USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 94-1628
OBDULIO ROSARIO-CORDERO, ET AL.,
Plaintiffs - Appellants,
v.
CROWLEY TOWING & TRANSPORTATION CO.,
Defendant - Appellee.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Jos Antonio Fust , U.S. District Judge]
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Before
Torruella, Chief Judge,
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Campbell, Senior Circuit Judge,
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and Boyle,* Senior District Judge.
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Jane E. L pez, with whom Gerardo L. Santiago-Puig, Miguel A.
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P rez-Vargas and Santiago Puig Law Office were on brief for
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appellants.
Raquel M. Dulzaides, with whom Jim nez, Graffam & Lausell
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was on brief for appellee.
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February 1, 1995
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* Of the District of Rhode Island, sitting by designation.
TORRUELLA, Chief Judge. The issue presented in this
TORRUELLA, Chief Judge.
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case is whether appellants' claims under Mandatory Decree No. 38
of the Minimum Wage Board of Puerto Rico are preempted by
514(a) of the Employee Retirement Income Security Act of 1974, 29
U.S.C. 1001 et seq., as amended ("ERISA"). Appellants Obdulio
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Rosario-Cordero and Otilio Mart nez-Arroyo ("Appellants")
initiated this action in Puerto Rico local court against their
former employer, Crowley Towing and Transportation Company
("Crowley"), alleging that they were not allowed to enjoy
vacation leave duly owed them pursuant to Mandatory Decree No.
38. The case was removed to the United States District Court for
the District of Puerto Rico on Crowley's theory that Appellants'
claims under Mandatory Decree No. 38 were preempted by ERISA.
Rosario-Cordero v. Crowley Towing & Transp. Co., 850 F. Supp. 98
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(D.P.R. 1994). Ruling on Crowley's motion for summary judgment,
the district court held that the Appellants' claims were indeed
preempted by ERISA. Id. at 102. For the following reasons, we
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affirm.
BACKGROUND
BACKGROUND
Crowley operates a tugboat operation covering Puerto
Rico, ports in the continental United States, the U.S. Virgin
Islands, and some international ports. The nature of Crowley's
operations requires its employees to travel to the different
ports to provide tug services.
Most of Crowley's employees are members of the
Seafarers' International Union, Atlantic, Gulf, Lakes and Inland
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Waters District, AFL-CIO (the "Union"). During all relevant
periods, Appellants were members of the Union, and the Union was
their exclusive bargaining representative. Pursuant to a
Collective Bargaining Agreement (the "CBA"), the Union and
Crowley agreed to participate in the Seafarers' Vacation Plan
(the "Plan").
The Plan is a multiemployer employee benefit plan which
provides vacation benefits to the employees of its members. The
Plan is structured and governed in accordance with ERISA. It is
administered by an Administrator. The Administrator, in turn, is
appointed by the Plan's twelve-member Board of Trustees. Six of
the Trustees are appointed by the Union and the other six by the
participating employers.
The Plan provides for the establishment of a fund from
contributions from the participating employers. The
contributions are deposited in the Plan's bank accounts. These
funds, which contain only Plan monies, are held in trust, and a
portion of the assets are invested in bonds and notes. The funds
are used to pay vacation benefits to the eligible participants,
and to cover the Plan's administrative costs. Under the CBA,
Crowley was required to make periodic contributions to the Plan
for each employee.
The Plan triggers vacation pay when an employee has
worked seventy-five days in a fifteen-month period, irrespective
of whether the employee intends to actually take the vacation
leave. During their employment, both Appellants applied for and
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received the vacation payment due them under the Plan's terms,
although they did not take the vacation leave. Appellants are
now retired.
Despite their receipt of vacation pay under the Plan,
Appellants filed suit against Crowley, claiming that they were
never allowed to take their vacation leave as mandated by Puerto
Rico's Mandatory Decree No. 38, (the "Decree").1 The Decree
provides in relevant part:
Every employee shall be entitled to
vacation leave with full pay to become
effective when he begins to enjoy it, at
the rate of one and five twelves [sic] (1
5/12) days for each month in which he has
worked at least one hundred (100) hours.
This leave is equivalent to seventeen
(17) workdays per year. . . .
The employer who does not grant any of
his employees the vacation leave to which
he is entitled after having accrued it
for two (2) years, shall grant him the
total thus far accrued, paying him twice
(2) the wage corresponding to the period
accrued in excess of said two years. . .
.
Any contract whereby the employee waives,
for money or other consideration, his
right to actually take his vacation leave
shall be unlawful and void.
