Court Dismisses Suit By Employee Discharged Upon His Return From Jury Service

Beth Abraham Health Services, a non-profit organization located in the Bronx that provides residential and community-based health care services for adults, hired the plaintiff in this case in October 1997 as an Authorization Specialist. The plaintiff’s main duty was to input information obtained from doctors, nurses, and others into a single, electronically-stored document called a care plan, using a computerized system called CHAMP.

During his employment at Beth Abraham, the plaintiff was counseled repeatedly regarding his performance. On February 21, 2007, Beth Abraham issued a “final” written warning to the plaintiff that advised him that without “immediate and sustained improvement,” he would be fired.

At some point in 2007, the plaintiff received a notice to appear in federal court on Monday, April 2, 2007 for jury duty. Beth Abraham had a written policy allowing employees to take time off for jury duty, but requiring them to notify Beth Abraham “immediately” upon receipt of the jury notice.  The plaintiff advised his supervisor of the jury duty notice at approximately 3:30 p.m. on Friday, March 30, the last work day before he was scheduled to begin his jury service. The supervisor went to the plaintiff’s work space on Monday, April 2, to ensure that plaintiff’s work got done in his absence and discovered, in her words, a desk “in complete disarray.” She became concerned that the information in the documents on the desk had not been input into the system and that that omission could jeopardize patients’ treatment plans. The supervisor immediately contacted the director of human resources and recommended that the plaintiff be fired. When the plaintiff returned to work on April 5, the director informed him that he was being fired for unsatisfactory job performance.

Following the termination of his employment, the plaintiff brought suit against Beth Abraham and other defendants, contending that he was fired because of his jury service in violation of the federal law known as the Jury System Improvements Act of 1978. That law states that “[n]o employer shall discharge … any permanent employee by reason of such employee’s jury service, or the attendance or scheduled attendance in connection with such service, in any court of the United States.” The defendants moved for summary judgment.

In its decision granting the defendants’ motion, the court found that there was no dispute that the plaintiff had received a notice of jury service, that he was absent from work due to that service, and that he was fired as soon as he returned to work. The court found, however, that the plaintiff had failed to offer sufficient evidence from which a jury could infer that he was fired because of his jury service.

According to the court, the plaintiff offered no evidence that he was treated less favorably than any other employee with his record of formal warnings about job performance, that there was a pattern or practice of intentional discrimination against employees who performed jury service, or that anyone at Beth Abraham made any invidious comments about jury service or about his jury service. The court said that the plaintiff based his suggestion that his jury service was the reason for the termination of his employment on “the single fact” that he was “fired while on jury service.”

The court observed that a plaintiff ordinarily can benefit from a presumption of causation based on temporal proximity. In this case, however, the court found that the inference was insufficient to allow the plaintiff to proceed with his claim. The court reasoned that there was a “substantial and undisputed record” of the warnings given to the plaintiff, including the issuance of a final warning just six weeks before he was fired. The court added that it also was undisputed that the supervisor made her decision to seek the termination of the plaintiff’s employment as soon as she saw the disarray on his desk and realized its implications for the safety of the patients.

The court found that Beth Abraham had offered an entirely legitimate reason for its decision to terminate the plaintiff’s employment. It decided that the plaintiff could not demonstrate that Beth Abraham’s stated reason for firing him was pretextual, and that his claim of retaliatory firing for participation in jury service rested entirely on one inference: He reasoned that his jury service must have precipitated his firing because he was notified that he was fired as soon as he returned from jury service. The court concluded that, in the absence of any other evidence that jury service prompted this adverse employment action, Beth Abraham was entitled to summary judgment. [Arnold v. Beth Abraham Health Services, Inc., 09 Civ. 7932 (DLC) (SDNY June 15, 2011).]

Court Rejects LTD Claim By Employee With Pre-Existing Condition

The plaintiff in this case began working for the American Red Cross in April 2004. Her initial term of employment ended in 2005 due to budgetary issues, but the organization rehired her on March 18, 2008. According to the plaintiff, Red Cross management rehired her with full knowledge that she was under a doctor’s care for multiple sclerosis (MS) and fatigue.

