Interpipe Contracting, Inc. v. Becerra

898 F.3d 879

INTERPIPE CONTRACTING, INC.; Associated Builders and Contractors of California Cooperation Committee, Inc., Plaintiffs-Appellants,

v.Xavier BECERRA, in his official capacity as Attorney General of the State of California; Christine Baker, in her official capacity as Director of the California Department of Industrial Relations; Julie A. Su, in her official capacity as California Labor Commissioner, Division of Labor Standards Enforcement, Defendants-Appellees.

Interpipe Contracting, Inc., Plaintiff-Appellant,

and

Associated Builders and Contractors of California Cooperation Committee, Inc., Plaintiff,

v.Xavier Becerra, in his official capacity as Attorney General of the State of California; Christine Baker, in her official capacity as Director of the California Department of Industrial Relations; Julie A. Su, in her official capacity as California Labor Commissioner, Division of Labor Standards Enforcement, Defendants-Appellees.

No. 17-55248

No. 17-55263

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 5, 2018, Pasadena, California

Filed July 30, 2018

David Wolds (argued), San Diego, California, for Plaintiff-Appellant Interpipe Contracting, Inc.

Anastasia P. Boden (argued), Sacramento, California, for Plaintiff-Appellant Associated Builders and Contractors of California Cooperation Committee, Inc.

Seth Goldstein (argued), Sacramento, California, for Defendant-Appellee Xavier Becerra

Ken Lau (argued), Oakland, California, for Defendants-Appellees Christine Baker and Julie A. Su.

Elizabeth D. Parry, Littler Mendelson P.C., Walnut Creek, California; Maurice Baskin, Littler Mendelson P.C., Washington, D.C.; for Amicus Curiae Associated Builders and Contractors.

Scott A. Kronland and Rebecca C. Lee, Altshuler Berzon LLP, San Francisco, California, for Amicus Curiae State Building and Construction Trades Council of California.

Before: Consuelo M. Callahan and Jacqueline H. Nguyen, Circuit Judges, and Robert W. Pratt,^* District Judge.

CALLAHAN, Circuit Judge:

California’s labor code requires employers on public works projects to pay their employees a "prevailing wage." To comply with this requirement, employers must either pay the prevailing wage itself or pay a combination of cash wages and benefits, such as contributions to healthcare, pension funds, vacation, travel, and other fringe benefits. In 2004, the California legislature expanded the list of eligible "benefits" to include employer payments to third-party industry advancement funds ("IAFs"). But there’s a catch. Since 2017, employers may take a wage-credit for IAF contributions only if their employees consent to doing so through a collective bargaining agreement ("CBA") negotiated by a union.

Plaintiffs-Appellants Interpipe Contracting, Inc. ("Interpipe") and Associated Builders and Contractors of California Cooperation Committee, Inc. ("ABC-CCC") challenge an amendment to the labor code that imposed the 2017 wage-credit limitation on these types of contributions. They argue that the amendment, SB 954, 2016 Leg., 2015–2016 Reg. Sess. (Cal. 2016), violates their constitutional rights because, they contend, it discriminates against pro-open shop advocacy.

Appellants’ challenges require us to answer two questions. First, we must decide whether SB 954 is preempted by the National Labor Relations Act ("NLRA") because it regulates an aspect of labor relations that Congress intended to leave to market forces, or because it regulates non-coercive labor speech. Second, if SB 954 is not preempted, we must decide whether it violates the First Amendment and the Fourteenth Amendment’s Equal Protection Clause by limiting the ability of certain IAFs to raise funds to finance their speech. Because we conclude that ABC-CCC lacks standing to press its equal protection claim, and because we hold that SB 954 is neither preempted by the NLRA nor infringes ABC-CCC’s First Amendment rights, we affirm the district court’s judgment dismissing Appellants’ action.

I.

A.

Since 1931, California has required contractors on public works projects to pay their employees a "prevailing wage." Cal. Lab. Code § 1770 ; State Bldg. & Constr. Trades Council of Cal., AFL-CIO v. City of Vista , 54 Cal.4th 547, 554, 143 Cal.Rptr.3d 529, 279 P.3d 1022 (2012). "[P]revailing wage laws are based on the ... premise that government contractors should not be allowed to circumvent locally prevailing labor market conditions by importing cheap labor from other areas." State Bldg. & Const. Trades Council , 54 Cal.4th at 555, 143 Cal.Rptr.3d 529, 279 P.3d 1022 (internal quotation marks omitted). "In satisfying the prevailing wage, employers can either pay all cash wages or pay a combination of cash wages and benefits, like contributions to pension funds, healthcare, vacation, travel, and other fringe benefits." Gomez v. Rossi Concrete , Inc ., 270 F.R.D. 579, 584 (S.D. Cal. 2010) ; see also Cal. Lab. Code § 1773.1. These "[e]mployer payments are a credit against the obligation to pay the general prevailing ... wages." Cal. Lab. Code § 1773.1(c).