Appellants claim, therefore, that Crowley is obligated to pay
them a sum equivalent to seventeen days of work per year of
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1 The Decree is one of 43 decrees promulgated by the Minimum
Wage Board of Puerto Rico. The Board is authorized by Section 2
of the Minimum Wage Act of Puerto Rico, 29 L.P.R.A. 245(a), to
establish mandatory decrees regarding the working conditions of
particular industries. These decrees are quasi-legislative
documents with the force of law. Mendoza v. Minimum Wage Board
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of Puerto Rico, 74 P.R.R. 695, 702 (1953).
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service, plus the double penalty provided by the Decree.
DISCUSSION
DISCUSSION
A. Standard of Review
A. Standard of Review
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Because the district court granted summary judgment in
Crowley's favor, we review that decision de novo. Serrano-P rez
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v. FMC Corp., 985 F.2d 625, 626 (1st Cir. 1993); Pagano v. Frank,
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983 F.2d 343, 347 (1st Cir. 1993). We must determine whether the
record, viewed in the light most favorable to the non-moving
Appellants and with all reasonable inferences drawn in their
favor, presents no genuine issue of material fact and thus
entitles Crowley to judgment as a matter of law. Serrano-P rez,
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985 F.2d at 626.
B. Preemption Under ERISA Generally
B. Preemption Under ERISA Generally
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As the Appellants correctly point out, preemption of
state law is generally disfavored. McCoy v. Massachusetts Inst.
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of Technology, 950 F.2d 13, 16 (1st Cir. 1991). This presumption
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against preemption is, however, not absolute. When Congress has
expressly so provided, federal preemption of state law is
mandated under the Supremacy Clause. Id.
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ERISA preemption is, as a general matter, expansive in
scope. McCoy, 950 F.2d at 16. In formulating the statute,
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Congress included a sweeping preemption clause, 514(a),
commanding that ERISA "shall supersede any and all State laws
insofar as they may now or hereafter relate to any employee
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benefit plan." 29 U.S.C. 1144(a) (emphasis added). For
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preemption purposes, "State laws" are "all laws, decisions,
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rules, regulations, or other State action having the effect of
law." 29 U.S.C. 1144(c)(1). Puerto Rico is expressly included
in the statute's definition of "State." 29 U.S.C. 1002(10).
The United States Supreme Court has repeatedly
explained that a state law "relates to" an employee benefit plan
"'if it has a connection with or reference to such a plan.'"
District of Columbia v. Greater Washington Bd. of Trade, __ U.S.
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__, 113 S. Ct. 580, 583 (1992) (quoting Shaw v. Delta Air Lines,
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Inc., 463 U.S. 85, 96-97 (1983)); Ingersoll-Rand Co. v.
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McClendon, 498 U.S. 133, 139 (1990). Moreover, a state law may
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"relate to" an employee benefit plan and thereby be preempted,
even if the law is not specifically designed to affect such
plans, and even if its effect is indirect. Greater Washington
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Bd. of Trade, __ U.S. at __, 113 S. Ct. at 583 (citing Ingersoll-
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Rand, 498 U.S. at 139).
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Following the Supreme Court's lead, this Circuit has
also construed the words "relate to" broadly; a state law may
relate to an employee benefit plan even though the law does not
conflict with ERISA's own requirements, and represents an
otherwise legitimate state effort to impose or broaden benefits
for employees. Simas v. Quaker Fabric Corp. of Fall River, 6
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F.3d 849, 852 (1st Cir. 1993) (citations omitted).
Therefore, a state law with even an indirect effect on
an ERISA-covered benefit plan is preempted, even though ERISA by
its terms may not necessarily address the topic covered by the
state law. For example, a state law is preempted if it restricts
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the choices of a benefit plan regarding its administration,
structure, or benefits. See, e.g., FMC Corp. v. Holliday, 498
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U.S. 52, 60 (1990) (ERISA preempts Pennsylvania antisubrogation
statute restricting structure of ERISA plans); Alessi v.
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Raybestos-Manhattan, Inc., 451 U.S. 504, 505 (1981) (ERISA
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preempts New Jersey statute insofar as statute prevents ERISA
plans from decreasing benefits); United Wire, Etc. v. Morristown
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Mem. Hosp., 995 F.2d 1179, 1193 (3d Cir. 1993) (state statute may
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be preempted if its effect is to "dictate or restrict the choices
of ERISA plans with regard to their benefits, structure, [or]
reporting and administration"); National Elevator Industry, Inc.
