METROPOLITAN LIFE INSURANCE CO. v. MASSACHUSETTS No. 84-325 SUPREME COURT OF THE UNITED STATES 471 U.S. 724; 105 S. Ct. 2380; 1985 U.S. LEXIS 23; 85 L. Ed. 2d 728; 53 U.S.L.W. 4616; 102 Lab. Cas. (CCH) P55,497; 119 L.R.R.M. 2569; 6 E.B.C. 1545 February 26, 1985, Argued June 3, 1985, Decided * * Together with No. 84-356, Travelers Insurance Co. v. Massachusetts, also on appeal from the same court. [Continued from mm.eri - This part related to NLRA] IV A Unlike ERISA, the NLRA contains no statutory pre-emption provision. Still, as in any pre-emption analysis, "'[the] purpose of Congress is the ultimate touchstone.'" Malone v. White Motor Corp., 435 U.S. 497, 504 (1978), quoting Retail Clerks v. Schermerhorn, 375 U.S. 96, 103 (1963). Where the pre-emptive effect of federal enactments is not explicit, "courts sustain a local regulation 'unless it conflicts with federal law or would frustrate the federal scheme, or unless the courts discern from the totality of the circumstances [*748] that Congress sought to occupy the field to the exclusion of the States.'" Allis-Chalmers Corp. v. Lueck, ante, at 209, quoting Malone v. White Motor Corp., 435 U.S., at 504. Appellants contend first that because mandated-benefit laws require benefit plans whose terms are arrived at through collective bargaining to purchase certain benefits the parties may not have wished to purchase, such laws in effect mandate terms of collective-bargaining agreements. The Supreme Judicial Court of Massachusetts correctly found that "[because] a plan that purchases insurance has no choice but to provide mental health care benefits, the insurance provisions of @ 47B effectively control the content of insured welfare benefit plans." 385 Mass., at 605, 433 N. E. 2d, at 1227. More precisely, faced with @ 47B, parties to a collective-bargaining agreement providing for health insurance are forced [***43] to make a choice: either they must purchase the mandated benefit, decide not to provide health coverage at all, or decide to become self-insured, assuming they are in a financial position to make that choice. The question then becomes whether this kind of interference with collective bargaining is forbidden by federal law. Appellants argue that because Congress intended to leave the choice of terms in collective-bargaining agreements to the free play of economic forces, not subject either to state law or to the control of the National Labor [**2394] Relations Board (NLRB), mandated-benefit laws should be pre-empted by the NLRA. The Court has articulated two distinct NLRA pre-emption principles. The so-called Garmon rule, see San Diego Building Trades Council v. Garmon, 359 U.S. 236 (1959), protects the primary jurisdiction of the NLRB to determine in the first instance what kind of conduct is either prohibited or protected by the NLRA. n26 There is no claim here that [*749] Massachusetts has sought to regulate or prohibit any conduct subject to the regulatory jurisdiction of the NLRB, since the Act is silent as to the substantive provisions [***44] of welfare-benefit plans. - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n26 See Belknap, Inc. v. Hale, 463 U.S. 491, 498-499 (1983). Garmon pre-emption involves balancing the State's interest in controlling or remedying the effects of the conduct in question against the interference with the Board's ability to adjudicate controversies committed to it by the Act, and the risk that the State will sanction conduct that the Act protects. Ibid. Garmon pre-emption accomplishes Congress' purpose of creating an administrative agency in charge of creating detailed rules to implement the Act, rather than having the Act enforced and interpreted by the state or federal courts. San Diego Building Trades Council v. Garmon, 359 U.S., at 241-245. - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - A second pre-emption doctrine protects against state interference with policies implicated by the structure of the Act itself, by pre-empting state law and state causes of action concerning conduct that Congress intended to be unregulated. The doctrine was designed, at least [***45] initially, to govern pre-emption questions that arose concerning activity that was neither arguably protected against employer interference by @@ 7 and 8(a)(1) of the NLRA, nor arguably prohibited as an unfair labor practice by @ 8(b) of that Act. 29 U. S. C. @@ 157, 158(a)(1) and (b). Such action falls outside the reach of Garmon pre-emption. See New York Telephone Co. v. New York Labor Dept., 440 U.S. 519, 529-531 (1979) (plurality opinion). n27 - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n27 Such analysis initially had been used to determine whether certain weapons of bargaining neither protected by @ 7 nor forbidden by @ 8(b) could be subject to state regulation. See, e. g., Belknap, Inc. v. Hale, supra (power to terminate replacements hired during a strike); Machinists v. Wisconsin Employment