Civ. No. 01-2914 (GEB)
March 26, 2003
This matter comes before the Court upon the motion of plaintiffs, Joseph Stong, Inc., and Neil Stong ("Stong") for summary judgment and the cross-motion of defendant, Mark B. Boyd, Commissioner of the State of New Jersey, Department of Labor ("NJDOL") for summary judgment. The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331. For the reasons discussed below, plaintiffs' motion for summary judgment is granted and defendant's cross-motion for summary judgment is denied.
By Court order dated, October 15, 2001, Mark B. Boyd, Commissioner of the State of New Jersey Department of Labor, was substituted as the defendant.
Stong is a plumbing contractor, incorporated in Pennsylvania, and based in Chester, Pennsylvania. Plaintiffs' Statement of Facts ("Pls' Stmt. of Facts") at 2. Neil Stong is the President of Stong and is a Pennsylvania resident. Id. Stong works on New Jersey state funded construction projects, which are governed by the New Jersey Prevailing Wage Act, N.J.S.A. § 34:11-4 et seq. Id. Stong hires apprentice plumbers and sprinkler fitters who are registered in an apprenticeship training program developed by the American Fire Sprinkler Association ("AFSA") and administered in Pennsylvania by the Southeast Pennsylvania Chapter of Associated Builders and Contractors ("ABC"), a construction contractors' association of which Stong is a member. Id. at 2. The AFSA apprenticeship program has been registered and approved on a national level by the Bureau of Apprenticeship and Training ("BAT"), United States Department of Labor. Id. at 2-3.
On the state level, Stong's apprenticeship program is approved and certified by the Pennsylvania Apprenticeship and Training Council ("PATC") and the Federal Committee on Apprenticeship. Id. at 3. PATC is a division of the Pennsylvania Department of Labor and Industry, which is responsible for establishing and maintaining apprenticeship standards and registering apprenticeship programs in cooperation with BAT. Id. "BAT is authorized to formulate and promote labor standards necessary to safeguard the welfare of apprentices, to extend such standards, and to cooperate with state agencies engaged in the formulation and promotion of apprenticeship standards." Defendant's Statement of Facts ("Def's Stmt. of Facts") at 2-3. PATC is a BAT approved State Apprenticeship Agency or State Apprenticeship Council ("SAC"). Pls' Stmt. of Facts at 3. Pennsylvania is a SAC state, in which the PATC has the power, approved by BAT, to register apprenticeship programs for federal purposes. Id. "BAT provides promotional, servicing, and data storage assistance to the limited field staff and works with employers to develop apprenticeship programs and register apprentices." Def's Stmt. of Facts at 4. New Jersey has no SAC and thus is considered a BAT state, where BAT registers apprentices and apprenticeship programs directly. Id.
Defendant is responsible for administering and enforcing New Jersey's prevailing wage laws. Pls' Stmt. of Facts at 4. The Public Contracts Section of NJDOL's Division of Wage and Hour Compliance ("Division") specifically enforces the Prevailing Wage Act. Id. The Public Contracts Section ensures that contractors on New Jersey public works projects properly classify their employees and pay them the appropriate wages under their classification pursuant to the prevailing wage laws. Id. Apprentices who do not meet New Jersey's regulations are paid a higher wage. Def's Stmt. of Facts at 2.
The Divisions enforcement procedures are as follows. Alleged violations of the prevailing wage laws are identified by the Public Contracts Section field representatives and then confirmed by their superiors in the Division. Pls' Stmt. of Facts at 4. Field representatives investigate complaints, prepare written reports and make initial determinations on whether a violation has occurred. Id. The field representatives are overseen by three district supervisors, who review the reports and either give the report back for further investigation or pass it along to a hearing officer to assess penalties and fines. Id. If the employer contests the finding of a violation, it may request an informal pre-hearing settlement conference. Id. If this does not occur or settle the matter, then a hearing officer holds a hearing and renders a decision. Id. If the employer then disputes this decision, the case is transferred to the Office of Administrative Law for an adversarial proceeding. Id.
