Circuit Court Agrees Crane Dispatcher Exempt from FLSA Overtime Rules

August 31, 2010 | Insurance Coverage

The plaintiff in this case was employed in several different capacities by Sunbelt Cranes, Construction & Hauling, Inc., from 1999 until 2008. When he resigned, he was a dispatcher in the company’s crane rental division. Thereafter, the plaintiff brought suit against Sunbelt under the Fair Labor Standards Act (FLSA) for unpaid overtime compensation. Sunbelt responded that the plaintiff was exempt from the FLSA and thus was not eligible for overtime pay. Following a non-jury trial, the court entered judgment in favor of Sunbelt, finding that the plaintiff was an administrative employee under the FLSA, and thus was not entitled to recover overtime pay. The trial court found that the plaintiff met the requirements for an administrative exemption: (i) he earned no less than $455 per week, (ii) he had primary duties that involved “the performance of office or non-manual work directly related to the management or general business operations of” Sunbelt or its customers, and (iii) he exercised “discretion and independent judgment with respect to matters of significance” in performing his primary duties. The plaintiff appealed to the U.S. Court of Appeals for the Eleventh Circuit.

On appeal, the parties did not dispute that the plaintiff worked in excess of 40 hours each week and that his salary exceeded $455 per week. They disagreed, however, over whether the plaintiff’s duties satisfied the remaining requirements for application of the administrative exemption.

The appellate court first examined the prong of the administrative exemption test that asked whether the employee’s primary duties directly related to “the management or general business operations of” Sunbelt or its customers. The appellate court noted that the trial court had found that the plaintiff’s primary job duties included customer communication, choosing the appropriate crane for specific jobs, assigning operators to cranes, overseeing other employees, preparing and reviewing job tickets, and maintaining the crane rental schedule. He also was responsible for selecting the type of materials, supplies, machinery, equipment, and tools that were needed to meet customers’ needs. In essence, the appellate court explained, the trial court concluded that the plaintiff “effectively managed Sunbelt’s crane rental department,” which it found was “the heart of Sunbelt’s business” and necessary to Sunbelt’s business operations. Therefore, the trial court concluded that the plaintiff’s work qualified him for this prong of the administrative exemption from overtime pay.

On appeal, the plaintiff argued that his position had been more akin to sales and retail, and therefore that the exemption did not apply to him, but the appellate court was not persuaded. It observed that even when employees engage in sales, their duties are administrative if the majority of their time is spent advising customers, hiring and training staff, determining staff pay, and delegating matters to staff. Accordingly, it found that the trial court had properly concluded that the plaintiff had met this prong of the administrative exemption test.

The appellate court then reviewed the test’s final prong: whether the employee’s primary duties involved “the exercise of discretion and independent judgment with respect to matters of significance.” It noted that the trial court had determined that the plaintiff was “responsible for directing and overseeing all operators, truck drivers, riggers, oilers, and erection crews;” that he had exercised discretion “as to which customers’ jobs each employee should be assigned and what equipment is required to perform the job properly;” that he had exercised independent judgment in deciding “which employees to send, and where to send them, based on the employees’ experience and reliability;” that he had to exercise independent judgment in the event of an emergency as he was “the first line of communication” and had to determine how best “to resolve the conflict and ensure that the customer’s needs were being met despite such emergency;” and that he had supervisory authority to hire and fire employees, even though he had never exercised that authority.

The appellate court acknowledged that there was evidence that the plaintiff’s position did not require the exercise of judgment or discretion, that the plaintiff had testified that he only priced certain types of cranes based on his own experience and information in load charts, and that the vast majority of his tasks simply involved the mechanical application of data from load charts. In addition, the appellate court observed that the plaintiff never resolved customer complaints, but rather simply forwarded any complaints and problems to his supervisor, and it found further evidence, substantiated by the plaintiff’s former supervisor, that the plaintiff had little to no role in hiring, firing, promoting, or disciplining employees.