The last day the plaintiff worked for the Red Cross was February 16, 2009. On February 25, 2009, the plaintiff submitted a claim for short term disability (STD) benefits; she received benefits for the maximum period available under the plan.

In correspondence dated June 20, 2009, the plaintiff’s attorney indicated that she intended to pursue a claim for long term disability (LTD) benefits. The Metropolitan Life Insurance Company, the claims administrator for the LTD Plan, notified the plaintiff that her claim was denied because her disabling condition was considered a preexisting condition under the LTD Plan. The plaintiff appealed but MetLife upheld its original determination denying her claim on the ground that her disability resulted from a pre-existing condition; the plaintiff brought suit.

She first urged the court to reverse MetLife’s decision under a theory of promissory estoppel, arguing that Red Cross managers knew about her medical problems and informed her that she would be immediately eligible for participation in the LTD disability plan upon her re-employment. The court rejected this argument, reasoning that the plaintiff could not recover on the basis of a representation by Red Cross management that deviated from the LTD Plan terms unless that representation was a plausible interpretation of an ambiguous plan provision. Here, the court ruled, the LTD Plan unambiguously precluded disability benefits for a disability arising from a pre-existing condition, and provided a clear definition for the term “pre-existing condition.”

The plaintiff next argued that she was exempt from the pre-existing condition provision based on her prior participation in a disability plan. The court rejected that contention, too, explaining that the plan’s “special rule” for pre-existing conditions provided continuity of coverage for existing plan participants when an employer changed insurance carriers. Because the plaintiff had not demonstrated that the Red Cross had changed insurance carriers, the provision did “not apply to the present controversy.”

The plaintiff’s third contention was that it was arbitrary and capricious for MetLife to grant her claim for STD benefits and then deny her claim for LTD benefits. The court, however, found “no authority” for the proposition that a decision to grant benefits under an STD benefits plan required payment of LTD benefits available under a separate plan with separate eligibility requirements.

Finally, the plaintiff claimed that MetLife’s application of the pre-existing conditions provision amounted to a breach of fiduciary duty because MetLife failed to consider Red Cross management’s promise that she would be immediately eligible for LTD benefits upon her reemployment. In rejecting this claim, the court explained that the plaintiff did not allege that MetLife had misled her to believe that the pre-existing conditions provision did not apply to her, nor did she allege any conduct on MetLife’s part that constituted a breach of a fiduciary duty.

The court therefore upheld MetLife’s decision to deny the plaintiff’s claim for LTD benefits. [Lemley v. Metropolitan Life Ins. Co., 2011 U.S. Dist. Lexis 58526 (E.D. Ark. May 31, 2011).]

Amendment To LTD Plan Permits Reduction Of Future Benefits Based On Amount Previously Received To Settle Accident Claim

In this case, the plaintiff was employed by Commonwealth Insurance Company, where she was covered for disabilities under its long term disability plan. In June 1991, she was seriously injured in a car accident. In March 1992, after a determination that she was totally disabled, Commonwealth granted her monthly disability benefits.

In 1994, the plaintiff settled her tort claims against the person allegedly responsible for the accident. Under the terms of that settlement, she received a lump sum of $445,000 and $1,939.96 per month for 240 months from the tortfeasor’s insurer. The Commonwealth long term disability plan in effect in 1991 (the 1991 Plan) did not allow Commonwealth to offset tort settlement proceeds against the plaintiff’s monthly disability benefits. The 1991 Plan did state, however, that the “company reserves the right to change or discontinue this Plan.”

The 1991 Plan was amended in 1998 (the 1998 Plan) to provide, in a section titled “Effect of Other Income on Benefits,” that disability benefits “will be reduced to the extent that you qualify for benefits payments from … disability payments which result from the act or omission of any person whose action caused your disability. These payments may be from insurance or other sources.” The 1998 Plan further stated that “[a]ny of these ‘Other Income Benefits’ that date back to a prior date during a certified period of disability may be allocated on a retroactive basis.” It then explained that, if the claims administrator determined there had been an overpayment of benefits, it could “reduce, by the amount of overpayment, any future benefit payment made to or on behalf of you or your dependent(s).” Failure to reimburse an overpayment would “result in suspension of benefits until reimbursement has occurred.”

