Filed: Oct. 05, 2001
Latest Update: Mar. 02, 2020
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ No. 00-3230 _ Minnesota Chapter of Associated * Builders and Contractors, Inc., * a Minnesota corporation; North * Central Chapter of the American * Fire Sprinkler Association, an * unincorporated association; Allied * Mechanical Systems of Hutchinson, * Inc., a Minnesota corporation; Ebert * & Hinson Fire Protection, Inc., * a Minnesota corporation; and General * Sprinkler Corporation, a South * Dakota corporation, * * Plaintiffs-Appellees
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ No. 00-3230 _ Minnesota Chapter of Associated * Builders and Contractors, Inc., * a Minnesota corporation; North * Central Chapter of the American * Fire Sprinkler Association, an * unincorporated association; Allied * Mechanical Systems of Hutchinson, * Inc., a Minnesota corporation; Ebert * & Hinson Fire Protection, Inc., * a Minnesota corporation; and General * Sprinkler Corporation, a South * Dakota corporation, * * Plaintiffs-Appellees,..
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United States Court of Appeals
FOR THE EIGHTH CIRCUIT
______________
No. 00-3230
______________
Minnesota Chapter of Associated *
Builders and Contractors, Inc., *
a Minnesota corporation; North *
Central Chapter of the American *
Fire Sprinkler Association, an *
unincorporated association; Allied *
Mechanical Systems of Hutchinson, *
Inc., a Minnesota corporation; Ebert *
& Hinson Fire Protection, Inc., *
a Minnesota corporation; and General *
Sprinkler Corporation, a South *
Dakota corporation, *
*
Plaintiffs-Appellees, *
*
*
v. * Appeal from the United States
* District Court for the
Minnesota Department of Public * District of Minnesota
Safety and Michael Jordan, *
Commissioner of Public Safety, *
*
Defendants-Appellees, *
*
Sprinkler Fitters Local 417, *
*
Intervenor-Appellant *
*
*
*
Building and Construction Trades *
Department, AFL-CIO, *
*
Amicus Curiae *
______________
Submitted: May 17, 2001
Filed: October 5, 2001
______________
Before MORRIS SHEPPARD ARNOLD and BYE, Circuit Judges, and GAITAN,1
District Judge.
GAITAN, District Judge
This case presents the issue of whether portions of the Minnesota Sprinkler Fitter
statute and rules which require contractors to adopt approved apprenticeship programs
is preempted by the Employee Retirement Income Security Act of 1974, 29 U.S.C. §
§ 1001, et seq. (“ERISA”). The district court held that the statute and rules were
preempted and issued a permanent injunction preventing enforcement of the
apprenticeship regulations. We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and
28 U.S.C. § 1292(a)(1) and affirm.
1
The Honorable Fernando J. Gaitan, Jr., United States District Judge for the
Western District of Missouri, sitting by designation.
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I. BACKGROUND
In 1992, the Minnesota legislature passed the Sprinkler Fitter Licensing Law
which comprehensively regulated the fire protection industry in Minnesota. See, 1992
Minnesota Laws, Chap. 508. The statute was codified as Minn.Stat.Chap. 299M.
Section 299M.04 gave statutory authority to the Minnesota Department of Public
Safety to promulgate rules governing Chap. 299M. One of the statutory provisions of
the Sprinkler Fitter Licensing statute was the requirement that only licensed journeymen
and registered apprentices could perform fire protection work. The law required
apprentices to be actively enrolled in a registered apprenticeship program and
registered with a federal or state agency that approved apprenticeship programs.
In 1994, the Minnesota Department of Public Safety issued rules putting into
effect the statutory provisions of Minn.Stat.Chap. 229M. The rules defined “federal
approval agency” as “the United States Department of Labor, Bureau of
Apprenticeship and Training” and the “state approval agency” was defined as “the
Department of Labor and Industry or a state agency in Minnesota or another state if the
commissioner determines that the state agency approves training programs and
monitors apprentice or trainee progress in a manner comparable to that done by the
Department of Labor and Industry or by the United States Department of Labor,
Bureau of Apprenticeship and Training.” Minn.R. 7512.0100, subps. 7, 14.
The statute and rules require all Minnesota sprinkler contractors to maintain an
apprenticeship program approved by the Minnesota Department of Labor and Industry
and to register all of their apprentices in the approved apprenticeship program.
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Minn.R. 7512.0100, subps. 1,7,14; Minn. R.7512.0900, subp. 3; Minn.R. 7512.2100.
Contractors without an approved program could not employ apprentices in the state.
To obtain an approved apprenticeship program, contractors had to meet a
number of requirements: 1) the apprenticeship program had to be of the same duration
as the majority of apprenticeship programs on file with the Department of Labor and
Industry; Minn. Stat. § 178.06; Minn. R. 5200.0320, subp. 1; Minn.R. 5200.0390,
subp. 1; 2) the apprentice wage structure had to be based on the prevailing wage for
sprinkler fitters in the county in which the contractor was headquartered, Minn.R.
