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July 28 — Claims for failure to follow New Jersey's Prevailing Wage Act aren't preempted by federal benefits or labor laws, the U.S. Court of Appeals for the Third Circuit has ruled.
In a July 28 opinion, Judge Michael A. Chagares reversed a ruling by the U.S. District Court for the District of New Jersey, finding that the state law creates an independent duty for employers to follow and doesn't require reference to a benefits plan under the Employee Retirement Income Security Act or a collective bargaining agreement under the Labor Management Relations Act.
As a result, the court found the complete preemption provisions of both federal statutes inapplicable to claims for violations of the state law and ordered the district court to remand the case back to New Jersey state court for lack of federal subject matter jurisdiction.
While the court refused to directly rule on express preemption of the state law under ERISA Section 514, it indicated that similar statutes have been found not to be preempted by that provision.
The action was originally brought in New Jersey state court by a group of multiemployer benefit funds that had obtained assignments of claims from their participants.
The participants were carpenters who worked for Tishman Construction Corp. of New Jersey on the construction of a casino hotel in Atlantic City, N.J.
The funds asserted on behalf of their participants that Tishman had failed to follow New Jersey's Prevailing Wage Act by failing to provide them with either fringe benefits or with the cash equivalent of those benefits.
Under the state law, the state's labor commissioner sets a per-hour wage requirement and a per-hour fringe benefit requirement for public works projects.
To comply with the fringe benefit mandate, an employer must provide its workers either with some type of fringe benefits equal to the requirement or a cash equivalent to the difference between the benefits provided and the hourly requirement.
Tishman had the case removed to federal court on the grounds that the claims for fringe benefits were preempted by ERISA Section 502 and LMRA Section 301.
The district court granted Tishman's motion to dismiss in June 2013, finding that the claims under the Prevailing Wage Act were preempted by ERISA Section 514 as relating to an ERISA-governed plan because the funds were fiduciaries of ERISA-governed plans within the meaning of the statute and were attempting to obtain fringe benefits.
The district court also ruled that it had subject matter jurisdiction over the case, finding that the claims were completely preempted by ERISA Section 502 because they were actually an “artfully pleaded” claim for benefits under that provision.
The appellate court disagreed with the lower court's complete preemption decision, finding that the federal statute was not implicated in a claim for wages under the Prevailing Wage Act.
Instead, the court found, the state statute provided an employer with an “independent legal duty” to follow that didn't require reference to either an employee benefits plan or a specific collective bargaining agreement.
The court said that the employer only needed to examine the prevailing wage levels and compare them against the wages and benefits that it was paying to its employees to determine if it was in compliance with the law.
As a result, the court found, a claim under the state statute was not completely preempted by ERISA or the LMRA and thus was not properly removed to federal district court in the first place.
The appellate court refused to address the district court's conclusion that the funds' claims under the state law were expressly preempted by Section 514 of ERISA, instead saying that Tishman could again raise that issue on remand to state court.
But the court indicated in a footnote that it didn't believe that an action under the Prevailing Wage Act was expressly preempted by ERISA, noting that the Third Circuit had earlier refuse to preempt Pennsylvania's prevailing wage law, which the court said was similar to the statute at issue here in Keystone Chapter, Assoc. Builders and Contractors, Inc. v. Foley, 37 F.3d 945, 18 EBC 2161 (3d Cir. 1994)).
In the same footnote, the court identified decisions from the Second, Sixth, Eighth and Ninth circuits that also found similar prevailing wage statutes not expressly preempted by ERISA Section 514.
According to the court, “every other Court of Appeals to answer this question with respect to similar PWAs has found them not expressly preempted.”
Chief Judge Theodore A. McKee and Judge Patty Shwartz joined in the opinion.
The funds were represented by Michael G. McNally and Seth Ptasiewicz of Kroll Heineman in Iselin, N.J.
Tishman was represented by Gregory R. Begg and Alexander X. Saunders of Peckar & Abramson in River Edge, N.J.
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