Did the First Circuit Just Change its Test for Preemption?

Or did it just use a clever turn of phrase? More likely the latter, I think, but even if that is the case, it is absolutely a turn of phrase that is useful and important to know for anyone litigating an ERISA preemption issue in the First Circuit.

Historically, courts in the First Circuit have focused on two concepts in deciding whether a state law claim is preempted: (1) whether the state law cause of action seeks to supplement the causes of action available under ERISA itself; and (2) whether the state law claim requires consideration of the ERISA plan to decide the claim or would dictate specific terms or operational procedures for the plan. Two weeks ago, the First Circuit, in the case of Merit Construction Alliance v. City of Quincy, discussed the second concept by, in essence, applying a sliding scale analysis that considered how much impact the state law in question actually had on the ERISA governed plan, finding that too much equals preempted, while too little equals not preempted.

In addressing whether a city ordinance requiring bidders to establish an apprenticeship program was preempted, the First Circuit explained:

ERISA “supersede[s] any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C. § 1144(a). The Supreme Court has distilled the statute's “relate to” language into two independently sufficient alternatives: “a connection with or reference to” an ERISA plan will result in preemption. Shaw, 463 U.S. at 97. . . The battle here, as waged by the parties, focuses on the “connection with” component of the two-sided ERISA preemption calculus. . . .[N]ot every conceivable connection will support preemption. For example, state laws that merely exert an “indirect economic influence” on a plan do “not bind plan administrators to any particular choice” and, thus, do not come within ERISA's preemptive reach. Cal. Div. of Labor Standards Enforcement v. Dillingham Constr., Inc., 519 U.S. 316, 329, 117 S.Ct. 832, 136 L.Ed.2d 791 (1997) (internal quotation marks omitted). On the other hand, “state statutes that ‘mandate[ ] employee benefit structures or their administration’ ... amount[ ] to ‘connection[s] with’ ERISA plans” and are therefore preempted. Id. at 328 (final alteration in original) (quoting Travelers, 514 U.S. at 658). The path from influence to coercion amounts to a continuum and it is not always a simple task to determine where along this continuum a particular state law falls.

The Court then proceeded to analyze where on that continuum the city ordinance fell, for purposes of determining whether or not it was preempted.

I don’t believe this discussion of the continuum was intended to create a new test for preemption or to establish a new standard for analyzing the issue. There has always been an element, in First Circuit preemption analysis, of considering how closely a state law acts upon the operation or terms of an ERISA governed plan, and this discussion of the continuum seems to fit easily within that tradition. Nonetheless, looking at the question of whether a particular claim is preempted by analyzing where it falls on such a continuum is a handy and potentially persuasive manner of addressing the question. Anyone advocating for or against preemption in the First Circuit would be well-served by structuring the argument around where on that continuum the claim in question falls. It is an easy framework for the audience to grasp, while sufficiently malleable to allow a party to argue for a favorable placement on that continuum.