Employee Benefit Plan Review – From the Courts

Failure to Timely File ‘Charge’ with EEOC Doomed Plaintiff’s ADA Suit, Seventh Circuit Rules

The plaintiff in this case, a senior customer service representative of Christian Brothers Services (CBS), was in an automobile accident in March 2011 as a result of which she had to use a cane and limped. According to the plaintiff, CBS fired her on February 1, 2012 because of a perceived disability (mobility impairment) caused by the accident that had required her to take time off from work and to use her health insurance to pay the costs she had incurred as a result of the accident.

Six months after being fired, the plaintiff filed a “Complainant Information Sheet” (CIS) with the Illinois Department of Human Rights (IDHR). The IDHR administers the Illinois Human Rights Act, which prohibits discrimination on grounds of disability. A CIS asks a complainant for basic information about his or her claim. On the basis of a CIS, the IDHR decides whether it has jurisdiction and, if it does, it copies the information in the CIS on an official charge form, which the filer can sign and submit. A CIS is a complaint of discrimination. It is not a charge. A charge is the administrative equivalent of a complaint filed in court; a CIS is not unless it asks for relief and, therefore, functions as a charge.

The plaintiff and CBS failed to resolve the plaintiff’s complaint, and on March 5, 2013, the plaintiff filed a “Charge of Discrimination” with the IDHR, with a copy to the federal Equal Employment Opportunity Commission. Thereafter, the plaintiff sued CBS, contending that her firing violated the federal Americans with Disabilities Act (ADA).

CBS moved for summary judgment on the ground that the plaintiff had failed to submit her charge of discrimination within the statutorily required deadline of 300 days from the date of the alleged incident of discrimination, and the U.S. District Court for the Northern District of Illinois granted its motion. The district court decided that the plaintiff had failed to submit a charge in time and, therefore, could not maintain her lawsuit.

The plaintiff appealed to the U.S. Court of Appeals for the Seventh Circuit, which affirmed.

In its decision, the circuit court noted that the IDHR had a work-sharing agreement with the EEOC that provided that a charge filed with the IDHR automatically was cross-filed with the EEOC. The circuit court ruled, however, that the CIS the plaintiff filed with the IDHR was “not a charge” because it did not request relief. Without such a request, the circuit court explained, the CIS was “just a pre-charge screening form” that did not prompt the IDHR to notify the employer, launch an investigation, or sponsor mediation between the parties. “[F]iling a charge form” did, the Seventh Circuit explained.

The circuit court then noted that the plaintiff had filed a Charge of Discrimination with the IDHR and the EEOC on March 5, 2013. It pointed out, however, that that was 398 days after the plaintiff had been fired – well after the deadline of 300 days.

Accordingly, the circuit court agreed with the district court that the plaintiff’s lawsuit was untimely and had to be dismissed. [Carlson v. Christian Brothers Services, 840 F.3d 466 (7th Cir. 2016).]

Fourth Circuit Rejects FMLA Claim by Employee Who Used FMLA Leave to Avoid Interrupting His Vacation

The plaintiff in this case, who was employed by United Airlines at Dulles Airport in Washington, D.C., was diagnosed with an anxiety disorder in 2009. United approved his request to take intermittent leave under the federal Family and Medical Leave Act (FMLA) to handle panic attacks.

On March 16, 2014, the plaintiff and his wife travelled on vacation to Johannesburg and Cape Town, South Africa. The plaintiff had about 20 days of time off from March 16 to April 4, but his time off did not include a short two-day period from March 30 to 31 when the plaintiff was assigned to customer service work in the United lounge. The plaintiff placed his schedule on the United shift-swap website, and successfully found someone to cover his March 31 shift. He was unable, however, to find anyone to cover his March 30 shift.

At 7:00 a.m. Cape Town Time (1:00 a.m. Eastern Standard Time) on March 30 – the day of his scheduled shift – the plaintiff called United to take medical leave under the FMLA. He had not made any advance reservations for a return flight. The next day, the plaintiff and his wife flew from Cape Town to Milan, Italy, where the plaintiff’s niece lived.

On April 3, the plaintiff and his wife departed for Washington.

The United Employee Resource Center at Dulles Airport noticed that the plaintiff had taken FMLA leave for the only shift he was scheduled to work in the midst of his extensive time off and notified United’s human resources department. United ultimately notified the plaintiff of its intention to discharge him for fraudulently taking FMLA leave and for making dishonest representations during the ensuing investigation, in violation of United’s “Working Together Guidelines,” which required that all employees “[b]e truthful in all communications, whether oral, written or electronic.” The plaintiff retired under threat of termination on June 9, 2014.