In September 2005, Commonwealth advised the plaintiff that it was “unable to issue your benefits check” because she was receiving workers’ compensation payments that should have been offset. Commonwealth requested information about those benefits “to avoid any further overpayment situation.” The plaintiff submitted information to Commonwealth showing that the payments she was receiving were tort settlement payments, not workers’ compensation payments. Commonwealth responded in June 2006 that, because of the settlement income she was receiving, there was an overpayment in her disability benefits. The letter, citing the 1998 Plan, stated that the disability benefits should have been offset by the lump sum settlement proceeds the plaintiff had received. The letter explained that, as a result of the failure to offset the settlement proceeds from 1994 onward, the plaintiff had been overpaid $82,185, and her future monthly benefits would be withheld for five years to recoup that overpayment.

The plaintiff responded in May 2007 that none of the 1991 Plan’s terms required the offsetting of tort settlement proceeds. Commonwealth replied in June and explained that, under the 1998 Plan, benefits would be reduced to the extent the plaintiff qualified for “benefit payments from … disability payments which result from the act or omission of any person whose action caused your disability.” The letter concluded that the provision it cited covered tort settlements.

The plaintiff brought suit under ERISA, seeking to recover the monthly benefits Commonwealth withheld. A federal district court ruled in favor of the plaintiff, and the case reached the U.S. Court of Appeals for the Fifth Circuit.

In its opinion reversing the district court’s ruling, the Fifth Circuit explained that, unless an employer contractually ceded its freedom, it generally was free under ERISA, for any reason at any time, to adopt, modify, or terminate a benefits plan. Here, the circuit court noted, Commonwealth did not use “clear and express language” that it intended to confer unalterable and irrevocable benefits to the plaintiff; in fact, it used “clear and express language” that it did not intend to do so. As the appellate court pointed out, the 1991 Plan stated, “While the company fully expects to continue this Plan indefinitely, the company reserves the right to change or discontinue this Plan.” Thus, the Fifth Circuit ruled, the plaintiff’s right to future benefits “never vested.” Accordingly, it continued, Commonwealth was free to alter the 1991 Plan to modify (or even terminate) the plaintiff’s future benefits, which was what it did when it amended the Plan in 1998.

The plaintiff nevertheless argued that even if the 1998 Plan applied, because she was entitled to benefits under the 1991 Plan, the 1998 Plan amendments could not negate or reduce those benefits. The Fifth Circuit disagreed with her.  It found that the plaintiff was not “entitled” under the 1991 Plan to a certain level of future benefits because it stated that Commonwealth could change or terminate the plan.

After concluding that the 1998 Plan permitted the offsetting of tort settlement proceeds against benefits paid under the Plan, the Fifth Circuit remanded the case to the district court. [Hargrave v. Commonwealth General Corp.’s Long Term Disability Plan, 2011 U.S. App. Lexis 9903 (5^th Cir. May 13, 2011).]

Appeal Of Denial Of Disability Claim Filed Days Late Dooms Plaintiff’s Lawsuit

The plaintiff, an employee of Wisconsin-based Briggs & Stratton Company, ceased working in November 2005 due to a variety of ailments, including cervical radiculopathy, bilateral carpal tunnel syndrome, and ulnar nerve compression. On August 9, 2007, the employee made a claim for disability retirement benefits under the Briggs & Stratton Retirement Plan, basing the claim upon the employee’s doctor’s opinion that the employee was totally and permanently disabled, could not return to Briggs & Stratton, and could not perform any work at all. The plan retained its own medical consultant, who opined that the employee was not totally and permanently disabled.  On September 26, 2007, the plan denied the employee’s claim for disability retirement benefits and on September 29, 2007, the employee was notified of the denial of her claim. The letter informing the employee of the denial of her claim advised her that she had 180 days from receipt of the letter to appeal the denial of benefits to the plan’s Retirement Committee. The requirement that an appeal from a denial of plan benefits must be made within 180 days from receipt of a denial letter was contained in the plan.

