United States District Court, Northern District of Illinois, E.D
January 29, 1985
NATIONAL METALCRAFTERS, A DIVISION OF KEYSTONE CONSOLIDATED INDUSTRIES, A DELAWARE CORPORATION, PLAINTIFF-COUNTERDEFENDANT,
DONALD J. MCNEIL, SUPERINTENDENT, WAGE CLAIMS DIVISION, ILLINOIS DEPARTMENT OF LABOR, DEFENDANT, AND BETTY JOHNSON, ET AL., INTERVENORS-DEFENDANTS-COUNTERPLAINTIFFS.
The opinion of the court was delivered by: Leighton, District Judge.
This is a lawsuit seeking to enjoin the Illinois Department of
Labor from commencing proceedings to enforce a determination made
against plaintiff pursuant to state law. Specifically, the
Department, through defendant McNeil, found that plaintiff
violated Illinois law by willfully refusing to pay claimants
here) vacation pay due under collective bargaining agreements.
The crux of plaintiff's cause of action is that Illinois law,
as it relates to the vacation pay sought by intervenors, is
pre-empted by the Employee Retirement Income Security Act
(ERISA), 29 U.S.C. § 1001 et seq., and by the National Labor
Relations Act (NLRA), 29 U.S.C. § 151 et seq. According to
plaintiff, therefore, state court action or intervention to
enforce the Department's demand for payment is improper.
Defendant and intervenors, however, contend that federal
pre-emption is inapplicable to what are essentially contract
claims under collective bargaining agreements. In their view, a
state court can fully adjudicate these claims.
The cause is before the court on the motions of plaintiff,
defendant, and intervenors, pursuant to Fed.R.Civ.P. 56, for
summary judgment on plaintiff's complaint. The parties do not
dispute any material facts, and each moves for judgment as a
matter of law, based on their pre-emption positions. Oral and
written presentations having been submitted to the court, the
only issue to be resolved is whether the Department's exercise of
jurisdiction conflicts with any federal statute, specifically,
whether it is pre-empted by either ERISA or the NLRA. That issue
arises out of the following facts.
Plaintiff, National Metalcrafters, a division of Keystone
Consolidated Industries, a Delaware corporation with its
principal place of business in Dallas, Texas, operates
manufacturing facilities in Rockford, Illinois. Employees at
plaintiff's Rockford plant traditionally have been represented by
the International Union, United Automobile, Aerospace and
Agricultural Implement Workers of America and its local Union No.
449 (the "Union"). Over the years the company and the Union
entered into a number of consecutive collective bargaining
agreements covering the employment terms of Union employees. The
most recent agreement began on April 14, 1980, and expired on
April 16, 1983. Section 6.1 of the agreement, entitled "Amount of
Vacation & Vacation Pay," obligated the company to pay vacation
benefits to Union employees based on length of service with the
Defendant Donald J. McNeil is Superintendent of the Wage Claims
Division of the Illinois Department of Labor. He administers the
provisions of the Illinois Wage Payment & Collection Act,
Ill.Rev.Stat., ch. 48 § 39m-1, m-11 (the "Act"), a statute
enacted to ensure that employers pay employees what is due under
the terms of collective bargaining agreements. An employer who
refuses to pay wages or final compensation earned under a Union
contract violates the Act.
Prior to expiration of the 1980 bargaining agreement, plaintiff
and the Union engaged in negotiations for a new agreement. As
part of the new contract, plaintiff proposed a reduction in
vacation benefits, the stated reason being to equalize Union
employees' and salaried employees' vacation benefits. Plaintiff
and the Union reached a bargaining impasse and when the 1980
agreement expired on April 16, 1983, the Union began a strike
against the company which continues to the present day.
In May, 1983, the company unilaterally implemented the vacation
benefits reduction plan, and in July, 1983, paid vacation
benefits based on the new plan rather than under the 1980
agreement. Subsequently, the Union filed an unfair labor practice
charge with the National Labor Relations Board (NLRB) alleging
that the company had violated the NLRA by, among other things,
not paying vacation benefits as embodied in the terms of the 1980
agreement.*fn1 At about the same time, 250 Union employees brought
claims before the Wage Claims Division of the Illinois Department
pursuant to the Act, for vacation wages earned and not paid by
Following briefing and oral argument, defendant McNeil found
that the company had withheld vacation pay from the employees in
violation of the Act. He ordered it to pay claimants, within 15
days, the difference between the amounts of vacation pay actually
given them in July, 1983, and the amounts they would have
received had the benefits been calculated in accordance with the
rates set forth in the 1980 contract between the company and the
Union. In reaching his decision, defendant rejected plaintiff's
arguments that the Act was pre-empted by ERISA and the NLRA, and
found that he had jurisdiction over the claims. In defendant's
view, ERISA did not pre-empt state intervention because the
vacation provisions of the Union contract under which claimants
worked did not constitute an employee benefit plan within ERISA.
