|July 22, 2014|
Previously published on July 18, 2014
In a case just decided by the First Circuit Court of Appeals in Boston, the Court has concluded that a City of Quincy, Massachusetts ordinance requiring bidders on municipal projects in the city to engage in a specific type of apprentice training program violated the Federal Employment Retirement Income Security Act (ERISA). The Court held that because the required apprentice training program qualified as an employee welfare benefit plan, and mandated certain requirements in the apprentice program, it was preempted by ERISA.
In this case, the City of Quincy was soliciting bids for a construction project for the construction of a middle school. Bidders for the project had to certify compliance with what the city named the “Responsible Employer Ordinance” that demanded that bidders on municipal public works projects have a bona fide apprentice training program that was registered with the Massachusetts Department of Labor standards. A trade alliance and two of its members filed suit against the City of Quincy and the Associated Builders and Contractors, Inc. and the New England Regional Council of Carpenters also filed legal briefs in the action.
The Court concluded that if a state law merely exerted an indirect economic influence on an employee benefit plan but did not bind the plan administrators to particular choices, then ERISA likely would not preempt the state or municipal law. Conversely, if a statute mandated a particular employee benefit of structure, it is preempted by the federal ERISA laws. Here, the Court noted that the state labor standards imposed a number of stringent conditions on bidders for the project, including documentation of the program’s terms and conditions, the location of the apprentice activities, training and instruction, wage rates, record keeping, instructor qualifications, apprentice enrollment, reporting and termination, and a defined graduation rate. The Court said that it had “no difficulty concluding that the ordinance goes far beyond simply influencing ERISA apprentice training programs. It mandates an employee benefit structure and specifies how the structure must be administered.” Accordingly, the First Circuit Court of Appeals struck down the City of Quincy requirements for bidders on public municipal projects.
This case presents a good reminder that federal statute and state statutes can sometimes conflict with each other and there are circumstances under which the federal statute is drafted by Congress in such a way that it will effectively trump the state or municipal statutes that conflict with the federal law. It is wise to think about the possibility that this may be occurring if certain municipalities put more stringent requirements that may be covered by broader federal laws. Be sure to consult with counsel at bid time so these items can be uncovered early in the process. Also, municipalities may want to seek counsel’s advice if there is a possible preemption issue with a new ordinance.