On October 9, 2007, the employee wrote to the plan to request copies of the records relied upon by the plan in denying her claim for benefits and advised the plan that “[a]fter I get these things [the records], I’ll decide whether or not to appeal.” Upon receipt of the records as requested, the employee retained counsel to bring an appeal to the plan from the denial of her claim for benefits. On February 4, 2008, the plan received a letter from the employee’s counsel requesting a copy of the plan document and advising the plan that the employee’s counsel would be filing an administrative appeal on the employee’s behalf “soon.” On February 8, 2008, the plan administrator, answered the letter, sending a copy of the plan document and advising the employee’s counsel that an appeal letter had to be received by the plan by March 31, 2008. (The February 8 letter actually overstated the appeal deadline by four days: 180 days from the employee’s receipt of the original denial of benefits was March 27, 2008.)

After receiving a vocational report dated March 27, 2008, the employee brought her appeal to the plan. The appeal letter, however, was not received by the plan until April 11, 2008 – 11 days after the March 31 deadline specified by the plan administrator in its February 8, 2008, letter and 15 days after the actual deadline of March 27, 2008.

In her appeal letter, the plaintiff acknowledged that her appeal was untimely, but offered no explanation for the delay in bringing the appeal. The plan refused to consider the appeal on the grounds that the appeal was untimely. The plaintiff thereafter filed suit against the plan in federal district court in Milwaukee, Wisconsin. After the plan was awarded summary judgment, the plaintiff appealed to the U.S. Court of Appeals for the Seventh Circuit.

The Seventh Circuit pointed out that there was no dispute that the plaintiff’s appeal from the plan’s original denial of benefits was untimely. It added that the plaintiff’s argument was that the untimeliness of her appeal should be excused because she was in “substantial compliance” with administrative review procedures under the plan.

The circuit court rejected that argument. It explained that ERISA plans have an interest in “finality of decisions” regarding claims for benefits that militates “against reopening a plan’s administrative claim process willy-nilly.” The plan in this case had fixed “a clear deadline” of 180 days for filing administrative appeals from denials of benefits, and, according to the circuit court, the plan had the right to enforce that deadline.  The Seventh Circuit noted that the plan had conceded at oral argument that it was within its discretion to entertain an untimely appeal, but added that the plaintiff had never offered an explanation for the untimeliness of her appeal that would warrant such an exercise of discretion in her favor. The circuit court therefore ruled that the plaintiff’s failure to file a timely administrative appeal from the plan’s initial denial of benefits was not excused on grounds of substantial compliance.

Finally, the Seventh Circuit ruled that the plan’s refusal to entertain the plaintiff’s untimely administrative appeal was not arbitrary and capricious, nor was it an abuse of discretion for the district court to require exhaustion of administrative remedies in this case. Because the plaintiff failed to exhaust her administrative remedies before bringing suit under ERISA, the district court properly granted summary judgment in favor of the plan, the circuit court concluded. [Edwards v. Briggs & Stratton Retirement Plan, 639 F.3d 355 (7^th Cir. 2011).]

“Joint Employer” Claim Under FLSA Dismissed In Outsourcing Case

The plaintiffs in this case alleged that they had been hired by Worldwide Domestic Services, Inc., from October 2010 to December 2010 to clean Chili’s restaurants in the Middle Tennessee area. The plaintiffs claimed that they cleaned the restaurants after hours, when the businesses were closed, and they cleaned only Chili’s restaurants. They asserted that Worldwide promised to pay each plaintiff $10 per hour for their time spent cleaning Chili’s restaurants and also promised to reimburse them for their transportation to the restaurants.