5200.0390, subp. 2; 3) contractors had to adopt the same graduated pay scale for
apprentices as was found in the majority of apprenticeship programs on file with the
Department of Labor and Industry, Minn.R. 5200.0320, subp. 10; Minn.R. 5200.0390,
subp. 1; 4) apprenticeship programs had to provide for at least 144 hours of “related”
or classroom instruction per year, Minn. Stat. § 178.07, Minn.R. 5200.0320, subp. 11;
and 5) contractors had to register apprentices in accordance with the journeyman-
apprentice ratios established by the Department of Labor and Industry2
In 1994, plaintiffs, the Minnesota Chapter of Associated Builders and
Contractors (“ABC”) and certain affiliated contractors, brought suit in the district court
seeking to enjoin portions of the Minnesota statute and rules governing the
apprenticeship programs. The parties stipulated to a temporary injunction barring
enforcement of the statute and rules while the court determined the issues raised in the
complaint. In early 1995, the parties filed cross motions for summary judgment and in
March 1996, the district court issued an order finding that the statute and rules were
preempted by ERISA and permanently enjoined the State Department of Public Safety
2
An employer may register one apprentice sprinkler fitter for the first
journeyman sprinkler fitter employed, and one apprentice sprinkler fitter for each
three journeyman sprinkler fitters employed thereafter.
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from enforcing those provisions of the statute and rules. That order and permanent
injunction were not appealed and remain in effect. The statute and rules have not been
repealed or changed since the injunction was issued.
On February 1, 2000, Sprinkler Fitters Local 417, a labor organization
representing journeyman and registered apprentice sprinkler fitters in the State of
Minnesota, moved to intervene in the case and to have the injunction dissolved due to
an intervening change in the law. The union claimed that the Supreme Court’s decision
in California Div. of Labor Standards Enforcement v. Dillingham Construction, N.A.
Inc., 519 U.S. 316,
117 S. Ct. 832,
136 L. Ed. 2d 791 (1997), made the injunction
“inappropriate,” in light of new criteria established by the Court for determining
whether ERISA preempted state law. ABC opposed the motion. The district court
granted the union’s motion to intervene, but denied the motion to dissolve the
injunction. The union filed the instant appeal.
The district court in its order denying the motion to dissolve the injunction noted
that the Supreme Court in Dillingham recognized a distinction between laws which
created incentives for the adoption of an approved apprenticeship plans or created
indirect economic incentives, and those laws such as the Minnesota statute and rules,
which required the adoption of an approved apprenticeship plans. The district court
also found that the Supreme Court had not specifically overruled its earlier ERISA
precedents, including those on which Boise Cascade Co. v. Peterson, 939 F.2d 632 (8th
Cir. 1991), cert. denied,
505 U.S. 1213 (1992) were based. The district court thus
found that Minnesota’s statute and rules “related to” an ERISA plan under the
“connection with” prong and were therefore preempted by ERISA.
The issue of whether the injunction issued by the district court has any continued
legal basis is purely a question of law which we review de novo.
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II. DISCUSSION
A. ERISA Preemption
“ERISA, codified at 29 U.S.C. § 1001-1461 (1994) ‘is a comprehensive statute
that sets certain uniform standards and requirements for employee benefit plans.’”
Wilson v. Zoellner, 114 F.3d 713, 715 (8th Cir. 1997), quoting, Arkansas Blue Cross
& Blue Shield v. St. Mary’s Hosp., Inc.,
947 F.2d 1341, 1343 n.1 (8th Cir. 1991), cert.
denied,
504 U.S. 957 (1992). “It was enacted in response to growing concerns about
‘the mismanagement of funds accumulated to finance employee benefits and the failure
to pay employees benefits from accumulated funds.’” Carpenters Local Union No. 26
v. U.S. Fidelity & Guar.Co.,
215 F.3d 136, 139 (1stCir. 2000), quoting, Massachusetts
v. Morash,
490 U.S. 107, 115,
109 S. Ct. 1668,
104 L. Ed. 2d 98 (1989).
“To meet the goals of a comprehensive and pervasive Federal interest and the
interests of uniformity with respect to interstate plans, Congress included an express
preemption clause in ERISA for the displacement of State action in the field of private
employee benefit programs.” Wilson, 114 F.3d at 715-16 (internal citations and
quotations omitted). In New York State Conference of Blue Cross & Blue Shield Plans
v. Travelers Ins. Co.,
514 U.S. 645,
115 S. Ct. 1671,
131 L. Ed. 2d 695 (1995), the Court
stated:
[w]e have found that in passing § 514(a), Congress intended ‘to ensure
that plans and plan sponsors would be subject to a uniform body of
benefits law; the goal was to minimize the administrative and financial
burden of complying with conflicting directives among States or between
States and the Federal Government . . ., [and to prevent] the potential for
conflict in substantive law . . . requiring the tailoring of plans and
employer conduct to the peculiarities of the law of each jurisdiction.’
-6-
Id. at 656, citing, Ingersoll-Rand Co. v. McClendon,
498 U.S. 133, 142,
111 S. Ct. 478,
484,
112 L. Ed. 2d 474 (1990).
ERISA’s preemption clause states:
Except as provided in subsection (b) of this section, the provisions of this
subchapter and subchapter III of this chapter shall supersede any and all
State laws insofar as they may now or hereafter relate to any employee
benefit plan described in section 1003(a) of this title and not exempt
under section 1003(b) of this title. . . .