Relations Comm'n, 427 U.S. 132 (1976) (concerted refusal to work overtime). It has been used more recently to determine the validity of state rules of general application that affect the right to bargain or to self-organization. See New York Telephone Co. v. New York Labor Dept., 440 U.S., at 539-540 (plurality opinion) (state unemployment compensation laws). Such pre-emption does not involve in the first instance a balancing of state and federal interests, see Brown v. Hotel Employees, 468 U.S. 491, 502-503 (1984), but an analysis of the structure of the federal labor law to determine whether certain conduct was meant to be unregulated. An appreciation of the State's interest in regulating a certain kind of conduct may still be relevant in determining whether Congress in fact intended the conduct to be unregulated. See New York Telephone Co. v. New York Labor Dept., 440 U.S., at 539-540. - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - In Teamsters v. Morton, 377 U.S. 252 (1964), the Court struck down an Ohio labor law that prohibited a type of secondary boycott neither prohibited nor protected under the NLRA. The Court ruled that if state law were allowed to deprive the union of a self-help weapon permitted under federal law, "the inevitable result would be to frustrate the congressional determination to leave this weapon of self-help available, and to upset the balance of power between labor and management expressed in our national labor policy." Id., at 260. Similarly, in Machinists v. Wisconsin Employment Relations Comm'n, 427 U.S. 132 (1976), the Court ruled that a State may not penalize a concerted refusal to work overtime that was neither prohibited nor protected under the NLRA, for "Congress intended that the conduct involved be unregulated because left 'to be controlled by the free play of economic forces.'" Id., at 140, quoting NLRB v. Nash-Finch Co., 404 U.S. 138, 144 (1971). More recently, a divided Court struggled with a feature of New York's unemployment-insurance law that provided certain unemployment-insurance payments to striking workers. New York Telephone Co. v. New York Labor Dept., supra. As in Machinists and Morton, the state law "altered the economic balance between labor and management." 440 U.S., at 532 (plurality opinion). A majority of the Justices nonetheless found the state law not pre-empted, on the ground that the legislative history of the Social Security Act of 1935, along with other federal legislation, suggested that Congress had decided to permit a State to pay unemployment benefits to strikers. n28 - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n28 A plurality opinion affirmed the state-court decision finding no pre-emption in part on the ground that the 1935 Congress intended to permit the States to make these payments, and in part on the ground that the unemployment insurance statute was a law of general application designed to insure employment security in the State, and not to regulate the bargaining relationship between management and labor. Id., at 532-533. Two opinions concurring in the result agreed with the plurality on only the legislative history ground. See id., at 546 and 547. - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - These cases rely on the understanding that in providing in the NLRA a framework for self-organization and collective bargaining, Congress determined both how much the conduct of unions and employers should be regulated, and how much it should be left unregulated: "The States have no more authority than the Board to upset the balance that Congress has struck between labor and management in the collective-bargaining relationship. 'For a state to impinge on the area of labor combat designed to be free is quite as much an obstruction of federal policy as if the state were to declare picketing free for purposes or by methods which the federal Act prohibits.'" New York Telephone Co. v. New York Labor Dept., 440 U.S., at 554 (dissenting opinion), quoting Garner v. Teamsters, 346 U.S. 485, 500 (1953). All parties correctly understand this case to involve Machinists pre-emption. B Here, however, appellants do not suggest that @ 47B alters the balance of power between the parties to the labor contract. Instead, appellants argue that, not only did Congress establish a balance of bargaining power between labor and management [***49] in the Act, but it also intended to prevent the States from establishing minimum employment standards that labor and management would otherwise have been required to negotiate from their federally protected bargaining positions, and would otherwise have been permitted to set at a lower level than that mandated by state law. Appellants assert that such state regulation is permissible only when Congress has authorized its enactment. Because welfare benefits are a mandatory subject of bargaining under the [*752] labor law, see Chemical & Alkali Workers v. Pittsburgh