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v. Calhoun, 957 F.2d 1555, 1561 (10th Cir.) (ERISA preempts
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Oklahoma statute insofar as it "may be used to effect change in
the administration, structure, and benefits of an ERISA plan"),
cert. denied, __ U.S. __, 113 S. Ct. 406 (1992); Arkansas Blue
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Cross & Blue Shield v. St. Mary's Hospital, 947 F.2d 1341 (8th
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Cir. 1991) (ERISA preempts Arkansas statute regulating the
assignment of benefits to health care providers), cert. denied,
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__ U.S. __, 112 S. Ct. 2305 (1992). Any such state laws can
avoid ERISA preemption only if they have merely a "'tenuous,
remote, or peripheral connection'" with a covered benefit plan,
"'as is the case with many laws of general applicability.'"
Combined Mgt. v. Superintendent of Bur. of Ins., 22 F.3d 1, 3
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(1st Cir. 1994) (quoting Greater Washington Bd. of Trade, __ U.S.
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at __, 113 S. Ct. at 583 n.1).
This broad preemptive effect of ERISA may be
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surprising, given that ERISA was passed primarily to safeguard
employees from the abuse and mismanagement of funds accumulated
in various types of employee benefit plans. Fort Halifax Packing
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Co. v. Coyne, 482 U.S. 1, 15 (1987). Yet, as we have explained,
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"the reason for the broad preemption provision is clear: By
preventing states from imposing divergent obligations, ERISA
allows each employer to create its own uniform plan, complying
with only one set of rules (those of ERISA) and capable of
applying uniformly in all jurisdictions where the employer might
operate." Simas, 6 F.3d at 852.
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Finally, we address what plans constitute "employee
benefit plans" for 514(a)'s purposes. The district court ably
set forth the applicable law on this point in its opinion,
Crowley, 850 F. Supp. at 100-101, and we follow suit here merely
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for the sake of thoroughness. Section 3(3) of ERISA defines
employee benefit plans as plans that are either "an employee
welfare benefit plan," or "an employee pension benefit plan," or
both. 29 U.S.C. 1002(3). An employee welfare benefit plan, in
turn, is defined as:
[A]ny plan, fund, or program which was
heretofore or is hereafter established or
maintained by an employer or by an
employee organization, or by both, to the
extent that such plan, fund, or program
was established or is maintained for the
purpose of providing for its participants
or beneficiaries, (A) . . . vacation
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benefits. . . .
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29 U.S.C. 1002(1) (emphasis added). ERISA does not further
define "plan, fund or program" or "vacation benefits." The
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Supreme Court, however, has clearly stated that "a multiemployer
fund created to provide vacation benefits for union members who
typically work for several employers during the course of a year
. . . undoubtedly falls within the scope of the Act."
Massachusetts v. Morash, 490 U.S. 107, 114 (1989). The Court
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distinguished such multiemployer plans, where vacation benefits
are paid out of a separate fund established for that purpose,
from a single employer's payroll practice of awarding vacation
pay, where the payments are made out of the employer's general
assets. The latter practices, the Court held, are not covered by
ERISA. Morash, 490 U.S. at 113-114. The Court went on to state:
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[W]e emphasize that the case before us
. . . concern[s] payments by a single
employer out of its general assets. An
entirely different situation would be
presented if a separate fund had been
created by a group of employers to
guarantee the payment of vacation
benefits to laborers who regularly shift
their jobs from one employer to another.
Employees who are a beneficiary of such a
trust face far different risks and have
far greater need for the reporting and
disclosure requirements [of ERISA] than
those whose vacation benefits come from
the same fund from which they receive
their paychecks.
Morash, 490 U.S. at 120.
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Given these principles, therefore, our task becomes
clear. We must determine 1) whether the Plan at issue in this
case is an "employee benefit plan" within the scope of ERISA, and
if so, 2) whether the Decree "relates to" the Plan. If it does,
then ERISA preempts the Decree and Appellants' claims under the
Decree are foreclosed.
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C. Is the Plan Covered by ERISA?
C. Is the Plan Covered by ERISA?
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As we explained above, the Plan is a multiemployer
employee benefit plan established and governed in accordance with
ERISA. Under the Plan, employees, including the Appellants here,
become entitled to vacation benefits regardless of their
employer, as long as they work seventy-five days in a fifteen-
month period. Employees seeking their vacation benefits must
apply directly to the Plan Administrator to obtain them. The
benefits are then paid to employees out of a segregated trust
fund established solely for that purpose, and not out of the
general assets of any individual employer.
The employers' participation in the Plan consists
solely of making the required contributions. The individual
employers, including Crowley, are not involved in the application
for or the administration of the benefits. In fact, the payment
of vacation benefits under the Plan rests on contingencies and
processes entirely outside of the individual employers' and
employees' control.