29 U.S.C. § 1144(a), § 514(a). “Thus, when state-law claims ‘relate-to’ ERISA plans,
those claims are transmuted into ERISA claims.” Carpenters Local Union No. 26, 215
F.3d at 139.
B. The Dillingham Decision.
Local 417 notes that the issue of whether ERISA preempts a particular state law
has caused a great deal of confusion over the last twenty years. Local 417 argues that
because the Supreme Court in Dillingham significantly changed the way in which
preemption questions are analyzed, there is no longer any basis for the injunction and
it should be dissolved.
In Carpenters Local Union No. 26, the Court explained:
As the language of section 1144(a) makes plain, the incidence of ERISA
preemption turns on the parameters of the phrase “relate to.” See
California Div. of Labor Standards Enforcement v. Dillingham Constr.,
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519 U.S. 316, 324,
117 S. Ct. 832,
136 L. Ed. 2d 791 (1997). That locution
is not self-defining, and the Justices have been at least mildly
schizophrenic in mapping its contours. The Court initially glossed the
phrase by portraying the scope of ERISA preemption as “deliberately
expansive.” Pilot Life Ins. Co. v. Dedeaux,
481 U.S. 41, 46,
107 S. Ct.
1549,
95 L. Ed. 2d 39 (1987). As time passed, it grew more guarded,
emphasizing the “starting presumption that Congress does not intend to
supplant state law,” New York State Conf. of Blue Cross & Blue Shield
Plans v. Travelers Ins. Co.,
514 U.S. 645, 654,
115 S. Ct. 1671,
131
L. Ed. 2d 695 (1995); accord, De Buono v. NYSA-ILA Medical & Clinical
Services Fund,
520 U.S. 806, 813,
117 S. Ct. 1747,
138 L. Ed. 2d 21
(1997), and warning that, unless congressional intent to preempt clearly
appears, ERISA will not be deemed to supplant state law in areas
traditionally regulated by the states, see
Dillingham, 519 U.S. at 325,
117
S. Ct. 832;
Travelers, 514 U.S. at 655,
115 S. Ct. 1671.
Importantly, these variations in emphasis have led the Court to conclude
in recent years that the phrase “relate to,” as used in ERISA’s preemption
provision, cannot be read literally. . . . To scale the phrase down to size,
the Court has devised a disjunctive test: “A law relate[s] to a covered
employee benefit plan for purposes of § 514(a) if it [1] has a connection
with or [2] a reference to such a plan.”
Dillingham, 519 U.S. at 324,
117
S. Ct. 832 (citations and internal quotations omitted) (alternations in
original). . . .
Travelers plainly signaled a significant analytic shift in regard to the
“connection with” portion of the ERISA preemption inquiry, abandoning
strict textualism in favor of a more nuanced approach:
For the same reasons that infinite relations cannot be the
measure of pre-emption, neither can infinite connections.
We simply must go beyond the unhelpful text and the
frustrating difficulty of defining its key term, and look
instead to the objectives of the ERISA statute as a guide to
the scope of the state law that Congress understood would
survive.
-8-
Carpenters Local Union No. 26, 215 F.3d at 139-140, quoting,
Travelers, 514 U.S. at
656,
115 S. Ct. 1671; accord,
Dillingham, 519 U.S. at 324,
117 S. Ct. 832.
Local 417 states that in light of this shift in the law, courts must now take a more
practical view and look at the scope of the state statutes that Congress intended would
survive ERISA and not presume that the statutes were preempted unless there was a
clear indication. ERISA is concerned with the segregation and investment of funds and
ensuring that funds are not depleted and that fiduciaries utilize the funds in the manner
in which they were intended. Local 417 states that ERISA is concerned that funds set
aside for apprenticeship and training programs are properly handled and accounted for,
but is not concerned with the substantive requirements for these apprenticeship and
training programs. The union argues that ERISA places no substantive regulations on
any apprentice program and states that if Congress had intended that states would no
longer be able to place any substantive requirement on apprentices it certainly would
have stated so. As such Local 417 states there is no mention in the statute or its
legislative history of an intention to supersede all state regulation of apprentices. The
union asserts that state regulation of apprenticeship standards is pervasive and was
pervasive when ERISA was passed. In light of this, the union states that there is no
mention by Congress of its attempt to preempt state regulation of substantive
apprenticeship standards. Local 417 argues that this is persuasive evidence that
Congress did not intend to preempt state laws regulating apprenticeship standards.
In Dillingham, the Supreme Court considered whether California’s prevailing
wage law was “related to” an employee benefit plan and thus preempted under ERISA.
The Court found that it was not. In that case, California required contractors on public
works projects to pay workers the prevailing wage in the project’s location.
Contractors could pay lower wages to apprentices who were participating in an
approved apprenticeship program. However, if a contractor employed apprentices who
were participating in apprenticeship programs which were not approved, they were
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required to be paid the prevailing journeyman’s wage. In considering whether the
California statute had a “connection with” ERISA plans, the Court first noted that
“apprenticeship standards and wages paid on state public works have long been
regulated by the States.” Id. at 330, 117 S. Ct. 840. The Court stated:
That the States traditionally regulated these areas would not alone
immunize their efforts; ERISA certainly contemplated the pre-emption of
substantial areas of traditional state regulation. The wages to be paid on
public works projects and the substantive standards to be applied to
apprenticeship training programs are, however, quite remote from the
areas with which ERISA is expressly concerned – reporting, disclosure,
fiduciary responsibility, and the like . . . . Given the paucity of indication
in ERISA and its legislative history of any intent on the part of Congress
to pre-empt state apprenticeship training standards, or state prevailing
wage laws that incorporate them, we are reluctant to alter our ordinary
assumption that the historic police powers of the States are not to be
superseded by the Federal Act. . . . Accordingly, as in Travelers, we
address the substance of the California statute with the presumption that
ERISA did not intend to supplant it.
