From the Courts

October 1, 2015 | Appeals | Insurance Coverage

Divorced Wife Was Not an “Eligible Spouse” Entitled to Survivor Benefits under Ex-Husband’s Pension Plan, Eleventh Circuit Rules

The plaintiff’s husband was a participant in the El Paso Corporation Pension Plan, under which he received retirement benefits beginning in 1987. The plaintiff and her husband divorced in 2011, and he died about eight months later.

After her ex-husband’s death, the plaintiff made a claim under the plan for a “Retiree Survivor’s Benefit” as an “Eligible Spouse.” El Paso denied the plaintiff’s claim and the plaintiff sued.

The U.S. District Court for the Northern District of Alabama granted summary judgment in favor of El Paso, and the plaintiff appealed to the U.S. Court of Appeals for the Eleventh Circuit.

The circuit court affirmed.

In its decision, the circuit court explained that the retirement plan provided that a retiree survivor’s benefit was payable only to an “Eligible Spouse.” It observed that the plan defined “Eligible Spouse” as:

The husband or wife of a deceased Participant, who (i) was married to the Participant under the laws of the State where the marriage was contracted at least one year prior to the date of his death, (ii) is not a party to a court action for judgment of separation or decree of divorce pending at the time of the Participant’s death, and (iii) subsequent to the Participant’s death has not remarried.

The plaintiff argued that she was an Eligible Spouse because, under her interpretation, clause (i) of the definition meant a person who was married to the plan participant for any one-year period before the participant’s death and she had been married to her husband for many years, even though they had divorced a number of months before he had died.

The circuit court was not persuaded by the plaintiff’s argument, agreeing with the district court that El Paso had reasonably interpreted clause (i) to include only those spouses married to the plan participant for the one-year period immediately preceding the participant’s death.

According to the Eleventh Circuit, if the plaintiff’s interpretation were accepted, it would create “incongruous outcomes.” The circuit court said that, for example, the plan could owe a retiree survivor’s benefit to any number of ex-spouses who had been married to the plan participant for at least a year. It also pointed out that the plaintiff’s interpretation would lead to “absurd results” with respect to clause (ii) because it would confer a retiree survivor’s benefit on ex-spouses but deny it to current spouses involved in divorce proceedings with the plan participant. As the circuit court noted:

Imagine a participant who was married to her first husband for at least one year, and who was divorcing her second husband (also of at least one year) at the time of her death. The first husband would qualify for the Retiree Survivor’s Benefit as an Eligible Spouse (because they were married for at least one year and he was not at that time a party to a divorce proceeding), but the second husband would not qualify (because he was a party to a divorce proceeding).

The circuit court agreed that that made “no sense” and was “not contemplated” by the plan. [Pugh v. El Paso Corp. Pension Plan, 2015 U.S. App. Lexis 10136 (11th Cir. June 17, 2015).]

Defendants in FLSA Case May Not Obtain Pre-Trial Discovery of Plaintiffs’ Immigration Status, New York Federal Court Decides

In this case, the plaintiffs, current and former employees of Alice’s Tea Cup, LLC, ATC II LLC, and ATCIII, LLC (all restaurants doing business under the name “Alice’s Tea Cup”), alleged that during the course of their employment, the restaurants failed to pay them overtime compensation and a “spread of hours” premium for days when they worked more than 10 hours. The plaintiffs asserted claims under the federal Fair Labor Standards Act (the FLSA) and the New York Labor Law (the NYLL).

The defendants made a number of pre-trial discovery requests of the plaintiffs. In particular, they demanded that the plaintiffs produce documents verifying their immigration status, work authorization documents, federal and state income tax returns and documents “sufficient to identify the current employer” for each plaintiff.

In response, the plaintiffs asked the court for a protective order “[p]rotecting plaintiffs from any discovery demand that involves plaintiffs’ immigration status or citizenship at the present or any point in time,” barring the discovery of the plaintiffs’ income tax returns, and protecting the plaintiffs from having to disclose their current employer. The plaintiffs contended that that information was irrelevant to their lawsuit.

The defendants opposed the plaintiffs’ motion, arguing that the information they sought was relevant to the plaintiffs’ ability to recover under the FLSA and the NYLL as well as to the plaintiffs’ credibility.

The court granted the plaintiffs’ motion for a protective order.

