The Nevada federal district court held Senate Bill 223 of the 2015 Nevada legislative session preempted under federal law. Representing several plaintiff Taft-Hartley trust funds, along with co-counsel from two other firms representing other funds, The Urban Law Firm assisted plaintiffs in their complaint filed in Sept. 2015 against the Nevada Labor Commissioner, the state official charged with enforcing the laws at issue. The plaintiffs argued S.B. 223 was preempted under the Employee Retirement Income Security Act (ERISA).
S.B. 223 primarily amended NRS 608.150, a long-standing Nevada statute that makes prime contractors liable for the indebtedness for labor of their subcontractors, to limit its scope and applicability. S.B. 223 specifically provided that a prime contractor is not liable for the labor costs of a subcontractor to the extent those costs are: (a) interest, liquidated damages, attorney’s fees, or costs resulting from a subcontractor’s failure to pay contributions or other payments to, or on behalf of, an employee; or (b) any amounts for which the prime contractor did not receive adequate notice by an administrator of a Taft-Hartley trust.
The bill also reduced to one year the statute of limitations period applicable to commencing an action against a prime contractor for the recovery of wages or benefits due to an employee of a subcontractor. A prime contractor or subcontractor who participates in a health or welfare fund, or other plan for the benefit of employees, must provide to the fund or plan notice of the name and location of the project upon the commencement of work on a project. Further, an express benefit trust that receives a portion of the compensation paid to a laborer is not exempt from the notice of right to lien to the owner of a property.
The plaintiff funds argued that the bill was entirely preempted under ERISA because the bill expressly referred to Taft-Hartley funds and also intruded into ERISA-governed relationships, and thus had an impermissible connection with ERISA plans. The federal district court, Judge Kent Dawson, presiding, agreed with the plaintiffs and held the bill entirely preempted by ERISA. Additionally, because of legislative history showing the legislature’s intent for an integrated statutory scheme in the amendments made by S.B. 223, the court held the ERISA-preempted provisions of the bill could not be severed from remaining portions, and thus held the entire bill preempted.
Had the bill remained, Taft-Hartley trusts in Nevada would have faced increased collection costs and the virtual elimination of an avenue to collect delinquent contributions from a delinquent subcontractor’s prime contractor.
Sean W. McDonald of The Urban Law Firm served as counsel for several Taft-Hartley funds, along with attorneys at two other Las Vegas-area firms representing other plaintiff funds. The Labor Commissioner has appealed the ruling to the Ninth Circuit Court of Appeals.
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