The plaintiffs contended that in early November 2010, paychecks issued by Worldwide bounced due to insufficient funds. They stated that, although Worldwide’s owner promised to pay them, Worldwide willfully refused in bad faith to compensate the plaintiffs for their wages earned. The plaintiffs alleged that Worldwide’s failure to pay the plaintiffs at least minimum wage for each hour they worked was a violation of the Fair Labor Standards Act (FLSA) and that several of the defendants were “joint employers” under the FLSA.

Brinker International Payroll Company moved to dismiss the claims against it, arguing that it was never an employer of the plaintiffs and that it could not be held liable under the FLSA as a “joint employer.”

The FLSA contemplates there being several simultaneous employers who may be liable for compliance with the FLSA.  The issue of joint employment for the FLSA depends upon all the facts in the particular case and is largely an issue of control. 

In granting Brinker’s motion to dismiss, the court found that Worldwide contracted with Brinker to have its restaurants cleaned after hours in an “outsourcing type of relationship.” It noted that the plaintiffs admitted that they worked at the direction of Worldwide. Moreover, the court found, the plaintiffs’ work was dependent on Worldwide’s ability to get and keep contracts for cleaning. The court said that the plaintiffs had agreed that no one from Brinker supervised, trained, or directed them; no Brinker employees were even present when the plaintiffs worked. Brinker had no control over their wages, no authority to hire, fire, or discipline them, and kept no employment records for the plaintiffs. In addition, the plaintiffs received their relevant income tax information from Worldwide or from another defendant, Elite Commercial Cleaning. As the court noted, the plaintiffs did not allege that Brinker knew which employees worked or how many hours they worked.

The court acknowledged that the plaintiffs contended that every hour they worked was at Chili’s and that they used some equipment from the restaurants (although they also used equipment from Worldwide), but it found that the any factors that might indicate a joint employer relationship were outweighed by those that indicated no such relationship between the plaintiffs and Brinker.

Accordingly, the court granted Brinker’s motion to dismiss the plaintiffs’ claims against it. [Politron v. Worldwide Domestic Services, LLC, 2011 U.S. Dist. Lexis 52999 (M.D. Tenn. May 17, 2011).]

Account Manager With Customer Contact Not Eligible For Overtime Pay

The plaintiff in this case was an account manager for a company that produced software programs to help advertising agencies place advertising in the media. The plaintiff acted as a bridge between the software developers and the customers, helping to determine the customers’ needs, then relaying those needs to the developers and so assisting in the customization of the software, and finally helping the customers use the customized software. The plaintiff contended in a lawsuit against the company that she was entitled to overtime pay under the Fair Labor Standards Act, but the company responded that she was exempt as an employee employed in an administrative capacity. The district court rejected her overtime claim on summary judgment, and the plaintiff appealed.

In affirming the district court’s decision, the court of appeals explained that the Department of Labor’s regulation that explains “administrative capacity” provides that to be deemed to be employed in an administrative capacity an employee must be paid more than $455 a week (a requirement the plaintiff satisfied) and that the employee’s “primary duty” must be both “the exercise of discretion and independent judgment with respect to matters of significance” and “the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers.” As an example of exempt employees, the regulation highlighted employees who are “acting as advisers or consultants to their employer’s clients or customers.”

The appellate court explained that the regulation was seeking to make it clear that the legal requirement to pay a worker a fixed percentage increase in his or her hourly wage if the employee worked more than 40 hours a week did not fit a worker who spent much work time off the employer’s premises, where the employee could not be supervised and if entitled to overtime “would be tempted to inflate” his or her hours. The appellate court continued that this was particularly true if, as the regulation also required, the work involved the exercise of “independent judgment relating to management or general business operations,” especially the business operations of a customer. An employer would be hard pressed to determine how many hours an employee should need to complete a particular job where much of it was performed on the premises of a different company, according to the appellate court.

The appellate court concluded that the plaintiff was “a picture-perfect example of a worker” for whom the FLSA’s overtime provision was “not intended.” The company’s software was “complex” and had to be customized to the needs of each client. The company’s account manager was “not a salesman for Best Buy or a technician sitting at a phone bank fielding random calls from her employer’s customers” but rather was “on the customer’s speed dial” during the testing and operation of the customer’s software.

