NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Wash-ington, D.C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

No. 95–789

CALIFORNIA DIVISION OF LABOR STANDARDS ENFORCEMENT, et al., PETITIONERS v. DILLINGHAM CONSTRUCTION, N. A.,

INC., and MANUEL J. ARCEO, dba

SOUND SYSTEMS MEDIA

on writ of certiorari to the united states court of appeals for the ninth circuit

[February 18, 1997]

Justice Thomas delivered the opinion of the Court.

The State of California requires a contractor on a public works project to pay its workers the prevailing wage in the project's locale. An exception to this requirement permits a contractor to pay a lower wage to workers participating in an approved apprenticeship program. This case presents the question whether the pre-emption provision of the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U. S. C. §1001 et seq., supersedes California's prevailing wage law to the extent that the law prohibits payment of an apprentice wage to an apprentice trained in an unapproved program. We conclude that California's law does not "relate to" employee benefit plans, and thus is not pre-empted.

Since 1931, the Davis-Bacon Act, 46 Stat. 1494, as amended, 40 U. S. C. §§276a to 276a—5, has required that the wages paid on federal public works projects

equal wages paid in the project's locale on similar, private construction jobs. California, in 1937, adopted a similar statute, which requires contractors who are awarded public works projects to pay their workers "not less than the general prevailing rate of per diem wages for work of a similar character in the locality in which the public work is performed." Cal. Lab. Code Ann. §1771 (West 1989). Under both the Davis-Bacon Act and California's prevailing wage law, public works contractors may pay less than the prevailing journeyman wage to apprentices in apprenticeship programs that meet standards promulgated under the National Apprenticeship Act, 50 Stat. 664, as amended, 29 U. S. C. §50 (known popularly as the Fitzgerald Act). See 29 CFR §29.5(b)(5) (1996); Cal. Lab. Code Ann. §1777.5 (West 1989 and Supp. 1997). California public works contractors are not obliged to employ apprentices, but if they do, the apprentice wage is only permitted for those apprentices in approved programs.

The federal arbiter of apprenticeship program adequacy is the Bureau of Apprenticeship and Training (BAT), located within the Department of Labor. An apprenticeship program that seeks to provide federal public works contractors with apprentice-wage-eligible apprentices must receive the blessing of either the BAT or a "State Apprenticeship Agency." 29 CFR §29.3 (1996). Since 1978, California's state apprenticeship agency, the California Apprenticeship Council (CAC), has been authorized under 29 CFR §29.12 to approve apprenticeship programs for federal purposes. App. 37. California has also charged the CAC with approving apprenticeship programs for purposes of California's prevailing wage statute. See Cal. Lab. Code Ann. §3071 (West 1989). Pursuant to the Fitzgerald Act, the United States Secretary of Labor has promulgated apprenticeship program standards. 29 CFR §29.5. California has adopted its own apprenticeship standards, 8 Cal. Code Regs. §212 (1996), that are "substantively similar" to the federal stan dards. Southern Cal. Chapter of Associated Builders and Contractors, Inc., Joint Apprenticeship Committee v. California Apprenticeship Council, 4 Cal. 4th 422, 434, 841 P. 2d 1011, 1017 (Cal. 1992) (Southern Cal. ABC). The CAC uses its own standards whether approving an apprenticeship program for federal or for state purposes.

An apprenticeship program in California may be sponsored by an individual employer, an individual labor union, a group of employers, a group of labor organizations, or by a joint management-labor venture (a so-called joint apprenticeship committee). See Cal. Lab. Code Ann. §3075 (West 1989).

In the spring of 1987, respondent Dillingham Construction was awarded a public works contract as the general contractor for the construction of the Sonoma County Main Adult Detention Facility. Dillingham subcontracted electronic installation work to respondent Manuel J. Arceo, doing business as Sound Systems Media.

When Sound Systems Media was awarded the subcontract, it was signatory to a collective bargaining agreement that provided a wage scale for apprentices, and required Sound Systems Media to contribute to a CAC-approved apprenticeship program, the Northern California Sound and Communications Joint Apprenticeship Training Committee.

In May 1988, after work on the project was underway, the existing union withdrew its representation of Sound Systems Media employees. Two months later, Sound Systems Media entered a new collective bargaining agreement with a different union. That agreement, like the earlier one, included a scale of wages for apprentices and provided for an affiliation with a joint apprenticeship committee, the Electronic and Communications Systems Joint Apprenticeship Training Committee (Electronic and Communications Systems JATC). Sound Systems Media relied on this new committee for its apprentices, to whom it paid the apprentice wage provided in the collective bargaining agreement. The Electronic and Communications Systems JATC, however, did not seek CAC approval until August 1989 and did not gain approval until October 1990. That approval was not retroactive.