Nonetheless, the circuit court found that the record supported the trial court’s conclusion that the plaintiff had exercised substantial control over the day-to-day operation of Sunbelt’s crane rental business. It added that although reasonable minds could differ about the degree of discretion the plaintiff exercised as a dispatcher, sufficient evidence existed in the record to support the trial court’s finding that the plaintiff had exercised discretion and independent judgment. The Eleventh Circuit found “no clear error” and concluded that the trial court had properly concluded that the plaintiff satisfied the final prong of the administrative exemption test. Accordingly, it affirmed the trial court’s determination that the plaintiff was not entitled to overtime pay under the FLSA. [Rock v. Ray Anthony Int’l, LLC, 2010 U.S. App. Lexis 10775 (11th Cir. May 26, 2010).]

Three Year Contractual Limitations Period Bars Long Term Disability Benefits Claim

The plaintiff in this case worked as a refrigeration technician for Ingersoll-Rand Company until September 2002, when he allegedly sustained an on-the-job injury. He submitted a claim for long term disability benefits, which was approved by the plan administrator. The plan provided that after 24 months of payments, an employee would no longer be considered disabled if the employee had not been approved to receive Social Security benefits due to disability or age. The plaintiff’s benefits began on March 29, 2003, and ended on March 28, 2005. MetLife stopped paying benefits because the plaintiff had not been approved to receive Social Security disability benefits within 24 months after first receiving payments. The plaintiff did not apply for Social Security disability benefits until April 2005.

On August 15, 2005, the plaintiff filed an administrative appeal of the denial of benefits. On September 8, 2005, MetLife affirmed the denial of benefits and explained in a letter that the plaintiff’s medical history failed to support a finding that he was disabled because he could perform a sedentary-to-light occupation; the plaintiff failed to meet the plan’s definition of disabled because he had not been approved to receive Social Security disability benefits; and the plaintiff could pursue a civil action if he so desired. The plaintiff submitted a “Request for Case Reinstatement” on June 6, 2008, which stated that he had recently been approved to receive Social Security disability benefits. MetLife denied the request for reinstatement on June 27, 2008, and the plaintiff brought suit to recover long term disability benefits on October 20, 2008.

The trial court granted MetLife’s motion for summary judgment, holding that the plaintiff’s claim was barred by the three year contractual limitation period contained in the plan. The plaintiff appealed to the U.S. Court of Appeals for the Eleventh Circuit.

In its decision, the circuit court observed that ERISA does not provide its own statute of limitations, and that courts either borrow a closely analogous state limitations period or apply a contractually agreed upon period, provided it is reasonable. It noted that the policy in this case provided for a three year limitations period that barred any lawsuit filed more than three years after “the time proof must be given.” It found that limitations period to be reasonable, and then explained that the provision’s “plain language” barred any action by the plaintiff filed after June 27, 2006. It reasoned that the plaintiff’s disability began on September 30, 2002, and the 180 day elimination period ended on March 29, 2003. The plan stated that proof of a claim had to be submitted within 90 days following the end of the elimination period, which was no later than June 27, 2003; three years after that was June 27, 2006.

The plaintiff argued that his claim was not barred because (i) the elimination period began on the date MetLife first denied his claim, March 28, 2005, and his claim accrued on June 27, 2008, when MetLife denied the claim for the last time; (ii) the plan permitted late notice of a proof of a claim if it was given “as soon as possible” and the plaintiff satisfied this provision by providing MetLife notice that he had been approved to receive Social Security benefits soon after receiving a favorable Social Security disability decision; and (iii) a rider amended the plan to displace the contractual limitations period. The circuit court rejected these arguments, finding that they conflicted with the unambiguous language of the provision of the plan setting forth the three year limitations period.  

Finally, the Eleventh Circuit rejected the plaintiff’s argument that the contractual limitations period was unreasonable or unconscionable because it ran while benefits were being paid and while the Social Security Administration considered his Social Security disability claim. It explained that the plaintiff suffered his injury in September 2002, but did not submit a claim for Social Security disability benefits until April 2005, and concluded that given his delay in seeking Social Security disability benefits, the plan provision was neither unreasonable nor unconscionable as applied to the facts of this case. Therefore, it concluded, the trial court had not erred in holding that the plaintiff’s claim was barred by the plan’s three year contractual limitation. [Bennett v. Metropolitan Life Ins. Co., 2010 U.S. App. Lexis 12484 (11th Cir. June 17, 2010).]