Id., at 330-332, 117 S. Ct. 840-41 (internal quotations and citations omitted).
However, in analyzing the statute, the Supreme Court found:
the apprenticeship portion of the prevailing wage statute does not bind
ERISA plans to anything. No apprenticeship program is required by
California law to meet California’s standards. . . . If a contractor chooses
to hire apprentices for a public works project, it need not hire them from
an approved program (although if it does not, it must pay these
apprentices journeyman wages). So apprenticeship programs that have
not gained CAC approval may still supply public works contractors with
apprentices. Unapproved apprenticeship programs also may supply
apprentices to private contractors. The effect of [the California statute]
on ERISA apprenticeship programs, therefore, is merely to provide some
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measure of economic incentive to comport with the State’s requirements,
at least to the extent that those programs seek to provide apprentices who
can work on public works projects at a lower wage.
Id. at 332, 117 S. Ct. 841.
The Court found that the California statute:
has the effect of encouraging apprenticeship programs – including ERISA
plans – to meet the standards set out by California, but it has not been
demonstrated here that the added inducement created by the wage break
available on state public works projects is tantamount to a compulsion
upon apprenticeship programs. . . . The prevailing wage statute alters the
incentives, but does not dictate the choices, facing ERISA plans. In this
regard, it is “no different from myriad state laws in areas traditionally
subject to local regulation, which Congress could not possibly have
intended to eliminate.” Travelers, 514 U.S. at 668,
115 S. Ct. 1683. . . .
We thus conclude that California’s prevailing wage laws and
apprenticeship standards do not have a “connection with,” and therefore
do not “relate to,” ERISA plans.
Id. at 333-334, 117 S. Ct. 842.
Local 417 argues that the injunction issued by the district court should be
dissolved because of the change signaled by the Supreme Court in Dillingham. The
Union also argues that previous caselaw relied on by the district court when it issued
the injunction, Boise Cascade Corp. v. Peterson, 939 F.2d 632 (8th Cir. 1991), cert.
denied,
505 U.S. 1213 (1992) is no longer valid.3 However, there are important
3
The Court finds it unnecessary to determine whether Boise Cascade is still
good law in this Circuit, because in that case, the state conceded that the
apprenticeship programs were “employee benefit plans” as defined by ERISA. In
the instant case, there has been no such concession and thus the Court does not look
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distinctions between the California prevailing wage law and the Minnesota statute and
rules, which do not mandate dissolution of the injunction.
The Minnesota rule relating to Contractor Operating Requirements states: “A
fire protection contractor may not employ a person to perform fire protection-related
work unless the person is a managing employee, certified journeyman, or registered
apprentice.” Minn.R. 7512.0900, Subp. 3. The Minnesota statute defines “apprentice
sprinkler fitter” as: “a person, other than a fire protection contractor or journeyman
sprinkler fitter, who is regularly engaged in learning the trade under the direct
supervision of a licensed fire protection contractor or journeyman sprinkler fitter and
is registered with a state or federal approval agency.” Minn. Stat. 299M.01, Subd. 2.
As previously noted, a state approval agency is defined as the Department of Labor and
Industry or a state agency in Minnesota or another state if the Commission determines
that the state agency approves training programs and monitors apprentice training
progress in a manner comparable to that done by the Department of Labor and Industry
or by the United States Department of Labor, Bureau of Apprenticeship and Training.
A federal approval agency is defined as the Bureau of Apprenticeship and Training.
Minn. R. 7512.0100, subps. 7, 14.
The Minnesota rules relating to apprenticeship programs and agreements states:
“[t]he minimum training standards to be met in an apprenticeship agreement must be
the standards for the apprenticeship program registered with the division but must be
no less than the Minnesota minimum standards listed in part 5200.0320.” Minn.R.
5200.0310. The Minnesota minimum standards state: “It must be the policy of the
employer that all apprentices employed in a trade covered under parts 5200.0290 to
5200.0420 must be governed by the terms of these standards and by the Minnesota
voluntary apprenticeship law . . . .” Minn. Rule 5200.0320 Subp. 2. The rules
to Boise Cascade as persuasive authority on this issue.
-12-
governing apprenticeship programs set out in very specific detail the length of an
apprenticeship program, responsibilities of the apprentice, how an apprentice should
be supervised, schedule of work processes, wage schedules, the amount of hours of
related instruction required and the hours of work required. See, Minn. Rules
5200.0320, Subp. 1-15.
