citing 29 C.F.R. § 29.13 (1992).)

"In California, apprenticeship training is governed by the Shelley--Maloney Apprenticeship Labor Standards Act of 1939 [("Shelley--Maloney Act")], which is codified as California Labor Code section 3070 et seq." S. Cal. Chapter of Assoc. Builders & Contractors, Inc., Joint Apprenticeship Comm., 4 Cal. 4th at 433. "Pursuant to the Shelley--Maloney Act, apprenticeship training is administered by the Division [of Apprenticeship Standards ("DAS")], which is under the auspices of the Department of Industrial Relations [("DIR")](hereafter Department)." Id. (citation omitted). "The Chief of the [DAS] . . . administers the apprenticeship law . . . and is empowered to investigate and either approve or disapprove written standards for apprenticeship programs." Id. (citations omitted).

California was "authorized under 29 C.F.R. § 29.12 to approve apprenticeship programs for federal purposes as a SAC state [in] 1978." Cal. Div. Of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 320 (1997). However, after California amended its apprenticeship law -- California Labor Code § 3075 -- in 1999, OATELS "began proceedings to derecognize" California as a SAC state "contending that the amended apprenticeship statute did not conform to federal standards." Cal. Dept. of Indus. Relations, Adm. Rev. Bd. Case No. 05-093, 2007 WL 352459 (Dep't of Labor Jan. 31, 2007) (final decision and order). The United States Department of Labor's Administrative Review Board ultimately withdrew California's recognition as a SAC state on January 31, 2007. Cal. Dept. of Indus. Relations, 72 Fed. Reg. 9590-01 (Dep't of Labor Mar. 2, 2007) (notice). Therefore, California "no longer has the authority to register or oversee apprenticeship programs for 'Federal purposes.'" Id.

B. The Three Public Works Projects at Issue

Plaintiffs' motion concerns the enforcement of California apprenticeship and prevailing wage laws on the following three public works projects (referenced collectively as "state projects"): (1) the Chicago Park Elementary School Multi-purpose/Gymnasium Expansion & Four New Relocatable Classroom Buildings Project in Nevada County, ("Chicago Park Project"); (2) the Marysville High School Alternative Education Center Project in Yuba County, ("Marysville High Project"); and (3) Williams-Brotherhood Joint Use Gym in Stockton, California ("Stockton Project"). The "Chicago Park Project" is a multi-purpose gymnasium and classroom expansion project. (Pls.' Compendium of Evidence in Supp. of Mot. for Prelim. Inj., Decl. of Michael Genest ¶ 3, ECF No. 6-2 ("Genest Decl.").)

The Treasurer of the State of California used a portion of the proceeds from the sale of "Build America Bonds," which occurred in April 2009 and May 2010, to fund a portion of the Stockton Project and the Chicago Park Project. (Genest Decl. ¶¶ 10a, 10c.) "Build America Bonds" are a new form of municipal bond which are subject to federal taxes. Id.

¶ 8. However, the U.S. Treasury pays a subsidy to the municipal lender to cover the differential costs associated with the taxable nature of the bond. Id. The Treasurer of the State of California funded the Marysville High Project with funds received from the sell of municipal bonds, which are usually exempt from federal taxation. Id. ¶¶ 5, 10b. Plaintiffs argue that the referenced financing for the state projects causes the projects to be projects for a "federal purpose" under the Fitzgerald Act and its implementing regulations, because of the referenced federal tax incentives involved with funding the projects. (Pls. Mot. for Prelim. Inj. at 21-24.)

III. DISCUSSION

A. Standing / Ripeness of Specific Injunctive Relief Sought

Plaintiffs request the following specific relief in their preliminary injunction motion:

[An order] enjoining and prohibiting Defendants . . .

(a) From refusing to recognize and comply with the United State Department of Labor Administrative Review Board's "Final Decision and Order" of January 31, 2007 and the U.S. Department of Labor's March 2, 2007 public notice, pursuant to 29 C.F.R. 29.13(d), that "the CDIR and the CAC no longer have ...


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