Court Rejects Victorious Defendants’ Request That Plaintiffs Pay Their Costs In ERISA Action

The plaintiffs in this case filed an action on behalf of the Kraft Foods Global, Inc. Thrift Plan, alleging that the defendants had breached their fiduciary duties in operating and administering the plan in violation of ERISA.  The plaintiffs sought to recover alleged losses suffered by the plan and to obtain injunctive and other equitable relief based upon the alleged breaches. After a class was certified and discovery was completed, the court granted the defendants summary judgment on all claims in the case.

Having prevailed, the defendants filed a bill of costs, arguing that they were entitled to recover $211,785.25 in costs attributable to court reporter charges and costs of duplication under Federal Rule of Civil Procedure 54(d)(1), which states that “[u]nless a federal statute . . . provides otherwise, costs – other than attorney’s fees – should be allowed to the prevailing party.” The plaintiffs disagreed, arguing that the recovery of costs in an ERISA case is governed by ERISA §1132(g)(1), rather than Rule 54(d)(1).

The court found that the plaintiffs should not be compelled to pay the defendants’ costs. The court found that § 1132(g)(1) “supplants Rule 54(d)(1) as the standard governing whether to award costs to a prevailing party in ERISA lawsuits” because Rule 54(d)(1) governs the award of costs except where costs are provided for in another federal statute, and that §1132(g)(1) is just such a statute.

As the court explained, ERISA Section 1132(g)(1) states that in an ERISA action brought “by a participant, beneficiary or fiduciary, the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party” (emphasis added). Rule 54(d)(1), it noted, gives a prevailing party a virtual entitlement to costs, which a trial judge may deny only in extremely limited circumstances. Section 1132(g)(1), however, makes the award of costs highly discretionary – so much so that the denial of attorneys’ fees or costs to prevailing defendants in ERISA cases “would rarely constitute an abuse of discretion.”

When considering a petition for costs under Section 1132(g)(1), the court said, it had to determine whether “the losing party engaged in litigation merely to harass its opponent.” Here, it noted, the defendants did not argue – and could not reasonably argue – that the plaintiffs’ lawsuit was frivolous. The plaintiffs filed their lawsuit in 2007 and the defendants did not seek to dismiss the suit on the ground that it failed to state a claim for relief or suffered from any other legal deficiency. Indeed, the court added, the plaintiffs successfully prosecuted a motion for class certification. Although the plaintiffs’ claims ultimately failed, they did so only after extensive discovery, equally extensive summary judgment briefing, and a 42 page Memorandum Opinion and Order. The court acknowledged that the defendants’ complete summary judgment victory was a significant factor in deciding whether the plaintiffs had a solid basis for their lawsuit. However, it did not accept the defendants’ premise that any case that failed to survive summary judgment must invariably have lacked a solid basis. Accordingly, the court concluded that the case as a whole, while ultimately not meritorious, had a solid enough basis that an award of costs was unwarranted. [George v. Kraft Foods Global, Inc., 2010 U.S. Dist. Lexis 47850 (N.D. Ill. May 14, 2010).]

Employee Not Eligible For Long Term Disability Benefits Where Disability Was Due To Preexisting Condition

Norman Blanco started working as an engineer at Porsche Engineering Services, Inc., on April 4, 2005, when he was 45 years old and his coverage under Porsche’s disability plans became effective one month later, on May 4, 2005. On July 27, 2005, Blanco had a heart attack and was hospitalized. Unable to return to work, Blanco submitted a claim for both short and long term disability benefits. On the attending physician statement submitted along with his claim, a cardiologist noted that Blanco had experienced an acute myocardial infarction and that he suffered from dilated cardiomyopathy and congestive heart failure (CHF). The doctor noted that Blanco was also limited by his “[r]ecent MI – severe ischemia/dilated cardiomyopathy, CHF class III-IV.”

