Third Circuit Says Prevailing Wage Claims Not Preempted by ERISA

Third Circuit Says Prevailing Wage Claims Not Preempted by ERISA Carmen Natale Susan Wigenton

The U.S. Court of Appeals for the Third Circuit has reinstated a suit filed under New Jersey’s Prevailing Wage Act, finding that it is not completely preempted by the Employee Retirement Income Security Act of 1974 or the Labor Management Relations Act.

In New Jersey Carpenters and the Trustees Thereof v. Tishman Construction Corp. of New Jersey, the appeals court reversed a ruling dismissing a suit by a labor union that claimed the general contractor for the Revel Casino Hotel in Atlantic City, N.J., was obligated to pay its members prevailing wages because the project was funded in part by New Jersey’s Economic Development Authority.

The Third Circuit’s ruling means that the prevailing wage claim, which was originally filed in Atlantic County Superior Court before being removed to federal court on subject-matter jurisdiction grounds pursuant to the complete preemption doctrine, will go back to district court with instructions to remand it to state court.

U.S. District Judge Susan Wigenton of the District of New Jersey granted the motion of defendant Tishman Construction Corp. of New Jersey to dismiss the suit after finding that the plaintiff, New Jersey Carpenters Funds, is a benefit plan under ERISA and that the suit seeks to collect benefits under the plan. Wigenton found that the plaintiff’s claims were preempted under ERISA Sections 502(a) and 514.

On appeal, the defendant maintained that the PWA claims are completely preempted because the remedies provided under that law are mirrored by those provided under ERISA.

But the panel—Chief Judge Theodore McKee and Judges Michael Chagares and Patty Shwartz—disagreed, finding the plaintiff’s PWA claim is not completely preempted under Section 502(a) because it does not arise from ERISA.

The appeals court cited its 2004 ruling in Pascack Valley Hospital v. Local 464A Welfare Reimbursement Plan, which held that a claim is completely preempted and removable under Section 502(a) if the plaintiff could have brought the claim under that section and if no other independent legal duty supports the plaintiff’s claim.

The duty under the PWA is independent because it is not “derived from, or conditioned upon,” the terms of an ERISA plan and the duty is independent if no analysis of the plan is needed to determine if that duty exists, the court said.

“The defendant’s duty to pay prevailing wages derives from the PWA, not any ERISA plan. No interpretation of any ERISA plan is necessary in order to determine whether the carpenters were paid prevailing wages,” Chagares wrote.

As the second prong of Pascack Valley was not met, the plaintiff’s claims are not completely preempted by Section 502(a) and that section cannot provide the basis for federal court jurisdiction, the appeals court said. Because the court determined the second prong was not met, it declined to decide whether the defendant met the first prong.

Similarly, the plaintiff’s claim under the PWA is not preempted by the LMRA because proving a prevailing wage violation does not require any reference to or analysis of any collective bargaining agreement, the court said. It simply requires comparing the wages that plaintiffs were paid to those provided in the PWA, a factual question that does not turn on any ERISA plan or the interpretation of any labor contract, the court said.

The U.S. Supreme Court held in the 1988 case Lingle v. Norge Division of Magic Chef that even if dispute resolution under a collective bargaining agreement and a state law would require addressing the same set of facts, the state law claim is independent of the agreement for purposes of considering whether a suit is preempted under Section 301 of the LMRA, as long as the claim can be resolved without interpreting the agreement itself, the Third Circuit said.

The PWA requires laborers to receive the prevailing wage rate on projects that are paid for in whole or in part out of the funds of a public body. The plaintiff contends that Revel, which opened in 2012, falls under the PWA because it received financial assistance in the form of incentives, tax exemptions and tax reimbursements from the New Jersey Economic Development Authority. The plaintiff union’s members contend that the authority is a public body under the PWA, according to the appeals court.

The carpenters contend that their employer, Simon/Watt, did not pay them fringe benefits as required under the PWA. The carpenters assigned their claims to the union, the court said.

Counsel for the plaintiff, Seth Ptasiewicz of Kroll Heineman Carton in Iselin, N.J., said the ruling “reaffirms the right of employees on construction sites to utilize the Prevailing Wage Act to obtain wages and benefits that were not paid.”

Ptasiewicz said he did not know how many workers were covered by the ruling, but he expects that question to be resolved on remand to state court.

The lawyers for Tishman Construction, Gregory Begg and Alexander Saunders of Peckar & Abramson in River Edge, N.J., did not immediately return calls about the case.

Contact the reporter at ctoutant@alm.com.

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