Citing Surveillance Videos and Other Evidence, Circuit Court Upholds Plan Administrator’s Decision to End Employee’s Long Term Disability BenefitsJuly 31, 2014 | | |
The plaintiff in this case was employed by BDP International as an air import coordinator. Her full time sedentary job required her to sit for most of an eight hour day and, occasionally, to lift or carry a small amount of weight.
After she was diagnosed with relapsing-remitting multiple sclerosis (“MS”) in the late 1990s, she suffered an exacerbation in May 2005 that caused her to experience difficulty walking, among other serious symptoms. As a consequence, her treating neurologist opined that she was “no longer able to work in any capacity,” and advised that she withdraw from work “on a permanent basis.”
The plaintiff stopped working and submitted a claim to BDP’s long term disability plan. In September 2005, Hartford Life and Accident Insurance Company, which administered the BDP plan, determined that the plaintiff was qualified to receive long term disability benefits. In 2006, the Social Security Administration (SSA) determined that the plaintiff was disabled and qualified for governmental benefits, which she began to receive.
In 2008, Hartford undertook a re-assessment of the plaintiff’s eligibility for benefits. After obtaining an updated peer review of her medical condition and two brief surveillance videos of the plaintiff performing chores outside her home, Hartford determined that the plaintiff no longer met the plan’s definition of “disabled.”
In response to the plaintiff’s request for an administrative review, Hartford sought an additional medical evaluation and the plaintiff submitted further input from her treating neurologist. Hartford upheld the denial, citing, among other factors, the opinions of its medical reviewers, inconsistencies in the reports of the plaintiff and her neurologist, observations derived from the surveillance videos regarding her current functional capacities and observations by an investigator who met with the plaintiff for several hours.
The plaintiff went to court. On cross-motions for summary judgment on the administrative record, the U.S. District Court for the Eastern District of New York concluded that Hartford’s denial of coverage was arbitrary and capricious and granted the plaintiff’s motion for summary judgment and damages. Among other things, the district court held that Hartford had erred in failing to “provide a cogent reason for its disagreement with the [SSA]” and found that, although “th[e] videos undoubtedly show [the plaintiff] doing things that she claimed not to be able to do,” the videos “d[id] not constitute substantial evidence that she is able to [work].”
Hartford appealed, and the U.S. Court of Appeals for the Second Circuit reversed.
In its decision, the Second Circuit first noted that plan administrators were “not bound by an SSA’s award of benefits.” It added that the plaintiff had only provided Hartford with the SSA award letter; that the plaintiff had presented no documents disclosing the basis for SSA’s determination; and that there was no indication that the SSA had conducted any reevaluation of the plaintiff’s condition after its initial award (with which Hartford had agreed). Consequently, it decided that it could not fault Hartford for failing to discuss the SSA’s position more substantially in its decision.
The circuit court also said that it “may be” that the surveillance videos alone did not constitute “substantial evidence” demonstrating that the plaintiff was no longer disabled, but it found that the record was “persuasive that Hartford’s decision rested on far more than the surveillance videos.” The circuit court observed that Hartford had stated that it utilized “clinical information and the video surveillance” in its determination and that it had obtained assessments from two separate reviewers and a report from an investigator who had interviewed the plaintiff for about two hours and thirty minutes. Simply put, the circuit court concluded, it could not agree with the district court that Hartford’s decision had been arbitrary and capricious and it reversed the district court’s ruling. [Ingravallo v. Hartford Life and Accident Ins. Co., 2014 U.S. App. Lexis 7653 (2d Cir. April 24, 2014).]
Circuit Court Upholds Pension Plan Administrator’s “Rational” Decision to Deny Death Benefit
The plaintiff in this case argued that the administrator of the NYNEX Pension Management Plan, in which his mother had been a participant, had abused its discretion in interpreting the terms of the plan applicable to benefits payable following her death.