Plate Glass Co., 404 U.S. 157, 159, and n. 1 (1971), and because Congress has never given States the authority to enact health regulations that affect the terms of bargaining agreements, appellants urge that the NLRA pre-empts any state attempt to impose minimum-benefit terms on the parties. n29 - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n29 Even if we were to accept appellants' argument that state laws mandating contract terms on collectively bargained contracts are pre-empted unless Congress authorizes their imposition, we would still find @ 47B not pre-empted here. For mandated-benefit laws are laws "regulating the business of insurance," see n. 21, supra, and Congress in the McCarran-Ferguson Act expressly left to the States the power to enact such regulation. 15 U. S. C. @ 1012(a). That Act states: "No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance." @ 1012(b). Appellants argue that @ 1012(a) does not apply to the NLRA because of @ 1014, which states: "Nothing contained in this chapter shall be construed to affect in any manner the application to the business of insurance of the . . . National Labor Relations Act." The federal laws excepted from the operation of @ 1012(b), however, are listed in that subsection itself. Section @ 1014 was meant, instead, to codify this Court's decision in Polish National Alliance v. NLRB, 322 U.S. 643 (1944), which held that the labor relations of insurance companies are subject to the NLRA. See, e. g., 91 Cong. Rec. 1090 (1945) (remarks of Rep. Gwynne); 90 Cong. Rec. 6419 (1944) (remarks of Rep. Allen); id., at 6526 (remarks of Rep. Brehm). - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - Appellants assume that Congress' ultimate concern in the NLRA was in leaving the parties free to reach agreement about contract terms. The framework established in the NLRA was merely a means to allow the parties to reach such agreement fairly. A law that interferes with the end result of bargaining is, therefore, even worse than a law that interferes with the bargaining process. Thus, it is argued, this case is a fortiori to cases like Morton, Machinists, and New York Telephone. The question has been before the Court in the past, see Algoma Plywood Co. v. Wisconsin Board, 336 U.S. 301, 312 (1949), and there is a surface plausibility to appellants' argument, which finds support in dicta in some prior Court decisions. See Teamsters v. Oliver, 358 U.S. 283, 295-296 (1959); Alessi v. Raybestos-Manhattan, Inc., 451 U.S., at 525-526. Upon close analysis, however, we find that Morton, Machinists, and New York Telephone all rest on a sound understanding of the purpose and operation of the Act that is incompatible with appellants' position here. C Congress apparently did not [***51] consider the question whether state laws of general application affecting terms of collective-bargaining agreements subject to mandatory bargaining were to be pre-empted. n30 That being so, "the Court must construe the Act and determine its impact on state law in light of the wider contours of federal labor policy." Belknap, Inc. v. Hale, 463 U.S. 491, 520, n. 4 (1983) (opinion concurring in judgment). - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n30 We have found no relevant legislative history on the specific question. The right to bargain collectively was only gradually understood to include the right to bargain about each subject that the Board found to be comprehended by the phrase "wages, hours and other terms and conditions of employment." @ 8(d), 29 U. S. C. @ 158(d). Thus, Congress could not easily have anticipated the claim that a state labor standard would be pre-empted as a result of the right to bargain. See Cox & Seidman, Federalism and Labor Relations, 64 Harv. L. Rev. 211, 242 (1950). - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - The NLRA [***52] is concerned primarily with establishing an equitable process for determining terms and conditions of employment, and not with particular substantive terms of the bargain that is struck when the parties are negotiating from relatively equal positions. See Cox, Recent Developments in Federal Labor Law Preemption, 41 Ohio St. L. J. 277, 297 (1980). The NLRA's declared purpose is to remedy "[the] inequality of bargaining power between employees who do not possess full freedom of association or actual liberty of contract, and employers who are organized in the corporate or other forms of ownership association." @ 1, 29 U. S. C. @ 151. The same section notes the desirability of "restoring [*754] equality of bargaining power," among other ways, "by encouraging the practice and procedure of collective bargaining and by protecting the exercise by workers of full freedom of association, self-organization, and designation of representatives of their own choosing, for the purpose of negotiating the terms and conditions of their employment or other mutual aid or protection." One of