"In 1997, the Division decided to strictly enforce the regulation because it believed that contiguous states had begun to enforce their own similar statutes and regulations to the perceived detriment of New Jersey contractors." Def's Stmt. of Facts at 5. This decision was memorialized in a letter dated June 11, 1997, from Leonard Katz ("Katz"), the Assistant Commissioner of NJDOL responsible for the Division of Wage and Hour Compliance, to Dennis Fitzgerald ("Fitzgerald"), the New Jersey state director of BAT. Pls' Stmt. of Facts at 5. Katz's letter stated that New Jersey would "not recognize apprenticeship programs for other states effective this date" because other states have taken a similar stance against New Jersey contractors. Id. The NJDOL relies on Fitzgerald to confirm the bona fide status of apprentices for purposes of the Prevailing Wage Act compliance. Id.
In 1999, Stong was investigated by the NJDOL to determine the wages paid to two apprentices, Jeff Shetter and Brian Haines, that were working on a public works project in Trenton, New Jersey. Id. at 6. Stong provided documentation that the apprentices were registered in Pennsylvania. Id. "On October 10, 1999, BAT advised the Division that the Stong Apprentices `are not registered apprentices.'" Def's Stmt. of Facts at 6. On February 29, 2000, Nelson Reeder ("Reeder"), Chief of the Public Contracts Section, informed Stong that it was found in violation of the Prevailing Wage Act. Pls' Stmt. of Facts at 8. A pre-hearing settlement conference was scheduled for April 11, 2000. Id. Stong then requested a formal hearing. Id. On July 12, 2000, the NJDOL issued a Final Order assessing past due wages, penalties and fees against Stong. Id.
On June 15, 2001, plaintiffs filed the instant action before this Court. On November 7, 2002, plaintiffs moved for summary judgment. Upon oral application, defendant cross-moved for summary judgment. These motions are fully briefed and are before the Court for its consideration.
It appears that defendant's counsel submitted a notice of cross-motion for summary judgment to plaintiffs' counsel, but an original notice of cross-motion for summary judgment was not filed with the Clerk of this Court.
A. STANDARD FOR SUMMARY JUDGMENT
A party seeking summary judgment must "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Orson, Inc. v. Miramax Film Corp., 79 F.3d 1358, 1366 (3d Cir. 1996); Healy v. New York Life Ins. Co., 860 F.2d 1209, 1219, n. 3 (3d Cir. 1988), cert. denied, 490 U.S. 1098 (1989); Hersh v. Allen Prod. Co., 789 F.2d 230, 232 (3d Cir. 1986).
In deciding whether there is a disputed issue of material fact, the Court must view the underlying facts and draw all reasonable inferences in favor of the nonmoving party. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Pennsylvania Coal Ass'n v. Babbitt, 63 F.3d 231, 236 (3d Cir. 1995); Hancock Indus. v. Schaeffer, 811 F.2d 225, 231 (3d Cir. 1987). The threshold inquiry is whether there are "any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242. 250 (1986) (noting that no issue for trial exists unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict in its favor).
In deciding whether triable issues of fact exist, Rule 56(e) of the Federal Rules of Civil Procedure provides, in relevant part:
When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.
Fed.R.Civ.P. 56(e). The rule does not increase or decrease a party's ultimate burden of proof on a claim. Rather, "the determination of whether a given factual dispute requires submission to a jury must be guided by the substantive evidentiary standards that apply to the case." Anderson, 477 U.S. at 255-56.
Under the rule, a movant must be awarded summary judgment on all properly supported issues identified in its motion, except those for which the nonmoving party has provided evidence to show that a question of material fact remains. Celotex, 477 U.S. at 324. Put another way, once the moving party has properly supported its showing of no triable issue of fact and of an entitlement to judgment as a matter of law, for example, with affidavits, which may be "supplemented . . . by depositions, answers to interrogatories, or further affidavits," id., "its opponent must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita, 475 U.S. at 586; see also Anderson, 477 U.S. at 247-48 ("by its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion . . . the requirement is that there be no genuine issue of material fact.").