Section 5.2 of the plan provided for a “Sickness Death Benefit,” payable when an employee died from sickness or injury during the course of employment. That benefit was “subject to the conditions imposed … elsewhere in this Plan” and was payable only if there were certain eligible beneficiaries, as designated in Section 5.4. Section 5.4 provided that eligible beneficiaries were “limited to the spouse and the dependent children and other dependent relatives of the deceased.” Section 5.6, which had the heading “Death After Termination of Employment,” provided that a death benefit was payable in the case of former employees who “became disabled by reason of accident or sickness while an employee and continued disabled, until death, to such a degree as to be unable to engage in any gainful occupation.” It also provided that, “[t]he amount of the Death Benefit, if any, shall not exceed the amount which could have been paid if the disabled person had died on the day he ceased to be an employee….”
The plan administrator rejected the plaintiff’s claim for a death benefit under Section 5.6, reasoning that Section 5.6 did not create a death benefit but, rather, served as a modification of the benefits created elsewhere in that section – for example, the Sickness Death Benefit from Section 5.2. Because the benefit in Section 5.2 was limited by the list of eligible beneficiaries in Section 5.4, and because the plaintiff’s mother had no eligible beneficiary as defined in Section 5.4 at the time of her death, the plan administrator concluded that no death benefit was owed to the plaintiff.
The plaintiff sued in federal district court, and a magistrate judge issued a report and recommendation concluding that the plaintiff was owed a death benefit under the plan. The district court judge reviewed the magistrate judge’s determination and rejected it, upholding the plan administrator’s objection. The district court held that the plan administrator’s interpretation of the plan was “at least a reasonable one,” and the plaintiff appealed.
The U.S. Court of Appeals for the Second Circuit agreed with the district court and affirmed its decision. The circuit court stated that although the plan could be interpreted differently, the administrator’s conclusion was “rational,” which was a sufficient basis for the plan administrator’s decision to be upheld. [Varney v. Verizon Communications, Inc., 2014 U.S. App. Lexis 5593 (2d Cir. March 27, 2014).]
Employers Generally Need Not Allow Employees More than Six Months Sick Leave under Federal Rehabilitation Act, Circuit Court Rules
The plaintiff in this case, an assistant professor at Kansas State University who had a one year contract to teach classes over three academic terms (fall, spring and summer), received news that she had cancer and needed treatment. She sought and the university gave her a six month paid leave of absence. As that period drew to a close and the spring term approached, the plaintiff’s physician advised her to seek more time off.
The plaintiff asked the university to extend her leave through the end of spring semester, promising to return in time for the summer term. According to the plaintiff, however, the university refused, explaining that it had an inflexible policy allowing no more than six months’ sick leave.
The plaintiff sued the university, contending that by denying her more than six months’ sick leave, the university had violated the federal Rehabilitation Act. The district court dismissed her complaint, and the plaintiff appealed to the U.S. Court of Appeals for the Tenth Circuit.
The circuit court affirmed. In its decision, it explained that the Rehabilitation Act prohibited recipients of federal funding, such as Kansas State, from discriminating on the basis of disability and that it was intended to prevent employers from “callously denying reasonable accommodations” that permitted otherwise qualified disabled persons to work – “not to turn employers into safety net providers for those who cannot work.”
The circuit court declared that it was “difficult to conceive” how an employee’s absence for six months – during which time the employee could not work from home, could not work part-time and could not work in any way in any place – could be consistent with discharging the essential functions of almost any job in the national economy today. Even if it were, the circuit court said, it was “difficult to conceive when requiring so much latitude from an employer might qualify as a reasonable accommodation.”
Moreover, the circuit court continued, there also was nothing inherently discriminatory in the fact that the university’s six month leave policy was “inflexible,” as the plaintiff asserted. The circuit court conceded that “inflexible leave policies” were not necessarily “categorically immune to attack,” noting that policies providing “unreasonably short sick leave periods” might not provide accommodation enough for employees who were capable of performing their jobs’ essential functions with just a “little more forgiven absence.” The circuit court concluded, however, that the university’s policy, which granted employees a full six months’ sick leave, was “more than sufficient to comply with the Act in nearly any case.” [Hwang v. Kansas State University, 2014 U.S. App. Lexis 9949 (10th Cir. May 29, 2014).]