Thus, it is quite clear that the Minnesota statues and rules, unlike the California
law, require apprentice programs to comply with the Minnesota specifications. The
Minnesota statute and rules do more than merely encourage or provide economic
incentives to contractors to hire apprentices who are registered in approved programs,
the Minnesota statues and rules absolutely demand it. The statute unequivocally states
that a “fire protection contractor may not employ a person to perform fire protection-
related work unless the person is a managing employee, certified journeyman, or
registered apprentice.” Minn. Rule 7512.0900, subp 3. Thus, the Minnesota statute,
unlike the California statute, “dictate[s] the choices facing ERISA plans.” Dillingham,
519 U.S. at 334,
117 S. Ct. 842.
Local 417 argues that the statute does not require contractors to use apprentices
and even if a contractor were to use apprentices, the statute does not prevent a
contractor from using apprentices who are not part of an approved program, so long
as they do not “install, connect, alter, repair, or add to a fire protection system.” Local
417 argues that apprentices can learn by observation and by handing tools to a
journeyman and by practicing at a training center. The union states that the statute
simply gives a substantial economic advantage to contractors to have their
apprenticeship programs approved and to register their apprentices in approved
programs.
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However, the Court does not find this argument persuasive. The purpose of an
apprenticeship program is to teach individuals through on-the-job training. To say that
an apprentice can still learn by simply observing and handing tools to a journeyman
would turn an apprentice into simply a laborer and provide no useful instruction in how
to actually install a fire protection system. The statute does more than simply provide
a powerful economic incentive, it prevents the use of apprentices who are not registered
in approved programs. It is for this reason that the Court finds that the Minnesota
statute differs from the California statute in Dillingham and why the Court finds that the
Supreme Court’s decision does not necessitate dissolution of the injunction.
Appellant also argues that a recent decision by the Tenth Circuit in Willmar Elec.
Service Inc. v. Cooke, 212 F.3d 533 (10th Cir.), cert. denied,
531 U.S. 979 (2000),
indicates that the Minnesota statute is not preempted by ERISA. In Willmar, the Court
considered whether a Colorado statute which required supervision of apprentices in a
one-to-one ratio by licensed journeymen was preempted by ERISA. The Court found
that the statute was not preempted stating:
[t]here is no direct restraint in the Colorado law on the number of
apprentices that may be trained. Rather, the limit to which Willmar refers
is the economic burden of requiring one-to-one supervision of
apprentices. The Supreme Court has recognized that laws of general
applicability inevitably affect ERISA plans, sometimes by increasing
costs, but that fact alone does not warrant a finding that Congress
necessarily intended to displace regulation of an area traditionally
regulated by the States.
Id. at 538. The Court in Willmar found that the effect of the supervision ratio
requirement was to indirectly increase the cost of the apprenticeship training and thus
was directly analogous to the apprentice wage law in Dillingham. The Court stated:
“[i]n Dillingham, if the contractor chose to hire an apprentice from a non-approved
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program, it was compelled by state law to pay journeyman’s wages. In our view this
is comparable to the manner in which the Colorado law affects the Willmar training
program – it does not prevent training, but it increases the cost associated with doing
so.” Id. at 538, n. 3. This is the key distinction between the California and Colorado
statutes and Minnesota’s statute. Minnesota’s statute acts to actually prevent training.
A fire protection contractor working in Minnesota simply cannot hire an apprentice
from an unapproved program to “install, connect, alter, repair, or add to a fire
protection system.” There is no provision whereby a contractor can pay a higher wage
if it wishes to do so, or hire more journeymen to supervise an apprentice. The statute
simply does not allow apprentices who are not registered or who are not registered in
approved programs to work as apprentice sprinkler fitters.
Thus, because the Dillingham and Willmar decisions are distinguishable, the
Court does not find that these decisions dictate dissolution of the injunction issued by
the district court in 1996. However, because the Dillingham decision was handed
down after the injunction was issued, the Court will consider whether the Minnesota
statute and rules have a “connection with” an employee benefit plan under the criteria
set out in Dillingham and other Eighth Circuit cases.
C. The “Connection With” Test.
In applying § 1144, the Supreme Court has utilized a two-part test to determine
whether a state law is preempted. “A law ‘relates to’ an employee benefit plan, in the
normal sense of the phrase, if it has [1] a connection with or [2] reference to such a
plan.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97,
103 S. Ct. 2890, 2900,
77
L. Ed. 2d 490 (1983). See also,
Dillingham, 519 U.S. at 324,
117 S. Ct. 837; De
Buono,
520 U.S. at 813,
117 S. Ct. 1751.
-15-
In the district court, ABC did not challenge the union’s argument that the statute
was not preempted under the “refers to” prong of the Dillingham test, therefore the
district court did not analyze this issue. Thus, our consideration will similarly be
limited to analyzing whether the Minnesota statute and rules are preempted under the
“connection with” prong of the test.
In Dillingham, the Court stated “to determine whether a state law has the
forbidden connection, we look both to the objectives of the ERISA statute as a guide
to the scope of the state law that Congress understood would survive, . . . as well as to
the nature of the effect of the state law on ERISA plans.” Id. at 325, 117 S. Ct. 838
(internal quotations and citations omitted).
In analyzing the effect of a state law on an ERISA plan, courts have considered
a variety of factors:
[1] whether the state law negates an ERISA plan provision, [2] whether
the state law affects relations between primary ERISA entities, [3]
whether the state law impacts the structure of ERISA plans, [4] whether
the state law impacts the administration of ERISA plans, [5] whether the
state law has an economic impact on ERISA plans, [6] whether
preemption of the state law is consistent with other ERISA provisions,
and [7] whether the state law is an exercise of traditional state power.