Section 1773.1 allows certain employer contributions to count toward the prevailing wage. Beginning in 2004, that provision provided that

Per diem wages ... shall be deemed to include employer payments for the following:

(1) Health and welfare.

(2) Pension.

(3) Vacation.

(4) Travel.

(5) Subsistence.

(6) Apprenticeship or other training programs ... so long as the cost of training is reasonably related to the amount of the contributions.

(7) Worker protection and assistance programs or committees ... to the extent that the activities of the programs or committees are directed to the monitoring and enforcement of laws related to public works.

(8) Industry advancement and [CBA] administrative fees, provided that these payments are required under a [CBA] pertaining to the particular craft, classification, or type of work within the locality or the nearest labor market area at issue.

(9) Other purposes similar to those specified in paragraphs (1) to (8), inclusive.

Id. § 1773.1(a) (2004). Prior to 2004, employers could credit contributions only to numbers (1) through (6) above. Id. § 1773.1(a) (2003). The 2004 version expanded the credit to include contributions to IAFs—number (8)—subject to approval under a CBA.

The added IAF wage-credit option sparked controversy when employers began interpreting subsection (9) as allowing them to wage-credit contributions to IAFs without employee consent , so long as the recipient IAFs were similar to, but not covered by, a CBA, as set forth in subsection (8). To close this loophole, in 2016 the state legislature amended § 1773.1 with SB 954—the law at issue here. SB 954 clarifies that subsection (9) allows wage crediting only for "other purposes similar to those specified in paragraphs (6) to (8), inclusive, if the payments are made pursuant to a [CBA] to which the employer is obligated ." Id. § 1773.1(a)(9) (2017) (emphasis added). Thus, since SB 954 went into effect on January 1, 2017, it has been clear that employers may reduce payments to employees to support their contributions to IAFs only if doing so is approved by their employees through a CBA.

Interpipe is a plumbing and pipeline contractor that favors "open shop" employment arrangements and opposes project labor agreements ("PLAs") on public works projects. "Open shop" is labor vernacular for projects involving an employer that has no formal contracts with a labor union, and where both unionized and non-unionized labor is permitted. Del Turco v. Speedwell Design , 623 F.Supp.2d 319, 326 (E.D.N.Y. 2009) ; Ray Angelini, Inc. v. City of Philadelphia , 984 F.Supp. 873, 875 (E.D. Pa. 1997). A PLA, by contrast, is a type of collective bargaining relationship involving multiple employers and unions that agree to abide by a uniform labor agreement in their bids on public works projects. Bldg. & Constr. Trades Dep’t, AFL-CIO v. Allbaugh , 295 F.3d 28, 30 (D.C. Cir. 2002).

Before SB 954 took effect, Interpipe took a wage credit for its contributions to ABC-CCC—an IAF that opposes PLAs and supports open shop arrangements. Since SB 954 went into effect, Interpipe has ceased making payments to ABC-CCC.

B.

Interpipe and ABC-CCC brought this action against California state officials ("Appellees" or "the State")¹ in federal district court challenging SB 954 on constitutional grounds. Appellants claimed that SB 954 violates the Supremacy Clause by frustrating the purposes of the NLRA, 29 U.S.C. § 151 et seq . They argued that the law regulates in an area Congress intended to leave to the free play of market forces, and is preempted by the NLRA’s prohibition on regulating non-coercive labor speech. ABC-CCC alone brought two additional claims: that SB 954 infringes its First Amendment right to free speech and violates the Equal Protection Clause. Appellants filed a motion for preliminary injunction and Appellees filed motions to dismiss and a motion for judgment on the pleadings.

On January 27, 2017, the district court denied Appellants’ motion for a preliminary injunction and dismissed their action. Associated Builders & Contractors of Cal. Cooperation Comm., Inc. v. Becerra , 231 F.Supp.3d 810, 828 (S.D. Cal. 2017). The court held that the NLRA does not preempt SB 954, that SB 954 does not infringe ABC-CCC’s First Amendment rights, and that ABC-CCC lacked standing to bring its equal protection claim. Id. at 820–28. As to the NLRA claim, the court held that Machinists² preemption—a doctrine deeming preempted conduct that " ‘Congress intended be unregulated,’ " id. at 820 (quoting Chamber of Commerce of U.S. v. Brown , 554 U.S. 60, 65, 128 S.Ct. 2408, 171 L.Ed.2d 264 (2008) ), such as collective bargaining—did not apply because the NLRA preserves States’ authority to set minimum labor standards, and SB 954 is such a standard. Id . at 821–24. The court further held that SB 954 does not regulate non-coercive labor speech because it "does not prevent employers or employees from speaking...