What the nonmoving party must do is "go beyond the pleadings and by [its] own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Celotex, 477 U.S. at 324; see also Lujan v. National Wildlife Fed., 497 U.S. 871, 888 (1990) ("[t]he object of [Rule 56(e)] is not to replace conclusory allegations of the complaint . . . with conclusory allegations of an affidavit"); Anderson, 477 U.S. at 249; Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992) ("to raise a genuine issue of material fact . . . the [nonmoving party] need not match, item for item, each piece of evidence proffered by the movant," but rather must exceed the `mere scintilla' threshold"), cert. denied, 507 U.S. 912 (1993).
B. PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT/ DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT1. New Jersey's Prevailing Wage Act and the Commerce Clause
Stong argues that since 1997, the NJDOL has purposely enforced its apprenticeship regulation in a discriminatory manner so as to benefit in-state economic interests at the expense of out-of-state economic interests in violation of the dormant commerce clause. Plaintiffs' Brief ("Pls' Br.") at 14. Defendant contends that New Jersey's Prevailing Wage Act is facially neutral and non-discriminatory in effect and therefore is not violative of the dormant commerce clause. Defendant's Brief ("Def's Br.") at 7-8. This Court agrees with plaintiffs.
The prevailing wage laws regulating apprentices in New Jersey provide, in relevant part,
`Apprentice' means an individual who. while performing work on a public work project, is registered, in good standing, in an apprenticeship program approved or certified by the Division of Vocational Education in the New Jersey Department of Education or by the Bureau of Apprenticeship and Training [BAT] in the United States Department of Labor.
The Commerce Clause of the United States Constitution provides that "Congress shall have Power . . . [t]o regulate Commerce . . . among the several States." U.S. Const. art. I. § 8, cl. 3. The negative or dormant commerce clause prohibits the states from burdening interstate commerce. Oklahoma Tax Comm'n v. Jefferson Lines, Inc., 514 U.S. 175, 179-80 (1995). In its negative aspect, the Commerce Clause "prohibits economic protectionism — that is, `regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors.'" Associated Indus. of Mo. v. Lohman, 511 U.S. 641, 647 (1994) (quoting New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 273 (1988)). "Thus, state statutes that clearly discriminate against interstate commerce are routinely struck down . . . unless the discrimination is demonstrably justified by a valid factor unrelated to economic protectionism . . ." West Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 192 (1994) (quoting New Energy, 486 U.S. at 273-74).
"The initial question in a dormant Commerce Clause case is whether the state regulation at issue discriminates against interstate commerce `either on its face or in practical effect.' If so, heightened scrutiny applies." Cloverland-Green Spring Dairies, Inc. v. Penn. Milk Mktg. Bd., 298 F.3d 201, 210 (3d Cir. 2002) (citing Maine v. Taylor, 477 U.S. 131, 138 (1986); Harvey Harvey, Inc., v. County of Chester, 68 F.3d 788, 797 (3d Cir. 1995), cert. denied, 516 U.S. 1173 (1996)). "`Discrimination against interstate commerce in favor of local business or investment is per se invalid, save in a narrow class of cases in which the [State] can demonstrate. under rigorous scrutiny, that it has no other means to advance a legitimate local interest.'" Id. at 210-211 (quoting C A Carbone, Inc., v. Town of Clarkstown, N.Y., 511 U.S. 383, 392 (1994); Juzwin v. Asbestos Corp., Ltd., 900 F.2d 686, 689 (3d Cir. 1990), cert. denied, 498 U.S. 896 (1990)). First, the regulation at issue here is not facially discriminatory. It applies equally to instate and out-of-state employers who employ apprentices while performing public works in New Jersey. However, "[i]t is clear that state laws that are facially neutral but have the effect of eliminating a competitive advantage possessed by out-of-state firms trigger heightened scrutiny." Id. at 211 (citing Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 333 (1977); Baldwin v. G.A.F. Seeling, Inc., 294 U.S. 511 (1935)).