Arkansas Blue Cross & Blue Shield v. St. Mary’s Hospital, Inc., 947 F.2d
1341, 1344-45 (8th Cir. 1991)(citations omitted). In conducting this
analysis, ‘[t]he court must still look to the totality of the state statute’s
impact on the [ERISA] plan-both how many of the factors favor
preemption and how heavily each individual factor favors preemption are
relevant.’ Id. at 1345.
Prudential Ins. Co. of America v. Doe,
46 F. Supp. 2d 925, 936 (E.D.Mo. 1999),
quoting,
Wilson, 114 F.3d at 717.
-16-
1) Do the Minnesota Statute and Rules Negate a Plan Provision?
ABC argues that the Minnesota statute and rules negate ERISA plan provisions
by substituting the state’s requirements for the range of terms found in ERISA
apprenticeship plans. The union argues that nothing about the Minnesota statute negates
any provision as to how an apprenticeship program will be funded, and therefore does
not negate any ERISA plan provision. The Court finds that because the statute and
rules dictate the terms of what constitutes an approved apprenticeship program, it
negates plan provisions.
2) Do the Minnesota Statute and Rules Affect Relations Between Primary
ERISA Entities or Impact the Structure of ERISA Plans?
“The primary ERISA entities include the employer, the plan, the plan fiduciaries,
and the beneficiaries.” Wilson, 114 F.3d at 718 (internal quotations and citation
omitted). ABC argues that the statute and rules affect relations between the employer,
(the plan administrator) and the employees, (the plan beneficiaries), by dictating how
the employees must be trained and paid. The union argues that while the statute affects
the substantive terms under which apprentices will be employed by the employer, the
statute does not affect any provision with respect to whether a plan participant is
entitled to received benefits. The Court finds that this is a distinction without a
difference. This factor therefore weighs in favor of preemption.
3) Will the Statute and Rules Impact the Administration of ERISA Plans?
ABC argues that the statute impacts the administration of ERISA plans by
requiring the employer to monitor its program to ensure that it complies with all of the
state’s requirements, i.e., required amount of on the job training, required wages and
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raises at required intervals, required amount of related instruction and the requisite
amount of supervision by journeymen. The union argues that there is no impact on the
administration of ERISA plans because the employer may still fund an apprenticeship
program either through a separate fund which is an ERISA plan or through its general
assets. The Court finds that this factor also weighs in favor of preemption. By
specifying all of the various requirements the statute and rules directly influence how
the ERISA plans are administered. The Court finds it immaterial that an employer may
still fund an apprenticeship program through a separate fund. Thus, the Court finds that
this factor also weighs in favor of preemption.
4) Will the Minnesota Statute and Rules Have an Economic Impact on the
Plan?
ABC argues that the statute and rules by dictating the duration of the plans, the
wages that must be paid to apprentices, the amount of instruction and the ratio of
journeyman to apprentices have a direct economic impact on the plan. Local 417
admits that the statute and rules have an indirect economic impact on ERISA plans
because meeting the standards required for registration could increase the costs over
plans that did not meet the required standards. However, Local 417 argues that while
this factor may weigh in favor of preemption, it is not enough to require preemption.
Because the requirements imposed by the statute and the rules would increase the costs
of providing these programs, the Court finds that this factor also weighs in favor of
preemption.
5) Is Preemption of the Minnesota Statute and Rules Consistent With
Other ERISA Provisions?
ABC argues that preemption of the Minnesota statue and rules are consistent
with other ERISA provisions because they do not impact any other ERISA provision
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in any way. Local 417 argues that preemption of the statute is not consistent with other
ERISA provisions because ERISA has nothing to say regarding substantive
apprenticeship standards. The Court cannot say that preemption of the Minnesota
statute is either strongly supported by or inconsistent with or contrary to any other
provision of ERISA. Therefore, the Court finds this factor to be neutral.
6) Whether the Minnesota Statute and Rules Are An Exercise of
Traditional State Power.
ABC states that the Minnesota statute and rules are not an exercise of traditional
state power because the state has not mandated the adoption of approved
apprenticeship programs in the past. ABC argues that the statute at issue goes far
beyond any regulation of apprenticeship that has occurred in either Minnesota or any
other state. Local 417 argues that apprenticeship regulation is a traditional exercise of
state power. The Supreme Court noted in Dillingham, 519 U.S. at 330,
117 S. Ct. 840,
that “apprenticeship standards and the wages paid on state public works have long been
regulated by the States.” Thus, the Court finds that this factor weighs against a finding
of preemption.
Considering all of the above factors, the Court finds that the Minnesota statute
and rules which dictate the standards for an approved apprenticeship training program
have a sufficient connection to ERISA plans so as to require a finding of preemption.
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D. The Savings Clause4.
Although ERISA acts to preempt some state laws, it also contains a “savings
clause” which exempts federal laws from ERISA preemption. The clause states:
Nothing in this subchapter shall be construed to alter, amend, modify,
invalidate, impair, or supersede any law of the United States (except as
provided in §§ 1031 and 1137(c) of this title) or any rule or regulation
issued under any such law.