It seems clear to us that this Plan is precisely the
type of plan that Congress intended to reach in enacting ERISA.
It certainly falls squarely within the description, quoted above,
set forth by the Supreme Court in Morash, 490 U.S. at 120.
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Employee members of the Plan are the beneficiaries of the trust
established for the payment of their vacation benefits, and thus
face the risks of fund mismanagement and payment failures that
ERISA was intended to prevent. If the Plan were not covered by
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ERISA, all of the Plan's participating employees would suddenly
be exposed to these risks. For these reasons, we find that the
Plan at issue here is indeed an "employee benefit plan" for
ERISA's 514(a) purposes.
D. Does the Decree "Relate to" the Plan?
D. Does the Decree "Relate to" the Plan?
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Appellants contend that the Decree does not "relate to"
the Plan because 1) the Decree is a law of "general
applicability" not aimed at the administration of ERISA plans; 2)
the penalty imposed by the Decree does not constitute a "plan"
such as ERISA is meant to regulate; and 3) if the cause of action
created by the Decree were preempted, employees would be left
without a remedy at law. We address each of these contentions in
turn.
1. Is the Decree a "law of general application" with
1. Is the Decree a "law of general application" with
a connection "too tenuous, remote, or peripheral" to
a connection "too tenuous, remote, or peripheral" to
relate to the Plan?
relate to the Plan?
Appellants claim that the Decree is a regulation
directed at all employers in the transportation industry
regardless of whether they maintain an ERISA-covered plan. The
Decree, they explain, mandates and regulates vacation leave and
other working conditions for the protection of workers in that
industry. As such, it is a law of general applicability neither
directed at nor predicated upon the existence of an ERISA plan,
and thus does not "relate to" the Plan.
In support of their argument on this point, Appellants
submit an inaccurate statement of the law. Significantly, they
incorrectly rely on the traditional preemption analysis
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applicable to less comprehensive federal statutes, arguing that
the Decree here is not preempted because it does not interfere
with ERISA's overriding concern of protecting beneficiaries of
employee benefit plans from fraud or misuse of plan funds. As we
have explained, however, the broad preemption clause of ERISA
obliges courts to apply ERISA's preemptive effects expansively,
and therefore the preemption analysis under ERISA is entirely
different than for other federal statutes. Thus, the narrower
preemption analysis offered by the Appellants is simply
inapplicable here.2
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2 The Appellants also erroneously rely on two cases to support
their contentions. First, they cite our decision in Combined
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Management, 22 F.3d at 1, for the proposition that a state law is
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not preempted by ERISA when the law is "a matter of general
application affecting all private employers, whether or not they
have adopted an ERISA plan, and because the law does not affect
the structure, administration, or type of benefits provided by
any ERISA plans." For good reason, the Appellants do not provide
a page cite or contextual explanation. The quoted sentence is
indeed in the case, but in the section summarizing the holding of
the district court, not in our own holding. Moreover, the
Combined Management decision simply does not support the
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Appellants' arguments. Although we found in that case that the
Maine state law in question was not preempted by ERISA, our
decision rested on the fact that the type of state law in
question, a workers' compensation law, was expressly excepted
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from ERISA's preemption clause under ERISA's own terms. Combined
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Management, 22 F.3d at 3-4 (citing ERISA 4(b)(3), 29 U.S.C.
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1003(b)(3)). Here, by contrast, the Decree is not a law
expressly excepted from ERISA's preemptive sweep.
Appellants also offer Vartanian v. Monsanto Co., 14 F.3d 697
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(1st Cir. 1994), and contend that the case sets forth a "two-
pronged test" for determining whether a state law relates to an
ERISA plan, which is not met here. Once again, the Appellants'
use of case law is misguided. Vartanian involved a plaintiff who
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brought claims against his employer under both an ERISA cause of
action and a cause of action for common law misrepresentation.
Vartanian, 14 F.3d at 699. We found there that the state common
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law cause of action was preempted by ERISA because the court's
inquiry was necessarily directed to the ERISA plan. The "test"
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Although the Decree is indeed a law of general
application affecting employers regardless of their participation
in plans, this does not necessarily save it from preemption. As
we explained, laws of general application will be preempted if
they "relate to" an ERISA-covered plan, even indirectly. Greater
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Washington Bd. of Trade, __ U.S. __, 113 S. Ct. at 583 (citations
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omitted). In the case at bar, the Decree requires that an
employer pay an employee the accrued vacation pay at the time the
employee takes leave. Any contract allowing the employee to
receive payment in lieu of leave is null and void. Under the
Decree, the employee must work at least one hundred hours in a
month to accrue one and five-twelfths vacation days. Presumably,
the employer may establish the employee's vacation schedule, and
when the employee will receive the payment.