Since June 11, 1997, the purpose and effect of the regulation has been to discriminate against out-of-state apprentices and in turn, out-of-state contractors, in violation of the dormant commerce clause. New Jersey has openly engaged in clear economic protectionism as evidenced by the record. As noted earlier, in a letter from Katz to Fitzgerald, Katz stated, "[b]ased on policies currently in place with our neighboring states, the New Jersey Department of Labor will no longer recognize out-of-state apprenticeship programs for the purposes of Prevailing Wage Act Compliance. Therefore . . . we do not recognize apprenticeship programs for other states effective this date. Certification of Glen B. Beard ("Beard Cert."), Exhibit 8.
Reeder explained during his deposition that Katz, as Assistant Commissioner of the Division of Wage Hour Compliance, he reported directly to Commissioner Gelade and that Katz sets policy in that division. Id. Exhibit 3 at 31-32. Reeder also noted that Fitzgerald's job was to confirm the bona fide status for apprentices and that an apprentice is not accepted in New Jersey unless and until Fitzgerald confirms it. Id. at 34. Reeder further stated that prior to 1997, he was not aware of an instance where New Jersey invalidated the wages paid to Pennsylvania, New York, or Delaware apprentices based on the apprentice program from that state. Id. at 50-51. In addition, he remarked that following 1997, there was a change in enforcement of the regulation. Id. at 51. Reeder commented, "[i]t just simply came down from Assistant Commissioner Katz or from someone that the instructions were, at my level, that henceforth and forever after, we're going to enforce our apprenticeship regulation the way it was intended." Id. When asked whether Stong's apprentices were participants in a properly registered apprenticeship program in the State of Pennsylvania, Reeder stated, "[i]n the State of Pennsylvania, that is correct." Id. at 68.
Ridolfino, a former Chief of the Public Contracts Section, stated in his deposition,
We had received a letter from Mr. Katz, if I recall properly, saying that we're no longer accepting apprentices registered in other states, and that's all I needed, and that's all I got. From that day forward, anybody who had a conference for apprentices, I wasn't accepting anybody that was registered in any other state, that was the extent of it.Id. Exhibit 7 at 18. Ridolfino further explained that he sent a copy of Katz's letter to plaintiffs' counsel to explain to her why New Jersey would not accept apprentices from any other state. Id. at 28-29. In addition, in field representative Raymond Williams's ("Williams") report regarding Stong's two apprentices under investigation, he stated, "[Jeff Shetter] was properly registered in PA approved apprenticeship program . . . Brian Haines . . . is also not registered in N.J. but was approved in Pennsylvania. New Jersey does not recognize PA apprentice programs . . ." Id. Exhibit 12. Furthermore, Raymond Smid, District Supervisor for the Wage and Hour Division of the New Jersey Department of Labor, when asked at his deposition whether apprentices registered in another state are accepted in New Jersey he replied, "[t]hey have to be registered in New Jersey." Id. Exhibit 6 at 10.
Defendant argues, for the first time at oral argument, that the reasoning from Grant's Dairy — Maine, LLC v. Comm'r of Maine Dep't of Agric., Food Rural Resources, 232 F.3d 8, 23 (1st Cir. 2000), should apply and that Katz's letter did not amount to a discriminatory purpose. However, Grant's Dairy — Maine is clearly distinguishable. In that case, the following statements about Maine's statutory scheme were proffered to establish discriminatory purpose: (1) "economic chaos in the State's dairy industry [would be created]"; (2) "potentially disruptive to the State's dairy industry"; (3) "shakes the entire system"; and (4) "essential to the stability of an industry undergoing considerable change." Id. The Grant's Dairy — Maine court held that these were innocuous expressions of concern about the stability of Maine's dairy industry. Id. In the instant situation, Katz's letter clearly expresses the NJDOL's intent to discriminate against any out-of-state apprentice in retaliation for discrimination against New Jersey contractors abroad. This was not an innocuous expression, but rather a statement of clear economic protectionism.