The plaintiff’s primary duty, the appellate court ruled, was directly related to the general business operations both of her employer and (as in a consulting role) of the employer’s customers. Accordingly, she was not entitled to overtime under the FLSA. [Verkuilen v. MediaBank, LLC, 2011 U.S. App. Lexis 10666 (7^th Cir. May 27, 2011).]

USERRA Claims Dismissed Where Veteran Was Re-Employed With Same Seniority, Benefits As Before His Military Service

The plaintiff was hired in 2001 to work as a dentist at Family Dental Group, PC (FDG). The plaintiff’s employment with FDG was governed by a signed employment agreement, which provided that he could be terminated without cause so long as he was given 30 days’ notice.

While still employed by FDG, the plaintiff, who previously had enlisted in the U.S. Army Reserves, was called to active duty by the Army on two occasions. He was first deployed to Fort Bragg in North Carolina and later to Fort Sam Houston in Texas from March 2003 until September 2003. When the plaintiff returned from active duty in September 2003, he was reemployed by FDG. In July 2004, the plaintiff again was called on to serve, and this time he was deployed to Iraq in September 2004. He was stationed in Iraq until December 2004.

In December 2004, the plaintiff informed FDG that he planned to return upon the completion of his service. He began working at FDG again on January 17, 2005. The plaintiff was afforded the same salary, benefits, and other conditions of employment that he received before he left for Iraq. On January 20, however, the plaintiff received a letter stating that his employment would be terminated in 60 days.

After the plaintiff questioned the legality of his termination, FDG reduced the amount of notice from 60 to 30 days, in accordance with the employment agreement. The plaintiff then filed a complaint with the U.S. Department of Labor’s Office of Veterans’ Employment and Training. He claimed that FDG had discriminated against him on account of his military service, in violation of the Uniformed Services Employment and Reemployment Rights Act (USERRA).

The DOL informed FDG that it was required to employ the plaintiff for 180 days following his return from active duty. FDG complied with the DOL’s directive and employed the plaintiff until July 20, 2005; the DOL closed the plaintiff’s USERRA case.

After his termination, the plaintiff reopened his DOL case and exhausted his administrative remedies there. He then filed a federal suit against, asserting various claims under USERRA. The court granted judgment in favor of FDG, and the plaintiff appealed.

The court of appeals explained that there was no dispute that the plaintiff was covered by USERRA and that he had provided proper notice of his desire to return to FDG. Morever, it was undisputed that the plaintiff returned to work in the same position he had before leaving for his Army service:  as a dentist employed pursuant to the terms of a written employment agreement. The circuit court stated that the only question was whether FDG’s letter providing the plaintiff with 60 days’ notice (later amended to 30 days and then to 180 days) and the plaintiff’s subsequent termination in accordance with the terms of that letter violated USERRA. The circuit court decided that it did not.

As the circuit court explained, USERRA provides a comprehensive remedial scheme to ensure the employment and reemployment rights of those called on to serve in the U.S. armed forces. Sections 4311 and 4312 provide separate rights for returning service members: Section 4311 protects against discrimination, Section 4312 creates an entitlement to reemployment, and Section 4316 requires that a person reemployed under USERRA not be terminated, except for cause, “within 180 days after the date of such reemployment, if the person’s period of service before the reemployment was more than 30 days but less than 181 days.”  

The evidence demonstrated that the plaintiff was re-employed on his return from his leave for 180 days, with the same seniority and other rights and benefits or lack of benefits that he had before he left on his tour. According to the circuit court, that was all that USERRA required. The circuit court therefore affirmed judgment against the plaintiff. [Hart v. Family Dental Group, PC, 2011 U.S. App. Lexis 10967 (2d Cir. May 31, 2011).]

Reprinted with permission from the September 2011 issue of the Employee Benefit Plan Review – From the Courts.  All rights reserved.