In March 1989, yet another union filed a complaint against Sound Systems Media with petitioner Division of Apprenticeship Standards of the California Department of Industrial Relations. Petitioner issued a notice of noncompliance to both Dillingham Construction and Sound Systems Media, charging that Sound Systems Media had violated Cal. Lab. Code Ann. §1771 by paying the apprentice wage, rather than the prevailing journeyman wage, to apprentices from a non-approved program. The County of Sonoma was ordered to withhold certain monies from Dil lingham Construction for the violation.

Respondents filed suit to prevent petitioners from interfering with payment under the subcontract. Their complaint alleged, inter alia, that ERISA pre-empted enforcement of the prevailing wage law. Respondents argued that the Electronic and Communications Systems JATC was an "employee welfare benefit plan" within the meaning of ERISA §3(1), 29 U. S. C. §1002(1), and that California's prevailing wage statute "relate[d] to" it, and was therefore superseded by ERISA's pre-emption provision, §514(a), 29 U. S. C. §1144(a). The District Court agreed that the prevailing wage statute "relate[d] to" ERISA plans, but concluded that pre-emption was forestalled by ERISA's saving clause, §514(d), 29 U. S. C. §1144(d). Pre-emption of the prevailing wage statute, the District Court determined, would "impair the purposes of the Fitzgerald Act and its regulations within the meaning of ERISA's savings clause." Dillingham Constr. N.A., Inc. v. County of Sonoma, 778 F. Supp. 1522, 1530 (ND Cal. 1991).

The Court of Appeals for the Ninth Circuit reversed. 57 F. 3d 712 (1995). Agreeing with the District Court, the Ninth Circuit held that the Electronic and Communications Systems JATC was an employee welfare benefit plan and that §1777.5 "relate[d] to" it. Id., at 718–719. Because California's prevailing wage statute was not an "enforcement mechanism" of the Fitzgerald Act, however, the Ninth Circuit parted company with the District Court and held that §1777.5 was not preserved by ERISA's saving clause. Id., at 721. The decision of the Court of Appeals accorded with that of the Tenth Circuit Court of Appeals in National Elevator Industry, Inc. v. Calhoon, 957 F. 2d 1555 (CA10), cert. denied, 506 U. S. 953 (1992). Both decisions conflict—as to whether a state prevailing wage law "relate[s] to" apprenticeship programs, and as to the reach of the saving clause—with that of the Eighth Circuit in Minnesota Chapter of Associated Builders and Contractors, Inc. v. Minnesota Dept. of Labor and Industry, 47 F. 3d 975 (CA8 1995). We granted certiorari, 517 U. S. ___ (1996), and now reverse.

Both lower courts determined, and neither party disputes, that the Electronic and Communications Systems JATC was a "plan, fund, or program [that] was established or is maintained for the purpose of providing for its participants . . . apprenticeship or other training pro grams." §3(1), 29 U. S. C. §1002(1). The question thus presented to us is whether California's prevailing wage statute "relate[s] to" that "employee welfare benefit plan" within the meaning of ERISA's pre-emption clause.

Since shortly after its enactment, we have endeavored with some regularity to interpret and apply the "unhelpful text" of ERISA's pre-emption provision. New York State Conference of Blue Cross and Blue Shield Plans v. Travelers Ins. Co., 514 U. S. ___ (1995) (slip op., at 9). We have long acknowledged that ERISA's pre-emption provision is "clearly expansive." Id., at ___ (slip op., at 8). It has:

"a `broad scope,' Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S. 724, 739 (1985), and an `expansive sweep,' Pilot Life Ins. Co. v. Dedeaux, 481 U. S. 41, 47 (1987); and . . . it is `broadly worded,' Ingersoll-Rand Co. v. McClendon, 498 U. S. 133, 138 (1990), `deliberately expansive,' Pilot Life, supra, at 46, and `conspicuous for its breadth,' [FMC Corp. v. Holliday, 498 U. S. 52, 58 (1990)]." Morales v. Trans World Airlines, Inc., 504 U. S. 374, 384 (1992).