the ultimate goals of the Act was the resolution of the problem of "[depressed] wage rates [***53] and the purchasing power of wage earners in industry," 29 U. S. C. @ 151, and "the widening gap between wages and profits," 79 Cong. Rec. 2371 (1935) (remarks of Sen. Wagner), thought to be the cause of economic decline [**2397] and depression. n31 Congress hoped to accomplish this by establishing procedures for more equitable private bargaining. - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n31 "It is well recognized today that the failure to spread adequate purchasing power among the vast masses of the consuming public disrupts the continuity of business operations and causes everyone to suffer. The piling up of excess capital reserves and plant capacities is a dead weight upon the whole economic structure. . . . . . . . "[Under the new program] [employees] were guaranteed protection in their cooperative efforts, in order that they might help the Government to insure a sufficient flow of purchasing power through adequate wages." Hearings on S. 1958 before the Senate Committee on Education and Labor, 74th Cong., 1st Sess., 34-35 (1935) (statement of Sen. Wagner). - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - The evil Congress was addressing thus was entirely unrelated to local or federal regulation establishing minimum terms of employment. Neither inequality of bargaining power nor the resultant depressed wage rates were thought to result from the choice between having terms of employment set by public law or having them set by private agreement. No incompatibility exists, therefore, between federal rules designed to restore the equality of bargaining power, and state or federal legislation that imposes minimal substantive requirements on contract terms negotiated between parties to labor agreements, at least so long as the purpose of the state legislation is not incompatible with these general goals of the NLRA. Accordingly, it never has been argued successfully that minimal labor standards imposed by other federal laws were not to apply to unionized employers and employees. See, e. g., Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 737, 739 (1981). Cf. Alexander v. Gardner-Denver Co., 415 U.S. 36, 51 (1974). Nor has Congress ever seen fit to exclude unionized workers and employers from laws [***55] establishing federal minimal employment standards. We see no reason to believe that for this purpose Congress intended state minimum labor standards to be treated differently from minimum federal standards. Minimum state labor standards affect union and nonunion employees equally, and neither encourage nor discourage the collective-bargaining processes that are the subject of the NLRA. Nor do they have any but the most indirect effect on the right of self-organization established in the Act. Unlike the NLRA, mandated-benefit laws are not laws designed to encourage or discourage employees in the promotion of their interests collectively; rather, they are in part "designed to give specific minimum protections to individual workers and to ensure that each employee covered by the Act would receive" the mandated health insurance coverage. Barrentine, 450 U.S., at 739 (emphasis in original). Nor do these laws even inadvertently affect these interests implicated in the NLRA. Rather, they are minimum standards "independent of the collective-bargaining process [that] devolve on [employees] as individual workers, not as members of a collective organization." [***56] Id., at 745. It would further few of the purposes of the Act to allow unions and employers to bargain for terms of employment that state law forbids employers to establish unilaterally. "Such a rule of law would delegate to unions and unionized employers the power to exempt themselves from whatever state labor standards they disfavored." Allis-Chalmers [*756] Corp. v. Lueck, ante, at 212. It would turn the policy that animated the Wagner Act on its head to understand it to have penalized workers who have chosen to join a union by preventing them from benefiting from state labor regulations imposing minimal standards on nonunion employers. D Most significantly, there is no suggestion in the legislative history of the Act that Congress intended to disturb the myriad state laws then in existence that set minimum labor standards, but were unrelated in any way to the processes of bargaining or self-organization. To the contrary, we [**2398] believe that Congress developed the framework for self-organization and collective bargaining of the NLRA within the larger body of state law promoting public health and safety. The States traditionally [***57] have had great latitude under their police powers to legislate as "'to the protection of the lives, limbs, health, comfort, and quiet of all persons.'" Slaughter-House Cases, 16 Wall. 36, 62 (1873), quoting Thorpe v. Rutland & Burlington R. Co., 27 Vt. 140, 149 (1855). "States possess broad authority under their police powers to regulate the employment relationship to protect workers within the State. Child labor laws, minimum and other wage laws, laws affecting occupational health and safety . . . are only a few examples." De Canas v. Bica, 424 U.S. 351, 356 (1976). State laws requiring that employers contribute to unemployment and workmen's compensation funds, laws prescribing mandatory state holidays, and those dictating payment to employees for time spent at the polls or on jury duty all have withstood scrutiny. See, e. g., Day-Brite Lighting, Inc. v. Missouri, 342 U.S. 421 (1952). Federal labor law in this sense is interstitial, supplementing state law where compatible, and supplanting it only when it prevents the accomplishment of the purposes of the federal Act. Hines v. Davidowitz, 312 U.S. 52, 67, n. 20 (1941); [***58] Electrical Workers v. Wisconsin Employment Relations [*757] Bd., 315 U.S. 740, 749-751 (1942); Malone v. White Motor Corp., 435 U.S., at 504. Thus the Court has recognized that it "cannot declare pre-empted all local regulation that touches or concerns in any way the complex interrelationships between employees, employers, and unions; obviously, much of this is left to the States." Motor Coach Employees v. Lockridge, 403 U.S. 274, 289 (1971). When a state law establishes a minimal employment standard not inconsistent with the general legislative goals of the NLRA, it conflicts with none of the purposes of the Act. "A holding that the States were precluded from acting would remove the backdrop of state law that provided the basis of congressional action . . . and would thereby artificially create a no-law area." Taggart v. Weinacker's, Inc., 397 U.S. 223, 228 (1970) (concurring opinion) (emphasis in original). Thus, in Malone v. White Motor Corp., supra, the Court rejected a similar challenge to a pre-ERISA state pension Act which established minimum funding and vesting levels for employee pension plans. The Court found the law not pre-empted by the NLRA, in part for reasons relevant here: "There is little doubt that under the federal statutes governing labor-management relations, an employer must bargain about wages, hours, and working conditions and that pension benefits are proper subjects of compulsory bargaining. But there is nothing in the NLRA . . . which expressly forecloses all state regulatory power with respect to those issues, such as pension plans, that may be the subject of collective bargaining." 435 U.S., at 504-505. n32 - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n32 The Court previously has addressed this same issue in the related context of the Railway Labor Act, 44 Stat. 577, as amended, 45 U. S. C. @ 151 et seq.: "The Railway Labor Act, like the National Labor Relations Act, does not undertake governmental regulation of wages, hours, or working conditions. Instead it seeks to provide a means by which agreement may be reached with respect to them. The national interest expressed by those Acts is not primarily in the working conditions as such. . . . "State laws have long regulated a great variety of conditions in transportation and industry . . . . But it cannot be that the minimum requirements laid down by state authority are all set aside. We hold that the enactment by Congress of the Railway Labor Act was not a preemption of the field of regulating working conditions themselves and did not preclude the State . . . from making the order in question." Terminal Railroad Assn. v. Railroad Trainmen, 318 U.S. 1, 6-7 (1943) (footnote omitted). - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - Massachusetts' mandated-benefit law is an insurance regulation designed to implement the Commonwealth's policy on mental-health care, and as such is a valid and unexceptional exercise of the Commonwealth's [**2399] police power. It was designed in part to ensure that the less wealthy residents of the Commonwealth would be provided adequate mental-health treatment should they require it. Though @ 47B, like many laws affecting terms of employment, potentially limits an employee's right to choose one thing by requiring that he be provided with something else, it does not limit the rights of self-organization or collective bargaining protected by the NLRA, and is not pre-empted by that Act. V We hold that Massachusetts' mandated-benefit law is a "law which regulates insurance" and so is not pre-empted by ERISA as it applies to insurance contracts purchased for plans subject to ERISA. We further hold that the mandated-benefit law as applied to a plan negotiated pursuant to a collective-bargaining agreement subject to the NLRA is not pre-empted by federal labor law. The judgment of the Supreme Judicial Court of Massachusetts is therefore affirmed. It is so ordered . JUSTICE POWELL took no part in the decision of these cases. --------------------------------------------------------------------****