In its decision, the court pointed out that federal courts had made clear that the protections of the FLSA were available to “citizens and undocumented workers alike.” Therefore, it added, in the context of wage and hour violations under both the FLSA and the NYLL, immigration status generally had “been protected from discovery.” The court said that there was a distinction between undocumented workers seeking backpay for wages actually earned, as in FLSA wage and hour violations, and those seeking backpay for work not performed, as in a termination in alleged violation of the federal National Labor Relations Act.  This was because denying undocumented workers the protection of the FLSA would “permit[] abusive exploitation of workers” and “create[] an unacceptable economic incentive to hire undocumented workers by permitting employers to underpay them,” in violation of the spirit of the Immigration Reform and Control Act (IRCA).

The court also was not persuaded by the defendants’ argument that the information they sought about the plaintiffs’ immigration status was relevant to the plaintiffs’ credibility. Although credibility was “always at issue,” the court said that that did not by itself warrant “unlimited inquiry into the subject of immigration status when such examination would impose an undue burden on private enforcement of employment discrimination laws.” In the court’s view, even if evidence regarding immigration status were relevant, “the risk of injury to the plaintiffs if such information were disclosed outweigh[d] the need for its disclosure” because of the “danger of intimidation and of undermining the purposes of the FLSA.”

The court denied discovery of the plaintiffs’ tax returns, finding that the defendants had failed to demonstrate either relevance or a compelling need and noting that “tax information from plaintiffs would serve no obvious purpose other than intimidation.”

Finally, the court denied the defendants’ request that the plaintiffs identify their current employers and admit that they were being paid in cash “because of their undocumented status.” The court concluded that the plaintiffs’ arrangement with their current employers said “nothing about the hours that the plaintiffs worked for the defendants or what they were paid.” [Rosas v. Alice’s Tea Cup, LLC, 2015 U.S. Dist. Lexis 87780 (S.D.N.Y. July 6, 2015).]

Court Finds that Plaintiff Failed to Demonstrate that Employer Met ADA’s Employee Numerosity Requirement

The plaintiff in this case asserted that South Ponderosa Stables hired him as a stable worker on June 11, 2012, paid him a salary of $600 per month, and provided him with room and board.

The plaintiff claimed that he began to experience serious health issues stemming from sinusitis in August 2012. He claimed that he requested a “reasonable accommodation of time off from his work duties due to his declining health and vision,” but that his employment was terminated on November 24, 2012, approximately one week after he had submitted the request. The plaintiff sued South Ponderosa, arguing that his termination violated the Americans with Disabilities Act (ADA).

South Ponderosa moved for summary judgment, arguing that it was not an employer for purposes of the ADA because it had not employed 15 or more employees for 20 or more weeks in either 2011 or 2012. For his part, the plaintiff contended that South Ponderosa was subject to the ADA because South Ponderosa had employed six to nine employees while he was there but also had used between eight and 10 unpaid volunteers each day who had to be counted as employees, which brought South Ponderosa’s employee count to 15 or more. The plaintiff also argued that South Ponderosa formed an “integrated enterprise” with Sombrero Ranches and Colorado Horses, and that South Ponderosa’s employee count should include the paid workers at those entities as well.

The court granted South Ponderosa’s motion for summary judgment.

In its decision, the court first found that South Ponderosa’s relationship with its volunteers did not reflect a “conventional master-servant relationship.” It pointed out that:

  • South Ponderosa did not formally hire or fire volunteers;
  • The volunteers were not governed by any formal rules or regulations;
  • The volunteers did not influence the operation of South Ponderosa;
  • The volunteers and South Ponderosa did not intend that the volunteers be employees as expressed in written agreements or contracts; and
  • The volunteers did not share in the profits, losses, and liabilities of South Ponderosa – and, in fact, were not paid at all by South Ponderosa.

The court acknowledged that South Ponderosa supervised the work of the volunteers, but said that would happen in any “purely volunteer labor relationship” and that its supervision of its volunteers was not sufficient to overcome the balance of the undisputed evidence.

The court reached the same conclusion with respect to the plaintiff’s argument that South Ponderosa formed an integrated enterprise with Sombrero Ranches and Colorado Horses and that the companies, therefore, jointly employed 15 or more individuals. Although the court found that there was evidence of common ownership of the three entities, it found no evidence that South Ponderosa and the other two entities had interrelated operations, common management, or centralized control of labor relations. Therefore, it concluded, the employees of Sombrero Ranches and Colorado Horses could not be counted toward the ADA’s employee numerosity requirement, and South Ponderosa had too few employees to qualify as an employer for purposes of claims brought under the ADA. [Solander v. South Ponderosa Stables Inc., 2015 U.S. Dist. Lexis 89212 (D. Ariz. July 9, 2015).]