Our efforts at applying the provision have yielded a two-part inquiry: A "law `relate[s] to' a covered employee benefit plan for purposes of §514(a) `if it [1] has a connection with or [2] reference to such a plan.'" District of Columbia v. Greater Washington Bd. of Trade, 506 U. S. 125, 129 (1992) (quoting Shaw v. Delta Air Lines, Inc., 463 U. S. 85, 96–97 (1983)). Under the latter inquiry, we have held pre-empted a law that "impos[ed] requirements by reference to [ERISA] covered programs," Greater Washington Bd. of Trade, supra, at 130–131; a law that specifically exempted ERISA plans from an otherwise generally applicable garnishment provision, Mackey v. Lanier Collection Agency & Service, Inc., 486 U. S. 825, 828, n. 2, 829–830 (1988); and a common-law cause of action premised on the existence of an ERISA plan, Ingersoll-Rand Co., supra, at 140. Where a State's law acts immediately and exclusively upon ERISA plans, as in Mackey, or where the existence of ERISA plans is essential to the law's operation, as in Greater Washington Bd. of Trade and Ingersoll-Rand, that "reference" will result in pre-emption.

A law that does not refer to ERISA plans may yet be pre-empted if it has a "connection with" ERISA plans. Two Terms ago, we recognized that an "uncritical literalism" in applying this standard offered scant utility in determining Congress' intent as to the extent of §514(a)'s reach. Travelers, 514 U. S., at ___ (slip op., at 9). Rather, to determine whether a state law has the forbidden connection, we look both to "the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive," ibid., as well as to the nature of the effect of the state law on ERISA plans, id., at ___ (slip op. at 12).

As is always the case in our pre-emption jurisprudence, where "federal law is said to bar state action in fields of traditional state regulation . . . we have worked on the `assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Con-gress.'" Id., at ___ (slip op. at 8) (quoting Rice v. Santa Fe Elevator Corp., 331 U. S. 218, 230 (1947)) (citation omit ted).

Respondents and several of their amici urge us to conclude that §1777.5 makes "reference to" ERISA plans. Because it seems that approved apprenticeship programs need not necessarily be ERISA plans, we decline to do so.

On its face, §1777.5 appears to allow the lower apprentice wage only to a contractor who acquires apprentices through a "joint apprenticeship committee"—an apprenticeship program sponsored by the collective efforts of management and organized labor. See Cal. Lab. Code Ann. §§3075, 3076 (West 1989). Were this the true extent of the prevailing wage law's reach, respondents' "reference to" argument might be more persuasive. The CAC has, however, promulgated regulations making clear that the class of apprenticeship program sponsors who may provide approved apprentices is broader. See 8 Cal. Code Regs. §230.1(a) (1992) ("Registered apprentices can only be obtained from the Apprenticeship Committee of the craft or trade in the area of the site of the public work") (emphasis added); id., §228(c) (defining an apprenticeship committee as "an apprenticeship program sponsor"); Cal. Lab. Code Ann. §3075 (West 1989) (stating that an "apprenticeship program sponsor may be a joint apprenticeship committee, unilateral management or labor apprenticeship committee, or an individual employer"). An apprenticeship program, it would seem, can be maintained by a single employer, and its costs can be defrayed out of that employer's general assets.

To comport with §302(c)(6) of the Labor Management Relations Act, 1947, 61 Stat. 157, as amended, 29 U. S. C. §186(c)(6), the expenses of any joint apprenticeship committee must be defrayed out of monies placed into a separate fund. The existence of that fund triggers ERISA coverage over programs like that of the Electronic and Communications Systems JATC. See ERISA Advisory Op. No. 94–14A (Apr. 20, 1994). But an employee benefit program not funded through a separate fund is not an ERISA plan. In Massachusetts v. Morash, 490 U. S. 107 (1989), we recognized a distinction between vacation benefits paid out of an accumulated fund and those paid out of an employer's general assets. A fund established to pay vacation benefits, we held, constituted an employee welfare benefit plan; the policy at issue in Morash, whereby vacation benefits were paid out of general assets, did not. The distinction, we concluded, was compelled by ERISA's object and policy:

"In enacting ERISA, Congress' primary concern was with the mismanagement of funds accumulated to finance employee benefits and the failure to pay employees benefits from accumulated funds. To that end, it established extensive reporting, disclosure, and fiduciary duty requirements to insure against the possibility that the employee's expectation of the benefit would be defeated through poor management by the plan administrator." Id., at 115 (citation and footnote omitted).