In many respects, therefore, the Decree's requirements
differ from or conflict with the terms of the Plan. Under the
Decree, the employer determines when the employee takes vacation
leave or payment; under the Plan, the choice is the employee's,
and the employer is not involved in the disbursement of vacation
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relied upon was formulated by the Supreme Court in Ingersoll-
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Rand, for determining when a "judicially created cause of action"
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is preempted. Ingersoll-Rand, 498 U.S. at 141. The analysis
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applied in Vartanian is not the sole, talismanic test for
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preemption in all circumstances, but one tailored for cases
involving common law causes of action, a circumstance not
presently before us. As we have already explained, this Circuit,
following Supreme Court precedent, has held that ERISA preempts
state laws if they relate to an ERISA plan, even indirectly. The
inquiry into whether a law "relates to" a plan is necessarily
fact-intensive. Here, the Decree by its terms interferes with
the administration, accrual and disbursement of benefits under
ERISA plans, and is therefore preempted.
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benefits. Under the Plan, an employee accrues vacation benefits
after working at least seventy-five days in a fifteen-month
period, whereas the Decree establishes a different timeframe for
triggering leave. Most significantly, the Decree imposes a
penalty on non-complying employers, and prohibits any alternative
arrangements.
In all these respects, the Decree imposes different
requirements on employers than those imposed by the Plan, and
affects the accrual and disbursement of vacation benefits to
employee members of the Plan. Moreover, the manner and degree
to which the Decree affects the Plan is substantial, and cannot
be termed "tenuous, remote, or peripheral." Indeed, the Decree
by its terms would prohibit a significant aspect of the Plan,
which allows employees to receive vacation payments in lieu of
leave. Therefore, we find that the Decree does "relate to" the
Plan for purposes of 514(a) of ERISA.
2. Appellants' remaining contentions
2. Appellants' remaining contentions
Appellants also contend that the Decree does not create
a "plan" such as ERISA is meant to regulate. Because the Decree
is only concerned with "vacation leave" and not with the field of
"vacation plans," they claim, the Decree is not preempted. Once
again, this argument seems to rest on the Appellants' misguided
perception of the applicable preemption principles. ERISA
preempts state laws that relate to covered plans; it does not
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require that a state law establish such a plan, or expressly
contemplate existing plans, in order for preemption to apply. As
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we have explained above, the Plan here is a covered plan under
the terms of ERISA, and the Decree significantly affects its
administration and restricts its terms. It is, therefore,
preempted by ERISA insofar as it affects ERISA-covered plans.
Appellants finally argue that if the Decree is
preempted, employees would be left without a remedy in law. They
claim that Crowley seeks here to "'don the mantle of ERISA'" to
escape its obligation to comply with Puerto Rico's employment
practices law (quoting Combined Management, 22 F.3d at 5).
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Although we are sympathetic to the Appellants' argument
on this point, it unfortunately is unavailing. As we explained
above, one of the primary purposes of ERISA's broad preemption
clause was to prevent states from imposing divergent obligations,
and to thereby allow employers to create and administer employee
benefit plans subject to one uniform set of regulations. Simas,
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6 F.3d at 852. The additional burdens and penalties placed on
employers by these divergent, preempted state laws are,
therefore, the necessary casualties of the otherwise beneficial
effects of ERISA. Unlike some other federal laws, ERISA does not
merely establish a "floor" of employee benefits or rights below
which states cannot fall. It sweepingly preempts any and all
state laws that "relate to" a plan within ERISA's coverage, even
those laws which provide stronger protections for employees. The
double penalty mandated by the Decree here is a perfect example
of the type of problem at which ERISA's preemption clause is
directed. The preemption clause of ERISA would be meaningless if
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employers such as Crowley could enter, by a collective bargaining
agreement, into a multiemployer vacation benefit plan, and comply
with that plan, yet still be held liable under the Decree because
the plan terms differ from the Decree.
Finally, we point out that if the Appellants had been
improperly denied benefits, which is not the case here, they
would have a cause of action under ERISA. Therefore, although
they lose their legal remedy under the Decree through preemption,
they gain the protections of ERISA by participating in an ERISA-
covered plan.
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CONCLUSION
CONCLUSION
For the foregoing reasons, we find that ERISA preempts
Mandatory Decree No. 38 insofar as it relates to ERISA-covered
employee benefit plans. The district court's order is therefore
affirmed.
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