29 U.S.C. § 1144(d). Local 417 argues that this provision saves from preemption any
state law that would otherwise be preempted if it simply recognizes federal standards
as being applicable within the state. Local 417 states that because the Minnesota
statute and rules allow for approval of apprenticeship programs by either the Minnesota
Department of Labor and Industry or the United States Department of Labor, the
statute thus does not mandate adherence to the state standards and thus is not
preempted.
ABC states that the Fitzgerald Act, 29 U.S.C. §§ 50, et seq. provides for the
voluntary adoption of apprenticeship programs by employers and others. ABC asserts
that a state may choose to follow either the federal guidelines administered by the
Bureau of Apprenticeship and Training or may develop its own guidelines through a
state apprenticeship council. ABC argues that because Minnesota has developed its
own guidelines through a state apprenticeship council, apprentice programs must be
4
ABC states that this argument was never raised by the defendants in either
the original action or by the union on intervention. However, in its Reply Brief,
Local 417 states that this argument was presented to the district court during oral
argument on the motion to dissolve the injunction. Therefore, the Court finds the
issue properly raised and will address it.
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approved by this body. ABC states that the establishment of apprenticeship programs
which comply with the Fitzgerald Act is entirely voluntary and an employer’s failure
to adopt an approved apprentice program or to register apprentices in the program has
no bearing on a contractor’s ability to employ apprentices within the state. ABC states
that preemption of the Minnesota statute and rules will have no impact upon the
Fitzgerald Act because contractors will not be required to adopt apprenticeship
programs that comply with the Fitzgerald Act, but they will not be prevented from
doing so either. Thus, because preemption would in no way impair enforcement of the
Fitzgerald Act, ABC argues that the Savings Clause does not apply.
In reply, Local 417 argues that even though the Minnesota Department of Labor
and Industry approves apprentice programs, the programs are approved for both federal
and state purposes. Thus, Local 417 argues, Minnesota’s apprenticeship standards are
federal as well as state standards. Local 417 states that these federal standards were
established pursuant to the Fitzgerald Act and to say that a state may not rely on these
standards interferes with the federal law. Thus, the union argues the Savings Clause
acts to prevent the preemption of Minnesota’s statute and licensing laws.
In Minnesota Chapter of Associated Builders & Contractors Inc. v. Minnesota
Dept. of Labor & Industry, 47 F.3d 975 (8th Cir. 1995), we considered whether ERISA
preempted the apprenticeship portion of Minnesota’s Prevailing Wage Law. The
Prevailing Wage Law specifically exempted apprenticeship programs from having to
pay the prevailing wage, if the programs had received either state or federal approval.
The district court in that case found that although the apprenticeship program was an
ERISA plan, the apprenticeship exemption provisions of the statute were not preempted
because preemption would have impaired the purposes of the Fitzgerald Act.
Id. at
980. In reaching this determination, we distinguished the case of Electrical Joint
Apprenticeship Committee v. MacDonald,
949 F.2d 270 (9th Cir. 1991), cert. denied,
505 U.S. 1204,
112 S. Ct. 2991,
120 L. Ed. 2d 869 (1992). In that case the court found
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preempted an administrative application of the prevailing wage law exemption for
apprentices because it required the apprentice programs to “comply with the standards
of the State Committee, independent and apart from the regulation authorized and
provided for by the Fitzgerald Act and its accompanying regulations.” Id. at 274. We
determined in Minnesota Chapter of Associated Builders & Contractors, that the
Minnesota statue was different “[b]ecause Minnesota’s apprenticeship exemption
allows approval by either the state or federal agency and because it is essential to any
apprenticeship program that an employer be allowed to pay lesser wages to apprentices
in training, Minnesota’s exemption is saved under ERISA’s savings clause. 29 U.S.C.
§ 1144(d).”
Id. at 981.
In the instant case, the rules state that an apprentice may be registered with either
a state or federal approval agency. Minn. Rule 7512.2100, subp. 2C. However, the
Department of Labor and Industry Rules relating to apprenticeship programs make no
reference to approval by a federal agency, instead stating under Minimum Training
Standards: “[t]he minimum training standards to be met in an apprenticeship agreement
must be the standards for the apprenticeship program registered with the division but
must be no less than the Minnesota minimum standards listed in part 5200.0320.”
Minn. R. 5200.0310. Further the Minnesota Minimum Training Standards state: “It
must be the policy of the employer that all apprentices employed in a trade covered
under parts 5200.0290 to 5200.0420 be governed by the terms of these standards and
by the Minnesota voluntary apprenticeship law . . .” Minn. Rule 5200.0320, subp. 2.
The rules further provide that “[a]ll apprenticeship agreements must be submitted to the
Division of Voluntary Apprenticeship for approval.” Minn. Rule 5200.0340.
These rules dictate that an apprentice program follow the standards established
by the State of Minnesota and do not offer the option of having an apprenticeship
program which only meets federal standards. Thus, the Court determines that because
the Minnesota statute and rules do not offer the choice of compliance with either state
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or federal standards, but instead mandate adherence to the state standards, they are
preempted under ERISA. Further, the Court finds that preemption of the statute and
rules will not “alter, amend, modify, invalidate, impair, or supersede” the Fitzgerald
Act, because contractors may still adopt voluntary apprenticeship programs which
follow the standards set forth by the federal government. Therefore, the Court finds
that the Minnesota statute and rules are not saved from preemption by ERISA’s
Savings Clause.