"Indeed," defendant stated, "it does not appear that the company
believed its vacation obligations were governed by ERISA, at
least until it began preparing its defense to these claims . . .
workers never have received ERISA-required reports." (Memorandum
in Support of Demand for Payment, p. 8). Defendant also concluded
that the NLRA pre-emption argument was without merit, because the
case did not turn on an interpretation of federal labor law, but
rather, on the provisions of the 1980 contract. Enforcement
therefore would not "usurp the NLRB's authority . . . interfere
with the collective bargaining process or dictate the outcome of
ongoing negotiations." Id. at p. 7. In summary, defendant found
that the company
[h]as wilfully refused to pay (vacation pay) as
provided in the Wage Payment and Collection Act, and
has falsely denied the validity of the instant
claims, with intent to secure for itself an
underpayment of its indebtedness to the claimants. A
demand for payment will issue and the Department will
take appropriate legal action to enforce said demand,
absent voluntary compliance by the employer.
The company did not comply with defendant's Order. Instead, it
commenced this action seeking declaratory and injunctive relief
to the effect that Illinois law, as it applied to the vacation
pay claims, is pre-empted by ERISA and the NLRA. After the action
was commenced, Betty Johnson, who was a claimant before defendant
McNeil, intervened and filed counterclaims against plaintiff, on
behalf of herself and all others similarly situated.
Congress enacted ERISA to protect working men and women from
abuses in the administration and investment of private retirement
plans and employee welfare plans. Donovan v. Dillingham,
688 F.2d 1367, 1370 (11th Cir. 1982). ERISA established certain minimum
standards for the vesting of benefits, funding of benefits,
carrying out fiduciary responsibilities, reporting to the
government, and making disclosures to participants, id., so that
"the private pension promise (would) become real, rather than
illusory." H.R.Rep. No. 93-533, 93d Cong.2d Sess., reprinted in
1974 U.S.Code Cong. & Ad.News 4639, 4648.
Title I of ERISA applies to any employee benefit plan if it is
established or maintained —
1) by any employer engaged in commerce or in any
industry or activity affecting commerce; or
2) by any employee organization or organizations
representing employees engaged in commerce or in any
industry or activity affecting commerce; or
3) by both.
29 U.S.C. § 1003(a).
An employee benefit plan can be either an "employee welfare
benefit plan" or an "employee pension benefit plan" or a plan
which is both. 29 U.S.C. § 1002(3). An employee welfare benefit
plan is described in the statute as
[a]ny plan, fund or program which was . . .
established or maintained by an employer . . . to the
extent that such plan, fund, or program was
established or is
maintained for the purpose of providing for
its participants or their beneficiaries . . .
A) . . . benefits in the event of sickness, accident,
disability, death or unemployment, or vacation
benefits . . .
29 U.S.C. § 1002(1).
ERISA contemplates that such plans shall be established
pursuant to a written instrument providing for fiduciaries, and
that the assets of the plan shall be held in trust by trustees to
manage and control the assets of the plan. 29 U.S.C. § 1102,
Not all employee plans can meet these statutorily specific
parameters. See 29 U.S.C. § 1143(a)(1) ("there are types of plans
not subject to this Act"). Additionally, the Secretary of Labor
has enacted 29 C.F.R. § 2510.3-1 which exempts certain practices
from ERISA coverage. These include:
Payment of compensation, out of the employer's
general assets, on account of periods of time during
which the employee, although physically and mentally
able to perform his or her duties and not absent for
medical reasons (such as pregnancy, a physical
examination or psychiatric treatment) performs no
duties; for example —
i) Payment of compensation while an employee is on
vacation or absent on a holiday, including payment of
premiums to induce employees to take vacations at a
time favorable to the employer for business reasons.
29 C.F.R. § 2510.3-1(b)(3)(i).
ERISA provides a broad pre-emption section. 29 U.S.C. § 1144(a)
[t]he provisions of this title . . . shall supersede
any and all state laws insofar as they may now or
hereafter relate to any employee benefit plan
described in Section 4(a) . . .
ERISA, however, does not pre-empt statutes regulating practices
which either do not qualify as, or are excepted from the
definition of, ERISA benefit plans, and therefore are not covered
by the statute. Shaw v. Delta Airlines, Inc., 463 U.S. 85
S.Ct. 2890, 2903, 77 L.Ed.2d 490 (1983).
Plaintiff of course argues that its vacation pay plan was
established pursuant to ERISA, and that Illinois law is
pre-empted insofar as it relates to the plan. This court
disagrees. The facts of this case simply do not substantiate
plaintiff's claims. Here the court is pointed to no established
fund, no beneficiaries and no fiduciaries. Plaintiff has
submitted no evidence of a summary plan description, no annual
reports, no trust agreement, which would lead the court to
conclude that this was an ERISA fund established or maintained by
the employer for the benefit of its employees. As noted by
defendant McNeil, the ERISA pre-emption argument only seems to
have come into play when plaintiff began preparing its defense to
court actions instituted against it.