New Mexico Appeals Court Rejects Plaintiffs’ Contention that They Were Entitled to Overtime Pay for Time Spent Traveling from Home to Worksites

Former employees of J.W. Drilling, Inc., a contractor based in Artesia, New Mexico, that performed oil field drilling and related work in the Permian Basin in southeastern New Mexico and west Texas, sued J.W. Drilling in a state court in New Mexico. The plaintiffs alleged that J.W. Drilling had failed to pay them overtime wages for the time they had spent traveling from their homes to J.W. Drilling’s job sites.

In particular, the plaintiffs asserted that J.W. Drilling’s “method of operation” had made travel a part of their duties and a “term of their employment relationship”, but that J.W. Drilling had “engaged in a continuing course of conduct” pursuant to which they only paid employees from their arrival time to their departure time at the remote work locations, even though travel time had caused the employees to work more than 40 hours per week.

The plaintiffs asserted that they were “traveling employees” for purposes of New Mexico law and that they had a right under New Mexico’s Minimum Wage Act (“MWA”) to compensation at one and one-half times their regular hourly rates for all hours worked in excess of 40 hours during a seven day period.

J.W. Drilling moved for summary judgment. The trial court granted its motion and dismissed the complaint and the plaintiffs appealed to a New Mexico appellate court.

The appellate court affirmed the trial court’s ruling, rejecting the plaintiffs’ argument that travel from their homes to a job site and back each day was compensable.

In its decision, the appellate court explained that, under New Mexico’s “going and coming rule,” employees generally were not considered within the course of their employment when they were on their way to work or returning home from work. The appellate court added, however, that New Mexico workers’ compensation law recognized a “traveling employee” exception to the “going and coming rule.” Under that exception, it said, when travel was an “integral part” of an employee’s duties and a benefit to the employer, the employee was considered within the course of employment the entire time he or she was traveling.

The appellate court, however, “declined to import principles related to traveling employees from workers’ compensation law” into the law governing the plaintiffs’ claims, which were not workers’ compensation-related claims but MWA claims.

The appellate court also rejected the plaintiffs’ argument that it should find “all employee travel beyond a normal commute” to be compensable, regardless of who owned the vehicle in which the employee traveled, explaining that New Mexico law was “silent on travel time,” whether within a “normal commute” or otherwise, and declaring that it would not “amend the current statutory language” to add such a requirement.

The appellate court concluded by stating that courts “must construe statutes as they find them and may not amend or change them under the guise of construction.” [Segura v. J.W. Drilling, Inc., 2015 N.M. App. Lexis 72 (N.M. Ct. App. June 25, 2015).]

Plaintiff Was Not Entitled to Increased Monthly Disability Payments, Circuit Court Confirms

In this case, the plaintiff alleged that she was entitled to increased monthly disability payments from the Bache Halsey Stuart Shield, Inc. Salary Protection Plan (LTD) because of a miscalculation and misapplication of the terms of the group disability insurance contract issued by Reliance Insurance Company.

The U.S. District Court for the Southern District of California ruled in favor of Bache Halsey, and the plaintiff appealed to the U.S. Court of Appeals for the Ninth Circuit. The Ninth Circuit affirmed.

In its decision, the circuit court explained that the plan provided that benefits would be based on “monthly earnings.” It acknowledged that the plan did not define “monthly earnings,” but noted that it defined “salary” as “the monthly salary” plus “the average commissions during the preceding 24 month period, or from the date of employment, if employed less than 24 months.”

The Ninth Circuit found that this language was unambiguous. It stated that the “clear meaning” of the term “salary” was that the “preceding 24 month period” applied to that time period immediately preceding an employee’s disability and that the only basis for applying a period of fewer than 24 months was if the employee was not employed for the full term.