The record reveals that the NJDOL was engaging in economic protectionism when it decided to no longer recognize out-of-state apprentices. Out-of-state contractors, like Stong, who employ out-of-state apprentices are at a disadvantage because in order to employ these apprentices on New Jersey public works projects, they would have to pay the apprentices a higher wage. The NJDOL's stated purpose in disallowing out-of-state apprentices was to protect instate contractors due to similar treatment against them in other states. The fact that in-state contractors also are affected by the out-right prohibition against out-of-state apprentices does not make the regulation any less violative of the dormant commerce clause. Carbone, 511 U.S. at 391 (stating that "[t]he ordinance is no less discriminatory because in-state or in-town processors are also covered by the prohibition.").
The United States Supreme Court has held that a state retaliating against other states in order to protect in-state economic interests is a violation of the dormant commerce clause. Great Atl. Pac. Tea Co. Inc. v. Cottrell, 424 U.S. 366, 379-80 (1976) (finding that the proper method of challenging a sister state's alleged discrimination is by pursuing a constitutional remedy under the commerce clause). New Jersey has openly engaged in discrimination against out-of-state apprentices and, in turn, out of state contractors, on public works projects in New Jersey in retaliation for out-of-state treatment of in-state contractors.
Defendant's stated justification of the regulation merely reenforces the illegal discriminatory purpose. Defendant stated, "[i]n 1997, the Division decided to strictly enforce the regulation because it believed that contiguous states had begun to enforce their own similar statutes and regulations to the perceived detriment of New Jersey contractors." Def's Stmt. of Facts at 5. In addition, defendant has not shown that nondiscriminatory alternatives were unavailable. The discriminatory purpose and effect of this regulation subject it to heightened scrutiny and render it invalid as violative of the dormant commerce.
2. New Jersey's Prevailing Wage Act and the Due Process Clause
Stong also asserts that the NJDOL's refusal to recognize Pennsylvania registered apprentices violates New Jersey's Prevailing Wage Act and the Due Process clause of the Fourteenth Amendment of the United States Constitution. Pls' Br. at 17. Defendant maintained, at oral argument, that New Jersey does recognize out-of-state apprentices and that Stong simply did not follow the proper procedures under the regulations. This Court agrees with plaintiffs.
The Due Process clause of the Fourteenth Amendment provides that no state shall, "deprive any person of life, liberty or property without due process of law." U.S. Const. amend. XIV. "[P]rinciples of Due Process require an agency to follow its own regulations, which have the force of law." Marshall v. Lansing, 839 F.2d 933, 943 (3d Cir. 1988) (citations omitted). "The Due Process Clause is implicated only when an agency violates regulations mandated by the Constitution or by law; or when `an individual has reasonably relied on agency regulations promulgated for his guidance or benefit and has suffered substantially because of their violation by the agency.'" Tolchin v. Supreme Court of the State of N.J., 111 F.3d 1099, 1115 (3d Cir. 1997) (quoting United States v. Caceres, 440 U.S. 741, 752-53 (1979)).
As noted earlier, New Jersey's prevailing wage laws state that the "apprenticeship program [be] approved or certified by the Division of Vocational Education in the New Jersey Department of Education or by the Bureau of Apprenticeship and Training [BAT] in the United States Department of Labor." N.J.A.C. § 12:60-7.1. The BAT regulations provide for, "cooperat[ion] with State agencies engaged in the formulation and promotion of standards of apprenticeship" and "recognition of a State agency as the appropriate agency for registering local apprenticeship programs." 29 C.F.R. § 29.1 (a), (b). Under these regulations, a Recognized State Apprenticeship Agency is "an agency or council which . . . has been approved by the Bureau [BAT] as the appropriate body for State registration and/or approval of local apprenticeship programs and agreements for Federal purposes." 29 C.F.R. § 29.2 (o). Pennsylvania's PATC is a BAT-approved State Apprenticeship Agency or SAC "empowered to regulate apprenticeship programs under Federal law." Ferguson v. Elec. Co. v. Foley, 115 F.3d 237, 239 n. 3 (3d Cir. 1997). The BAT regulations further provide, "[t]he Secretary's recognition of a State Agency or Council (SAC) gives the SAC the authority to determine whether an apprenticeship program conforms with the Secretary's published standards." 29 C.F.R. § 29.12 (a). As defendant stated in oral argument, BAT approved Pennsylvania's apprenticeship program and registered the apprentices.
