October 15, 2019
by Bob Incollingo
The New Deal is not over. Eighty years on, the National Apprenticeship Act of 1937, also known as “the Fitzgerald Act”,1 authorizes and directs the Secretary of Labor “to formulate and promote the furtherance of labor standards necessary to safeguard the welfare of apprentices, to extend the application of such standards by encouraging the inclusion thereof in contracts of apprenticeship, to bring together employers and labor for the formulation of programs of apprenticeship, (and) to cooperate with State agencies engaged in the formulation and promotion of standards of apprenticeship, ….” (29 U.S.C. 50a). Hand in hand with this directive, New Jersey’s present state administration has campaigned to spur the creation and expansion of apprenticeship programs in non-traditional business sectors.2 Of the various ways this is playing out, the recent linkage of apprenticeship to public contracting presents new and significant challenges for construction companies in our State.
Since the Public Works Contractor Registration Act (NJSA 34:11-56.48 et seq.) took effect on April 11, 2000, a contractor who bids or works on publicly owned construction projects in New Jersey must first register with the NJ Department of Labor & Workforce Development (NJDOL). Effective May 1, 2019, there are new legal requirements to get or renew a Public Works Contractor Registration (PWCR) certificate. Amendments to the law now require an applicant for new or renewed PWCR certification to qualify by participation in a registered apprenticeship program.
As the State’s website on registered apprenticeship defines it, apprenticeship is a combination of on-the-job training and related technical instruction to master the practical and theoretical aspects of a skilled occupation.3 For purposes of the new PWCR requirements, “registered apprenticeship program” means an apprenticeship program which is registered with and approved by the United States Department of Labor (USDOL), which provides each trainee with combined classroom and on-the-job training in an occupation recognized as an apprenticeable4, and which meets the program standards of enrollment and graduation under Part 29 of the Code of Federal Regulations. Those regulations establish labor standards to safeguard the welfare of apprentices and promote apprenticeship opportunity.5
The USDOL list of apprenticeable occupations does not perfectly track New Jersey’s own craft, trade and worker classifications, and (notably) does not scan for particular trades for which State registration is required.6 As of the date of this article, the regulations proposed by the NJDOL to interpret the amended PWCR statute have not yet been fixed, and who if anyone will be excused from the new apprenticeship requirement remains an open question.7
So, if a New Jersey public works contractor directly employs craftworkers, it must now certify to the NJDOL that it participates in a registered apprenticeship program as defined in N.J.S.A. 34:11-56.50 for each craft it employs.8 The referenced statute accepts only those apprenticeship programs which are registered with and approved by the USDOL, which conditions eligibility for registration upon a program’s conformity with standards published in part 29 of the Federal regulations.
The amended PWCR Act does not detail how apprenticeship training programs are to be funded. The interpretive regulations proposed by the NJDOL, on the other hand, require that the registered apprenticeship program be financed by an ERISA-covered apprenticeship training program trust fund into which the contractor makes ongoing contributions.
An ERISA-covered apprenticeship training program trust fund means an “employee welfare benefit plan,” as that term is defined within the Employee Retirement Income Security Act of 1974 (ERISA), that is subject to the requirements for such a plan under ERISA, and that is a fund established and maintained for the sole purpose of financing a registered apprenticeship program.9
These statutes and regulations, read together, push public contractors into participating in an established employee welfare benefit plan or setting up their own employee welfare benefit plan, thus subjecting their companies and officers to potential fiduciary liability for managerial shortcomings. Contractors who want their New Jersey PWCR may find themselves on a problematic and steep learning curve in plan administration to comply with the Employee Retirement Income Security Act of 1974, as amended, and the related regulations (including, amendments relating to the Consolidated Omnibus Budget Reconciliation Act of 1985, and the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”)), including the privacy provisions under HIPAA.
Responsibility for employee benefits and negligent noncompliance with the foregoing laws presents new legal risks for public works contractors who are novices in this area. A prudent public works contractor should investigate with the benefit of counsel whether the purchase of fiduciary liability insurance is warranted by changed circumstances brought on by the amended PWCR Act and regulations concerning the NJ Public Works Contractor Apprentice Program.
Bob Incollingo is a dedicated New Jersey construction attorney who litigates coverage disputes and other cases overlaid by contractual risk transfer and insurance issues. He has been certified as a Construction Risk and Insurance Specialist (CRIS) through the International Risk Management Institute, Inc. (IRMI). This insurance designation recognizes specialized expertise in construction insurance, and demonstrates one’s commitment to the construction industry through an on-going continuing education component focusing on construction risk and insurance.
1. 29 U.S.C. 50, so named for William Fitzgerald, the Congressman from Norwich, Connecticut who sponsored the legislation. (I thought you’d like to know.)
2. “Governor Murphy Announces $4.5M in Grants to Develop, Grow Apprenticeships in High-Demand Industries” 10/24/2018, https://www.nj.gov/governor/news/news/562018/approved/20181024a.shtml
4. Yes, that’s a word. See, https://www.doleta.gov/OA/bul16/Bulletin_2016-28_Attachment1.pdf
5. The Federal regulations extend the application of program standards by prescribing policies and procedures concerning the registration of acceptable apprenticeship programs with the USDOL Employment and Training Administration, Office of Apprenticeship.
6. See, for example, NJDEP well drilling and pump installer licenses.
7. Proposed Amendments: N.J.A.C. 12:62-1.2 and 2.1, Proposal Number: PRN 2019-069, NJ DOL Regulation / Public Works Contractor Registration (Apprenticeship Program)
8. N.J.S.A. 34:11-56.52 as amended
9. State of New Jersey Department of Labor and Workforce Development Division of Wage and Hour Compliance Supplement – Application for Public Works Contractor Registration Licenses, Registrations or Certificates Required by State Law and Participation in Registered Apprenticeship Programs (Supplement to LSSE-2 (5/1/19)), which provides in relevant part:
“For the purpose of this Supplement to the Application for Public Works Contractor Registration, a contractor is considered to be participating in a registered apprenticeship program if:
“1. The contractor is signatory to a collective bargaining agreement through which the contractor has access to a registered apprenticeship program that is sponsored by the labor union, or agrees to joint sponsorship with the labor union of a registered apprenticeship program; provided that the collective bargaining agreement also requires ongoing employer contributions into an ERISA-covered apprenticeship training program trust fund,
“2. The contractor is signatory to an agreement with a workforce intermediary, such as an industry association, consortium of businesses, community-based organization, or educational institution, through which the contractor has access to a registered apprenticeship program sponsored by the workforce intermediary, or agrees to joint sponsorship with the workforce intermediary of a registered apprenticeship program; provided that the agreement between the contractor and the workforce intermediary also requires ongoing employer contributions into an ERISA-covered apprenticeship training program trust fund;
“3. The contractor is the sponsor of a registered apprenticeship program;
“4. The contractor currently employs at least one apprentice who is registered with the United States Department of Labor within a registered apprenticeship program; provided that as of the date of the contractor’s submission to the Department of the Application for Public Works Contractor Registration, the apprentice has completed at least 1000 hours of on-the-job learning with the contractor; or
“5. During the one-year period immediately preceding submission to the Department of the Application for Public Works Contractor Registration, the contractor employed at least one apprentice who was registered with the United States Department of Labor within a registered apprenticeship program; provided that the apprentice had completed at least 1000 hours of on-the-job learning with the contractor.”