Ex-Employee Who Engaged in Several Years of Litigation with Employer Lost Right to Compel Arbitration of Wage Claims, Appeals Court Rules
In this case, Damon Tulip worked as a family service counselor and as a community services counselor for Service Corporation International (SCI), which owned funeral homes nationwide. The employment agreement signed by Tulip provided that all disputes relating to any aspect of his employment with SCI would be resolved through binding arbitration, and that any claim had to be presented in writing “within one year of the date the claiming party knew or should have known of the facts giving rise to the claim.”
After Tulip left SCI in September 2007, another former SCI employee, on behalf of a national class of SCI employees including Tulip, filed a lawsuit in December 2007 against SCI, asserting wage claims under state law (the Bryant action).
Then in January 2008, SCI was sued in a purported class action (the Stickle action) in federal court in Arizona for alleged violation of the federal Fair Labor Standards Act of 1938 (FLSA). The Stickle action alleged that SCI did not pay the class members for all hours worked and did not pay overtime at one and one-half times the hourly wage. The suit also alleged that SCI required pre-approval for overtime pay, deducted meal break hours from pay, and required employees to do “community work” without compensation. The suit sought damages in the amount of the plaintiffs’ unpaid wages; the court conditionally certified a class action on the FLSA claim and approximately 1,400 SCI employees – including Tulip – opted into the class action lawsuit. In fact, in December 2009, Tulip filed a “Consent to Become a Party Plaintiff” in the Stickle action and responded to interrogatories served upon him as a party plaintiff.
After more than two and one-half years of litigation in the Bryant action, the parties stipulated to dismiss the claims of the out-of-state class members, including Tulip.
Thereafter, in October 2010, a third lawsuit (the Emmick action) was filed, in a Washington state court, against SCI on behalf of a class of Washington employees, including Tulip. The Emmick lawsuit against SCI alleged state law claims and sought to recover unpaid wages and unpaid overtime.
In April 2011, the court hearing the Stickle action entered an order dismissing “the claims of all opt-in plaintiffs,” including Tulip. In May 2011, SCI moved to dismiss the Emmick action. In response, the plaintiffs in the Emmick action voluntarily dismissed their claims and the court entered the order of dismissal on May 17, 2011.
Two days later, Tulip sent SCI a demand for arbitration under the terms of his employment agreement of his claims for unpaid wages, overtime and other compensation. SCI did not respond, and Tulip filed a “Petition to Compel Arbitration” in Washington state court. SCI filed a motion to dismiss, asserting that Tulip had waived his right to arbitration by participating in the prior litigation. In response, Tulip moved for summary judgment, arguing that he was entitled to arbitration. The court dismissed Tulip’s petition to compel arbitration with prejudice, and Tulip appealed.
The appellate court affirmed. In its decision, the appellate court observed that Tulip had signed the employment agreement, which contained the agreement to arbitrate, and it found that Tulip “was aware of his right to arbitrate” when he signed the agreement.
The appellate court then decided that Tulip affirmatively had chosen to litigate his wage claims by opting in as a plaintiff to the Stickle action; that he had remained a party in the Stickle action for one and one-half years, engaging in discovery and failing to raise the right to arbitrate; and that he first had made his demand for arbitration two days after the plaintiffs in the Emmick action voluntarily had dismissed their wage claims.
According to the appellate court, Tulip’s decision to invoke the “litigation machinery” and to resort to arbitration only after dismissal of his claims was “inconsistent with arbitration” under the terms of his employment agreement. Concluding that Tulip’s delay in seeking arbitration had prejudiced SCI, the appellate court then affirmed dismissal of Tulip’s petition to compel arbitration. [Tulip v. Service Corp. Int’l, 2014 Wash. App. Lexis 939 (Wash. Ct.App. April 21, 2014).]
De Minimus Work Closing a Starbucks Found Not Compensable
The plaintiff in this case worked as a shift supervisor for Starbucks Corporation from June 2008 until the end of his employment in January 2011. While he was employed at Starbucks, he was aware that the company maintained the policy: “time worked equals time paid.”
One of the plaintiff’s job responsibilities was to accurately record his work time using the point-of-sale (“POS”) system so that Starbucks could pay him for all of his time worked. The POS system was part of Starbucks’ System to Automate Retail (“STAR”) software. In addition to the POS registers at the front of the store, the STAR system included a computer in the backroom, commonly referred to as the Manager’s Workstation (“MWS”).