Benefits paid out of an employer's general assets presented risks indistinguishable from "the danger of defeated expectations of wages for services performed," a hazard with which ERISA is unconcerned. Ibid.

The Secretary has carried this funded/unfunded distinction into areas that are, we think, analogous to that of apprenticeship programs. See, e.g., 29 CFR §2510.3–1(k) (scholarship programs paid for out of an employer's general assets are not ERISA plans); §2510.3–1(b)(3)(iv) (training provided on the job with general assets does not constitute ERISA plan); see also ERISA Advisory Op. No. 94–14A (April 29, 1994) (apprenticeship programs paid for out of trust funds are ERISA plans); ERISA Advisory Op. No. 83–32A (June 21, 1983) (in-house professional development program financed out of general assets is not an ERISA plan). Although none of these regulations specifically answers the question whether an unfunded apprenticeship program is covered by ERISA, they suggest—as does our decision in Morash—that it is not.

Section 1777.5, then, "functions irrespective of . . . the existence of an ERISA plan." Ingersoll-Rand Co., 498 U. S., at 139. An apprenticeship program meeting the substantive standards set forth in the Fitzgerald Act regulations can be approved whether or not its funding apparatus is of a kind as to bring it under ERISA. See Southern Cal. ABC, 4 Cal. 4th, at 429, n. 1, 841 P. 2d, at 1014, n. 1. Section 1777.5 is indifferent to the funding, and attendant ERISA coverage, of apprenticeship programs. Accordingly, California's prevailing wage statute does not make reference to ERISA plans. We turn now to the question whether it nonetheless has a "connection with" such plans.

In Shaw v. Delta Air Lines, Inc., we held that the New York Human Rights Law, which prohibited "employers from structuring their employee benefit plans in a manner that discriminates on the basis of pregnancy," and New York's Disability Benefits Law, which required "employers to pay employees specific benefits," "relate[d] to" ERISA plans. 463 U. S., at 97. Shaw and other of our ERISA pre-emption decisions, see, e.g., FMC Corp. v. Holliday, 498 U. S. 52 (1990); Alessi v. Raybes tos-Manhattan, Inc., 451 U. S. 504 (1981), presented us with state statutes that "mandated employee benefit structures or their administration"; in those cases, we concluded that these requirements amounted to "connection[s] with" ERISA plans. See Travelers, 514 U. S., at ___ (slip op., at 11).

The state law at issue in Travelers, our most recent exercise in ERISA pre-emption, stands in considerable contrast. That statute regulated hospital rates, and required hospitals to exact surcharges (ranging from 9% to 24% of the rate set under the statute) from patients whose hospital bills were paid by any of a variety of non-Blue Cross/Blue Shield providers. Because ERISA plans, as might be expected, were predominant among the purchasers of insurance, see Brief for Petitioner in Travelers, O. T. 1994, No. 93–1408, p. 1–2, the statute was asserted to run afoul of ERISA's pre-emption provision. The differential rates charged to commercially insured patients and to patients insured by Blue Cross/Blue Shield (collectively "the Blues") made commercial insurance relatively more expensive—and relatively less attractive. The resulting cost variations encouraged insurance purchasers, including ERISA plans, to provide insurance benefits through the Blues. Commercial insurers argued that these cost variations and their resulting economic effects had a "connection with" those ERISA plans, requiring pre-emption of the law that dictated them.

We upheld the statute. The "indirect economic influence" of the surcharge, we noted, did not "bind plan administrators to any particular choice and thus function as a regulation of an ERISA plan itself." 514 U. S., at ___ (slip op., at 13). Nor did the indirect influence of the surcharge "preclude uniform administrative practice or the provision of a uniform interstate benefit package if a plan wishe[d] to provide one." Ibid. Indeed, if ERISA were concerned with any state action—such as medical-care quality standards or hospital workplace regulations—that increased costs of providing certain benefits, and thereby potentially affected the choices made by ERISA plans, we could scarcely see the end of ERISA's pre-emptive reach, and the words "relate to" would limit nothing. Id., at ___ (slip op., at 14–15). We also noted that several States regulated hospital charges at the time that ERISA was enacted, and yet neither ERISA's language nor legislative history made any mention of pre-empting these state efforts.