Blanco’s claim for short term disability benefits was approved, but they expired on November 1, 2005. The plan administrator, Prudential Insurance Company of America, denied Blanco’s claim for long term disability benefits pursuant to the plan’s preexisting condition exclusion. The denial was affirmed during the plan’s review process. Blanco brought suit and the district court granted Prudential’s motion for summary judgment; Blanco appealed.

In affirming the district court’s decision, the U.S. Court of Appeals for the Seventh Circuit explained that if Blanco’s heart attack had occurred anytime after May 4, 2006 (i.e., 1 year after the effective date of his coverage), the preexisting exclusion clause in the plan would not have applied. Because his disability occurred when it did, Blanco had to get past two roadblocks to receive benefits, the circuit court pointed out. The plan’s preexisting exclusion clause defeated a claim for long term disability benefits if an employee like Blanco:

A. received treatment, consultation, care or services including diagnostic measures, or took prescribed drugs or medicines, or followed treatment recommendation in the 3 months prior to the effective date of coverage, or

B. had symptoms for which an ordinarily prudent person would have consulted a health care provider in the 3 months prior to his effective date of coverage.

According to the circuit court, Blanco had a long history of progressively worsening heart disease, including a heart attack in 1999 and a stent inserted in 2002. He also had a cardiac catherization in 2004, and his cardiomyopathy and CHF initially were documented in 2004. At that time, he had an ejection fraction (EF) of 20 percent, which was significantly below normal.

The circuit court noted that cardiomyopathy and CHF were progressive conditions. Therefore, the Seventh Circuit decided, Blanco’s cardiomyopathy and CHF “were certainly preexisting during the ‘look back’ period – the three months before his heart attack.” During that period, Blanco also visited a physician for testicular pain and it was discovered that he had a blood pressure of 210/132. Blanco explained that his blood pressure was so high because he forgot to take his blood pressure medication that day, although he usually did not forget to take it. The physician recommended that Blanco be hospitalized because he was in a hypertensive crisis, but Blanco talked the physician out of having him hospitalized by insisting that he had just forgotten to take his medication that day. The physician implored Blanco to take his medication as quickly as possible, warned him of potential symptoms to look for, and sent him on his way.

Given this medical history, the circuit court agreed with the district court that Blanco’s disability was caused by a preexisting condition under the policy. First, it pointed out that by stating that he regularly took his blood pressure medication, but forgot to do so on the day of his doctor’s appointment, Blanco admitted he was taking prescription drug medication for his heart during the look-back period.

Blanco also had a preexisting condition under the policy subsection that defined a condition as preexisting if there were symptoms during the look-back period for which an ordinarily prudent person would have consulted a health care provider. In the circuit court’s view, Blanco’s extraordinarily high blood pressure during the look-back period was a potential symptom for which an ordinarily prudent person would have consulted a health care provider. Because Blanco’s physician told him of his extraordinarily high blood pressure and recommended hospitalization, his hypertension was a preexisting condition under the policy. Therefore, Blanco was not eligible for long term disability benefits. [Estate of Blanco v. Prudential Ins. Co. of America, 606 F.3d 399 (7th Cir. 2010).]

Divorced Spouse Loses Claim To COBRA Health Benefits And For Immediate Payment Under QDRO

The plaintiff and her husband were divorced on November 6, 2006. Through the divorce decree, the plaintiff was awarded $57,505.22 from her former husband’s pension and savings funds. Upon receiving written notice of the divorce in June 2007, the plaintiff’s former husband’s welfare fund informed the plaintiff that she was not eligible for COBRA coverage because she had failed to provide them with timely notice of her divorce; she did not appeal this decision. Moreover, the pension fund and savings fund notified the plaintiff that payments awarded to her from the divorce decree would be disbursed to her once her former husband became eligible to receive a distribution under the provisions of the plans.

After sending letters to the funds demanding immediate payment and COBRA coverage, the plaintiff brought suit. In her complaint, she claimed that the defendants had violated ERISA and had negligently inflicted emotional, psychological, physical, and financial harm to her when they denied her COBRA coverage and refused her an immediate payment of $57,505.22. The district court granted summary judgment in favor of the defendants on all claims, and the plaintiff appealed.