The plaintiff claimed that he performed unpaid work during shifts at the end of the business day – “closing” shifts – but not when he worked shifts in the morning or in the afternoon. According to the plaintiff, at the end of a closing shift, he was responsible for using the store computer (the MWS) to transmit sales data to Starbucks headquarters, a process called the “close store procedure.” The close store procedure consisted of selecting “close store” with the computer’s mouse or keyboard, entering a password and then pressing the “Y” key. Immediately after running the close store procedure, the plaintiff set the store alarm by typing a numeric code on the alarm panel located near the computer.
The plaintiff contended that the STAR software required that he clock out on the POS system before initiating the close store procedure. The plaintiff said that he performed this routine during his closing shifts from approximately December 2008 to October 2010, when Starbucks replaced the STAR software with another system, which eliminated the requirement that an employee initiate the close store procedure after clocking out for the day.
According to the plaintiff, the store close procedure typically lasted “one minute to two minutes” before he activated the alarm. After activating the alarm, the plaintiff exited and locked the front door of the store. The store’s alarm system required that the employees leave the store within one minute of setting the alarm.
In compliance with Starbucks’ safety guidelines, the plaintiff would walk his co-workers to their cars and stay outside the store with a co-worker who was waiting for a ride. The plaintiff asserted that every couple of months, after clocking out and exiting the store, he would have to bring the store’s patio furniture inside. Additionally, the plaintiff occasionally would have to reopen the store after clocking out and leaving if another employee had forgotten a personal belonging inside the store.
After the plaintiff’s final day of employment at Starbucks, he received his final wage statement. Thereafter, he brought a class action lawsuit against Starbucks, claiming that it had violated the California Labor Code by failing to pay him for the time he had spent closing up the store after he had clocked out at the conclusion of certain shifts.
Starbucks moved for summary judgment, arguing that, among other things, his claim for unpaid wages failed as a matter of law because the time he spent in and around the store after clocking out was de minimus. The court granted Starbucks’ motion.
In its decision, the court agreed with Starbucks and ruled that the plaintiff’s claim for unpaid wages failed as a matter of law because any unpaid time was de minimus, adding that the “de minimus doctrine” was a defense to wage claims asserted under the California Labor Code.
As the court explained, to determine whether work time was de minimus, courts consider:
1) the practical administrative difficulty of recording the additional time;
2) the aggregate amount of compensable time; and
3) the regularity of the additional work.
Applying these standards, the court noted, other courts have held that daily periods of approximately 10 minutes were de minimus. It then found that the duration of the plaintiff’s post-closing activities was “even briefer than the time periods” found to de minimus by other courts. As the court explained, the plaintiff activated the alarm approximately one minute after he clocked out; once the plaintiff set the alarm, the plaintiff needed to exit the store within one minute to avoid triggering the alarm; and it took 30 seconds to walk out of the store. The court added that the plaintiff then locked the door, which took 15 seconds to “a couple minutes,” and walked his co-workers to their cars, which took 35 to 45 seconds. The court then said that, on rare occasions – once every “couple of months” – the plaintiff spent “a few minutes” letting co-workers back inside the store or bringing in patio furniture that he had forgotten to retrieve before clocking out.
The court determined that, even assuming that all of this time otherwise would be compensable “work,” it generally totaled less than four minutes, and nearly always was less than 10 minutes. As such, the court ruled, the amount of time favored a finding that the alleged work was de minimus.
In addition, the court decided that the “administrative difficulty of recording the additional time” also favored applying the de minimus defense because Starbucks “could not feasibly capture the time at issue in this case.”
The court ruled that where, as in this case, the first two factors were satisfied, the de minimus defense would apply – even when a plaintiff alleged uncompensated time every day. Thus, the court concluded, although the plaintiff claimed that he had performed off-the-clock work during every closing shift to which he was assigned, which was not every shift that he worked, the facts were consistent with a finding that the time spent closing the store was de minimus and non-compensable under the California Labor Code. [Troester v. Starbucks Corp., 2014 U.S. Dist. Lexis 37728 (C.D. Cal. March 7, 2014).]
Reprinted with permission from the August 2014 issue of the Employee Benefit Plan Review – From the Courts. All rights reserved.