We think that, in every relevant respect, California's prevailing wage statute is indistinguishable from New York's surcharge program. At the outset, we note that apprenticeship standards and the wages paid on state public works have long been regulated by the States. As discussed in Part I-A, supra, California has required that prevailing wages be paid on its public works projects for nearly as long as Congress has required them to be paid on Federal projects, and for more than 40 years prior to the enactment of ERISA. Similarly, California has legislated in the apprenticeship area for the better part of this century. See, e.g., The Shelley-Maloney Apprentice Labor Standards Act, 1939 Cal. Stat. 220, codified at Cal. Lab. Code §3070 et seq. Congress, in the Fitzgerald Act, recognized pre-existing State efforts in regulating apprenticeship programs and apparently expected that those efforts would continue. See 29 U. S. C. §50 (directing the Secretary of Labor "to cooperate with State agencies engaged in the formulation and promotion of standards of apprenticeship"); see also H. R. Rep. No. 945, 75th Cong., 1st Sess., 2 (1937).

That the States traditionally regulated these areas would not alone immunize their efforts; ERISA certainly contemplated the pre-emption of substantial areas of traditional state regulation. The wages to be paid on public works projects and the substantive standards to be applied to apprenticeship training programs are, however, quite remote from the areas with which ERISA is expressly concerned—"reporting, disclosure, fiduciary responsibility, and the like." Travelers, supra, at ___ (slip op., at 15) (quoting Shaw, 463 U. S., at 98). A reading of §514(a) resulting in the pre-emption of traditionally state-regulated substantive law in those areas where ERISA has nothing to say would be "unsettling," Travelers, supra, at ___ (slip op., at 18). Given the paucity of indication in ERISA and its legislative history of any intent on the part of Congress to pre-empt state apprenticeship training standards, or state prevailing wage laws that incorporate them, we are reluctant to alter our ordinary "assumption that the historic police powers of the States were not to be superseded by the Federal Act." Rice, 331 U. S., at 230. Accordingly, as in Travelers, we address the substance of the California statute with the presumption that ERISA did not intend to supplant it.

Like New York's surcharge requirement, the apprenticeship portion of the prevailing wage statute does not bind ERISA plans to anything. No apprenticeship program is required by California law to meet California's standards. See Southern Cal. ABC, 4 Cal. 4th, at 428, 841 P. 2d, at 1013. If a contractor chooses to hire apprentices for a public works project, it need not hire them from an approved program (although if it does not, it must pay these apprentices journeyman wages). So, apprenticeship programs that have not gained CAC approval may still supply public works contractors with apprentices. Unapproved apprenticeship programs also may supply apprentices to private contractors. The effect of §1777.5 on ERISA apprenticeship programs, therefore, is merely to provide some measure of economic incentive to comport with the State's requirements, at least to the extent that those programs seek to provide apprentices who can work on public works projects at a lower wage.

Apprenticeship programs have confronted these differential economic incentives since well before the enactment of ERISA, and would face them today even if California had no prevailing wage statute. To supply apprentices eligible for the apprenticeship wage to federal public works contractors, an apprenticeship program must meet the standards promulgated by California under the Fitzgerald Act. What is more, with or without the possibility of being able to provide apprentices eligible for a lower wage on public projects, apprenticeship programs in California have other incentives to seek CAC approval. See Southern Cal. ABC, 4 Cal. 4th, at 429, 841 P. 2d, at 1013 ("[i]n California, additional financial incentives exist in the form of direct financial subsidies for training provided by approved programs," and because "an apprentice who completes an approved training program obtains a certificate of completion naming him or her a skilled journeyman in the chosen trade"). It cannot be gainsaid that §1777.5 has the effect of encouraging apprenticeship pro- grams—including ERISA plans—to meet the standards set out by California, but it has not been demon- strated here that the added inducement created by the wage break available on state public works projects is tantamount to a compulsion upon apprenticeship prog rams.

The effect of the prevailing wage statute on ERISA-covered apprenticeship programs in California is substantially similar to the effect of New York law on ERISA plans choosing whether to provide health insurance benefits in New York through the Blues, or through a commercial carrier. The prevailing wage statute alters the incentives, but does not dictate the choices, facing ERISA plans. In this regard, it is "no different from myriad state laws in areas traditionally subject to local regulation, which Congress could not possibly have intended to eliminate." Travelers, 514 U. S., at ___ (slip op., at 22). We could not hold pre-empted a state law in an area of traditional state regulation based on so tenuous a relation without doing grave violence to our presumption that Congress intended nothing of the sort. We thus conclude that California's prevailing wage laws and apprenticeship standards do not have a "connection with," and therefore do not "relate to," ERISA plans.

For the reasons stated herein, the judgment below is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.