The record reveals that the NJDOL was fully aware that Stong's two challenged apprentices were approved and registered in Pennsylvania. As noted earlier, Williams explained in his investigation report that both apprentices were registered in Pennsylvania and Reeder also stated that he was aware that both apprentices were registered in Pennsylvania. Beard Cert. Exhibits 3, 12. However, the NJDOL still refused to recognize Stong's apprentices. Defendant argues that New Jersey will recognize out-of-state apprentices if the employer establishes "a New Jersey presence." Defendant asserts that a potential employer would become aware of this requirement, not by the regulation, but by calling the NJDOL. Because there is no notice in the regulation regarding the requirement of establishing "a New Jersey presence," and the regulation clearly states that compliance requires that the apprentices either be approved or certified by the NJDOL or BAT, then Stong fully complied with the regulation. "To satisfy the requirements of the Due Process Clause, laws and regulations must provide specific standards which avoid arbitrary and discriminatory enforcement." Tolchin, 111 F.3d at 1115 (citing Grayned v. City of Rockford, 408 U.S. 104, 109 (1972)). The NJDOL has acted in direct contravention of its own law by refusing to recognize Stong's apprentices who, as is required by the regulation, were registered apprentices in the BAT approved SAC state of Pennsylvania. Therefore, this Court holds that the NJDOL has violated the Due Process clause.
Defendant asserts that apprenticeship programs in SAC states present enforcement problems for the Division because it cannot conduct on-site inspections of out-of-state apprenticeship programs. Certification of Nelson Reeder ¶¶ 22-24. However, the regulation provides that a NJDOL or BAT approved or certified apprenticeship program is all that is required. As Reeder stated, registration in a SAC approved, out-of-state apprenticeship program is facially valid. Id. ¶ 25.
For the reasons stated herein, plaintiffs' motion for summary judgment is granted and defendant's cross-motion for summary judgment is denied. An appropriate form of order is filed herewith.
This matter comes before the Court upon the motion of plaintiffs, Joseph Stong, Inc., and Neil Stong for summary judgment and the cross-motion of defendant, Mark B. Boyd, Commissioner of the State of New Jersey Department of Labor for summary judgment; and the Court having considered the parties' submissions; and having heard oral argument on December 16, 2002; and for the reasons stated in the Memorandum Opinion accompanying this order;
IT IS this 26th day of March, 2003;
ORDERED that plaintiffs' motion for summary judgment is GRANTED; and it is further
ORDERED that defendant's cross-motion for summary judgment is DENIED; and it is further
ORDERED that defendant is enjoined from denying recognition to apprentices properly registered in apprenticeship training programs approved or certified by BAT-approved State Apprenticeship Councils; and it is further
ORDERED that defendant cease, withdraw, reverse and rescind all investigations, citations and administrative proceedings against plaintiffs, and all related debarment proceedings and claims for unpaid wages, fees and penalties against plaintiffs, based on findings or allegations that apprentices properly registered by the Pennsylvania Apprenticeship and Training Council are not or were not properly registered for purposes of the New Jersey Prevailing Wage Act; and it is further
ORDERED that plaintiffs are directed to submit an affidavit of plaintiffs' costs and reasonable attorneys' fees incurred in this matter, on or before April 7, 2003, and defendant is directed to submit any response thereto within ten (10) days thereafter, and the Court shall thereafter rule upon the application on the papers without oral argument.