III. CONCLUSION
Accordingly, for the foregoing reasons, we affirm the judgment of the District
Court.
BYE, Circuit Judge, dissenting.
I disagree with the majority's conclusion that ERISA preempts the Minnesota
Sprinkler Fitter statute and concomitant regulations. I believe that conclusion reflects
a more expansive view of ERISA preemption than that expressed by the Supreme Court
in California Div. of Labor Standards Enforcement v. Dillingham Const., 519 U.S. 316
(1997), and other recent decisions.
We are dealing with a matter traditionally regulated by the States, where we start
with the presumption that ERISA does not preempt the state law. Dillingham, 519 U.S.
at 330-32. In areas of traditional state regulation, we must differentiate between a state
law that dictates choices faced by ERISA plans when administering the funding or
provision of benefits, and a state law that dictates substantive safety standards
applicable to ERISA and non-ERISA programs alike. I believe that Dillingham, as well
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as several other recent Supreme Court decisions, instruct us that a state law of the
former type is preempted, but the latter type is not. Compare Egelhoff v. Egelhoff, 121
S. Ct. 1322, 1329 (2001) (finding preemption where the state law "does dictate the
choices facing ERISA plans with respect to matters of plan administration.")
(emphasis added) (internal quotations omitted), with De Buono v. NYSA-ILA Med. &
Clinical Serv. Fund,
520 U.S. 806, 815-16 (1997) (finding no preemption where the
state law "impose[d] some burdens on the administration of ERISA plans" but dictated
that both ERISA and non-ERISA owned or operated hospitals pay a tax, and therefore
functioned as a law of general applicability irrespective of the existence of an ERISA
plan), and New York State Conf. of Blue Cross & Blue Shield v. Travelers Ins. Co.,
514 U.S. 645, 657, 660 (1995) (emphasizing ERISA's focus on the "nationally uniform
administration of employee benefit plans" and finding no preemption where the state
law imposed a surcharge that had an indirect economic influence on ERISA plans but
did not "preclude uniform administrative practice or the provision of a uniform
interstate benefit package if a plan wishes to provide one") (emphasis added).
Applying Dillingham, the Tenth Circuit found no preemption of a Colorado law
setting substantive safety standards for apprenticeship training programs by requiring
a one-to-one ratio of electrical journeyman to apprentices on jobsites. Willmar Elec.
Serv. Inc. v. Cooke, 212 F.3d 533, 537-39 (10th Cir. 2000). The court addressed and
rejected an argument that the law should be preempted because it "dictated" the
teacher-to-student ratio that ERISA plans must use in an apprenticeship training
program:
An examination of the objectives of ERISA and the effects of the
Colorado law persuades us that this is not the type of regulation Congress
had in mind in the preemption clause. The primary effect of the ratio
requirement is to indirectly increase the cost of apprentice training. In this
respect it is directly analogous to the apprentice wage law at issue in
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Dillingham. In requiring such supervision the Colorado law neither
mandates nor limits the granting of benefits to employees.
Willmar, 212 F.3d at 538.
I find the Tenth Circuit's logic and reasoning in Willmar persuasive, and disagree
with the majority's attempt to distinguish it on the grounds that Minnesota's law actually
prevents apprentice training. The substantive safety standards in Minnesota's statute
and regulations are perhaps more comprehensive than the Colorado law at issue in
Willmar, but that is a difference in degree, not in kind. Both sets of laws have the same
effect on ERISA plans; both indirectly increase the cost of apprentice training in order
to comply with substantive safety standards set by the state, but neither "mandates nor
limits the granting of benefits to employees." Id. Likewise, both function as laws of
general applicability, indiscriminately requiring safety standards for ERISA and non-
ERISA apprenticeship training programs alike.
"Indeed, if ERISA were concerned with any state action — such as medical care
quality standards or hospital workplace regulations — that increased costs of providing
certain benefits, and thereby potentially affected the choices made by ERISA plans, we
could scarcely see the end of ERISA's pre-emptive reach, and the words 'relate to'
would limit nothing." Dillingham, 519 U.S. at 329. Applying Dillingham, we found
no preemption for a Minnesota law that dictated ethical standards for physicians
participating in an ERISA plan, concluding that "[n]othing in ERISA attempts to
preempt the entire field of health care or the regulation of professional standards for
physicians." Shea v. Esensten,
208 F.3d 712, 719 (8th Cir. 2000). We found it
significant that "Minnesota's law [is one] of general application. It makes no reference
to and functions irrespective of the existence of an ERISA plan."
Id. at 717 (citations
and internal quotations omitted).
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Likewise, nothing in ERISA attempts to preempt the entire field of
apprenticeship training programs. Minnesota's Sprinkler Fitter statute and concomitant
regulations are laws of general application, which function irrespective of the existence
of an ERISA plan in their indiscriminate imposition of substantive safety standards. I
find it inconsistent for us to hold in Shea that substantive quality standards in the
medical field are not preempted, while holding that substantive safety standards in the
fire protection industry are preempted.
I respectfully dissent.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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