According to plaintiff, however, the "plain meaning" of the
statute mandates a finding that its plan is within ERISA. While
it is true that ERISA encompasses "vacation benefits" under the
rubric of employee welfare plan, 29 U.S.C. § 1002(1), it is
equally true that such benefits must meet the other ERISA
requirements that the assets of the plan be funded in trust. The
court does not dispute that in a proper case vacation benefits
can fall within ERISA coverage, and be subject to federal
pre-emption. See e.g., Baker v. Caravan Moving Corporation,
561 F. Supp. 337 (N.D.Ill. 1983). But this is not that case.
Plaintiff persists, however, and cites California Hospital
Association v. Henning, 569 F. Supp. 1544 (C.D.Cal. 1983) as
support for its view that all vacation plans and programs are
covered by ERISA, "irrespective of whether such arrangement is
funded, trusteed, or embodied in a writing." Id. at 1546. Henning
is a lone voice however, and it is in direct contravention of the
statute. 29 U.S.C. § 1102, 1103. This court is of the opinion
that Henning was wrongly decided, and that the better view is
expressed in the interpretation of ERISA found in Taggart
Corporation v. Life and Health Benefits Administration, Inc.,
617 F.2d 1208
(5th Cir. 1980), cert. denied 450 U.S. 1030, 101 S.Ct.
1739, 68 L.Ed.2d 225 (1981), where the court held that ERISA does
not apply to a program with no assets, no fund, and no trust to
be protected by ERISA.
Furthermore, Henning directly contradicts the Secretary's
regulation exempting vacation benefits paid out of an employer's
general assets from ERISA coverage. The administrative
interpretation of ERISA by those entrusted with its enforcement
is entitled to great weight. Abella v. W.A. Foote Memorial
Hospital, Inc., 740 F.2d 4 (6th Cir. 1984).
As this court stated to counsel at oral argument, the matter
appears clear that the Act is not pre-empted by ERISA. ERISA has
nothing to do with how collective bargaining agreements are
administered or enforced. At issue here is whether a state agency
can order an employer to pay wages earned under a collective
bargaining agreement. That is a far cry from the purpose for
which Congress enacted ERISA.
Even assuming arguendo, that plaintiff's vacation plan did fall
within ERISA's provisions, the court doubts that plaintiff has
standing to bring this action under ERISA. See 29 U.S.C. § 1132
(e)(1) (a civil action may only be brought by "the Secretary,
or by a participant, beneficiary or fiduciary"). Also see
Franchise Tax Board v. Construction Laborers Vacation Trust,
463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983). Nothing in the
evidence or oral presentations made to this court indicates that
plaintiff employer is either a participant, beneficiary, or
fiduciary, and thus, entitled to bring an ERISA action.
A final factor in rejecting the ERISA pre-emption argument is
that the Illinois law in question provides for criminal
penalties. It has been held that any Act which sanctions criminal
prosecution for failure to make certain wage payments is not
pre-empted by ERISA. See 29 U.S.C. § 1144(b)(4); Sasso v.
Vachris, 116 Misc.2d 797, 456 N.Y.S.2d 629 (Sup. 1982). For the
foregoing reasons, therefore, the court concludes that
plaintiff's claim of ERISA preemption is without merit.
The court also rejects plaintiff's alternative argument of NLRA
pre-emption. Not every state law dealing with terms and
conditions of employment comes within the sweep of the federal
labor laws. San Diego Building Trades v. Garmon, 359 U.S. 236,
243-44, 79 S.Ct. 773, 778-79, 3 L.Ed.2d 775 (1959). To determine
if state regulation is pre-empted by federal labor laws, a court
must make a balanced inquiry into such factors as the nature of
the federal and state interests and the potential for
interference with federal regulation. State interests that are "a
merely peripheral concern" of federal labor law override the
federal interest. Id. Alternatively, state regulation may escape
pre-emption by being directed at state "interests so deeply
rooted in local feeling and responsibility" that, in the absence
of compelling congressional direction, (a court) could not infer
that Congress had deprived the states of the power to act. Id. at
243, 244, 79 S.Ct. at 778, 779. See also, Gould Inc. v. Wisconsin
Department of Industry, Labor and Human Relations, et al.,
750 F.2d 608, at 610-611 (7th Cir. 1984).
The Illinois Act is one that provides basic protections for the
working citizens of Illinois. In balancing the interests at play
here, it is plain to this court that the Department seeks to
enforce rights which are "a merely peripheral concern" of federal
law, and which implicate "interests so deeply rooted in local
feeling and responsibility" that state action in no way
interferes with the NLRB's authority.
Summary judgment is appropriate in actions where there is no
genuine issue of material fact, and the moving party is entitled
to judgment as a matter of law. Fed.R.Civ.P. 56; Cedillo v.
of Bridge & Structural Iron Workers, 603 F.2d 7, 10 (7th Cir.
1979). The parties agree that there is no issue of material fact
in dispute, and the court has carefully reviewed relevant law
relating to pre-emption. The law is clear that the Illinois Wage
Payment & Collection Act is not pre-empted by ERISA, or the NLRA,
and the court concludes that defendant and intervenors are
entitled to judgment as a matter of law. Accordingly, defendant's
and intervenors' motions for summary judgment are granted, and
judgment is entered in their favor; plaintiff's motion for
summary judgment is denied.