The circuit court then ruled that, even assuming that the plan’s definition of “salary” contained an ambiguity as applied to the plaintiff, the district court had not erred in deciding that the plaintiff’s argument that the “preceding 24 month period” meant something other than 24 months was an “unreasonable and strained interpretation of the policy.” The circuit court said that although the plaintiff argued that Reliance should have considered only the months in which she actively had worked and earned commissions because she had been out on disability for several months during the 24-month period preceding her disability date, the policy terms “explicitly” anticipated consideration of fewer than 24 months only where an employee had been employed for fewer than 24 months. The Ninth Circuit pointed out that nothing in the record indicated that the plaintiff had “ceased to be employed during this period,” even when not actively working, and that her counsel had conceded in oral argument that in those months during the 24-month period in which the plaintiff had been out on disability, she had received payments under a “Salary Continuation Plan” that Bache Halsey had purchased as a source of funding to pay the benefits of disabled employees.

Therefore, the circuit court reasoned, the plaintiff had received monthly earnings throughout the 24-month period immediately preceding her disability. Moreover, although Reliance had decided not to calculate her disability benefits based on these 24 months, its chosen interpretation was more favorable to the plaintiff and “was reasonable under these circumstances,” the circuit court concluded. [Withrow v. Bache Halsey Stuart Shield, Inc. Salary Protection Plan (LTD), 2015 U.S. App. Lexis 10195 (9th Cir. June 17, 2015).]

Eighth Circuit Upholds Plan’s Two Year Lawsuit Requirement, Refusing to Apply Missouri Law to Extend Limitations Period to 10 Years

After the plaintiff, a Missouri resident, received treatment for uterine fibroid tumors at the Mayo Clinic in September 2008, she submitted a claim for reimbursement under the Carpenters’ Health and Welfare Trust Fund of St. Louis’ Employee Welfare Benefit Plan. Carpenters concluded that her treatment fell outside the plan’s coverage because the treatment was investigative, experimental, and required prior approval.

The plaintiff appealed the decision internally, but in July 2009 Carpenters informed her that the denial of her claim was final.

The plan under which the plaintiff’s claim was denied was a self-funded multiple employer welfare benefit plan, governed by the Employee Retirement Income Security Act, that was maintained pursuant to collective bargaining agreements between the participating employers and the Carpenters’ District Council of Greater St. Louis. The plan specified that any civil action for wrongful denial of medical benefits under ERISA had to be filed within two years of the final date of denial.

In January 2012 – almost two and one-half years after the plaintiff had learned that her claim had been denied – she sued the plan in the U.S. District Court for the Western District of Missouri, alleging wrongful denial of health care benefits. She argued in the district court that the plan’s contractual two year statute of limitations was invalid because the plan’s rules of construction stated that its terms should be read to comply with Missouri law. The plaintiff then asserted that a 10 year Missouri statute of limitations governed her claim and that a separate Missouri statute barred contracting parties from shortening that limitations period.

The district court rejected the plaintiff’s argument. It applied the plan’s contractual two year statute of limitations and concluded that the plaintiff’s claim was time barred. It identified no controlling statute that prevented the contractual limitations provision “from taking effect” and granted summary judgment for Carpenters.

The plaintiff appealed to the U.S. Court of Appeals for the Eighth Circuit.

The Eighth Circuit affirmed, finding that the plaintiff’s argument that the two year limitations period should not apply was “not persuasive.” It explained that because the parties, through the plan, had agreed on a limitations period, there was “no need to borrow a state statute of limitations” unless the plan’s limitations period either was unreasonably short or a controlling statute prevented the plan’s limitations provision from taking effect. After noting that the plaintiff did not argue that the plan’s two year statute of limitations was unreasonable, the Eighth Circuit found that the Missouri law that prohibits parties from shortening the limitations period for enforcing a contract was not a controlling statute that prevented the plan’s contractual limitations provision from taking effect.

The Eighth Circuit determined that application of the Missouri law would “not only negate the plan’s contractual statute of limitations” but also would “risk creating a national crazy quilt of ERISA limitations law, with contractual limitations enforceable in some states but not in others, contrary to the uniformitarian policy of the statute.” More specifically, the circuit court said, applying the Missouri statute would “[negate] an ERISA plan provision,” negatively “impact the administration of ERISA plans,” and create inconsistencies “with other ERISA provisions.” It concluded, therefore, that ERISA preempted application of the Missouri law, the plan’s two year limitations period was enforceable, and the district court had properly granted judgment in favor of Carpenters. [Munro-Kienstra v. Carpenters’ Health and Welfare Trust Fund of St. Louis, 2015 U.S. App. Lexis 10156 (8th Cir. June 17, 2015).

Reprinted with permission from the October 2015 issue of the Employee Benefit Plan Review – From the Courts.  All rights reserved.

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