The appellate court affirmed. It explained that, under COBRA, an employee’s spouse who lost coverage following a divorce was a plan beneficiary, even though there was no employer-employee relationship between the employer and the spouse. Federal law provides that such qualified beneficiaries have 60 days from the date of a qualifying event such as a divorce to notify the employer or plan administrator of the divorce. Without timely notice of the divorce, a plan administrator was not required to provide the otherwise-qualified beneficiary with notice of the right to continue coverage, the circuit court added.

In this case, the plaintiff had 60 days from the date of her final divorce – until January 5, 2007 – to notify the fund of her divorce and elect health care coverage. However, the appellate court noted, the defendants first received written notice in June 2007. The circuit court ruled that the plaintiff’s failure to elect COBRA continuation coverage within 60 days following the November 6, 2006 final divorce “effectively terminated her COBRA rights.”

The appellate court also affirmed the district court’s decision that the defendants had not violated ERISA by failing to make an immediate payment of the $57,505.22 that the plaintiff had been awarded in her divorce decree. As the appellate court noted, ERISA explicitly provides that a qualifying order (QDRO) cannot require a plan to provide a type or form of benefit, or any option, not otherwise provided under the plan, nor require the plan to provide increased benefits.

The QDRO in this case assigned the plaintiff funds from her former husband’s pension fund account and from his savings fund account. The appellate court noted that although the QDRO failed to specify the date of distribution, both plans provided that no distributions would be made before the plaintiff’s former husband separated from service or turned 50. These events had not yet occurred, it added, and consequently, the plan administrators informed the plaintiff that she would not receive her payments until one of those events occurred. Accordingly, the appellate court found no error in the administrators’ interpretations of the QDRO and no abuse of discretion in their interpretations of the plan provisions, and it affirmed the district court’s grant of summary judgment to the defendants on the plaintiff’s ERISA claim for denial of benefits. [Ludwig v. Carpenters Health & Welfare Fund of Philadelphia and Vicinity, 2010 U.S. App. Lexis 11467 (3rd Cir. June 4, 2010).]

Failed Physical Examination Dooms Plaintiff’s Claims Under The Rehabilitation Act And The Age Discrimination In Employment Act

The plaintiff here worked on a temporary basis at the Cheyenne Veteran Affairs Medical Center as a boiler plant operator. Following a failed physical examination, the plaintiff was reassigned to a lower paid position. He then brought suit, claiming that this reassignment discriminated against him based on his obesity (the plaintiff was 6’3″ and 338 pounds) and diabetes in violation of the Rehabilitation Act of 1973 and that age discrimination played a role in his reassignment in violation of the Age Discrimination in Employment Act (ADEA). The district court granted summary judgment for the defendants on all counts, and the plaintiff appealed.

The U.S. Court of Appeals for the Tenth Circuit affirmed. It upheld the district court’s ruling on the Rehabilitation Act claim, assuming that the plaintiff was disabled but finding that he was not otherwise qualified to hold the position as required by that law, that there were “no reasonable accommodations that would have allowed [the plaintiff] to remain employed in the boiler room,” and thus that the transfer to the lower paid position was reasonable.

The Tenth Circuit also affirmed the district court’s grant of summary judgment as to the plaintiff’s age discrimination claim. The circuit court acknowledged that the plaintiff had properly alleged all the elements to establish a prima facie case:  he was over the age of 40, he was performing satisfactory work, he was terminated from this position, and, finally, he was replaced by employees who were younger. It found, however, that the defendants had asserted a non-age related justification for its actions:  the plaintiff failed the mandated physical and it believed that he was unable to perform the essential functions required of a boiler room operator. The plaintiff also was unable to allege facts sufficient to show that the justification was a pretext or that age was a determinative factor. There were no disputed facts and the evidence that existed could not support a claim under the ADEA, the circuit court concluded. It therefore found that summary judgment in favor of the defendants was appropriate on this claim. [Wilkerson v. Shinseki, 606 F.3d 1256 (10th Cir. 2010).]

Reprinted with permission from the September 2010 issue of the Employee Benefit Plan Review – From the Courts.  All rights reserved.

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