The plaintiff subsequently sued United for retaliation under the FMLA. He argued that United had threatened to terminate his employment in retaliation for taking FMLA leave. The U.S. District Court for the Eastern District of Virginia entered summary judgment on behalf of United and dismissed the plaintiff’s claim.

He appealed to the U.S. Court of Appeals for the Fourth Circuit, contending that he had produced sufficient evidence for a reasonable jury to conclude that his use of FMLA leave was a protected activity and that he had been constructively discharged as a result. For its part, United maintained that the plaintiff had been discharged not only for fraudulently taking FMLA leave but also for being untruthful during the ensuing investigation in violation of United’s Working Together Guidelines.

The Fourth Circuit affirmed.

In its decision, the Fourth Circuit found that the plaintiff had not produced sufficient evidence for a reasonable factfinder to conclude that United’s explanation was a pretext for retaliation. It explained that the plaintiff could not rely on “mere speculation or the building of one inference upon another” to establish that he had been fired in retaliation for taking FMLA leave.

According to the circuit court, the “undisputed evidence” depicted an employee departing for vacation despite being scheduled to work, and then conveniently calling in FMLA leave 12 hours after the last plane had departed that would have allowed him to return before his scheduled shift. Moreover, the circuit court continued, the plaintiff also had waited to contact United until the middle of the night in Washington “when no one was present to answer the phone and ask for details about his FMLA claim.”

In the Fourth Circuit’s opinion, it seemed “perfectly logical” for United to conclude that the plaintiff did not want to interrupt his Cape Town vacation to come back for one day of work.

The circuit court also was not persuaded by the plaintiff’s argument that the notice sent by the Employee Resource Center to the human resources department was evidence of “discriminatory animus.” The circuit court ruled that the notice contained “straightforward factual information” and that such factual communication between human resources personnel was “not, without more, evidence of discriminatory animus.”

Finally, the Fourth Circuit rejected the plaintiff’s argument that, although he would have been penalized for simply skipping his March 30 shift, he should not have been discharged, and that the severity of the consequence he had received was evidence of pretext. The circuit court explained that courts were not “a kind of super-personnel department weighing the prudence of employment decisions.” It said that discharge was “not disproportionate to the offense of misrepresentation and fraud.” The circuit court concluded that it was “inconsequential” that missing work without providing notice normally merited a lesser penalty because those employees did not violate the honesty component of the Working Together Guidelines. [Sharif v. United Airlines, Inc., 841 F.3d 199 (4th Cir. 2016).]

Unused Vacation Time Did Not Extend Date Employee’s Insurance Ended, Fifth Circuit Decides

The plaintiff’s husband was enrolled in his employer’s group life insurance plan, which was insured under a policy issued by Metropolitan Life Insurance Company. MetLife also served as the claims administrator of the plan.

The plaintiff’s husband’s employment was terminated on May 16, 2012. After that, his employer sent him a check for 30.67 hours of accrued but unused vacation time. He died on June 19, 2012, 34 days after his employment had been terminated.

The plan provided that insurance ended on the date the insured’s employment ended, but that benefits would be paid if an insured died within 31 days after his insurance ends. The plaintiff filed a claim for benefits, which MetLife denied on the basis that her husband’s insurance had ended on May 16, 2012 – the date he had been terminated.

The plaintiff sued MetLife under the Employee Retirement Income Security Act of 1974 (ERISA), seeking to recover the insurance benefits to which she claimed she was entitled. She argued that her husband’s accrued, unused vacation time had extended the date that his insurance had ended by approximately four days, so that he had died within the 31-day benefits window.

The U.S. District Court for the Middle District of Louisiana ruled in favor of MetLife, holding that its interpretation of the plan was legally correct and that it had not abused its discretion in denying benefits.

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

The circuit court affirmed the district court’s decision, declaring that MetLife’s denial of benefits was “consistent with a fair reading of the plan.”

The circuit court decided that the plaintiff’s husband’s unused vacation time did not extend the date his “insurance end[ed]” past the date his employment ended. It noted that a policyholder’s “approved vacation[]” was described in the policy as “time off” and, it found, an employee could not be on approved vacation – that is, taking time off – after the date the employee’s employment was terminated.

The plaintiff’s husband’s final paycheck included a payout for vacation time already earned but not used, but it “did not extend the duration he was employed or the date his insurance ended,” the Fifth Circuit concluded. [Briscoe v. Metropolitan Life Ins. Co., 2016 U.S. App. Lexis 22568 (5th Cir. Dec. 19, 2016).]

Meal Money Did Not Have to be Included in Employee’s ‘Regular Rate of Pay’ When Calculating Overtime, Tenth Circuit Decides

The plaintiffs in this case were former hourly employees of CGG Land (U.S.) Inc., which provides seismic-mapping services at remote locations throughout the United States. To reach the remote locations, CGG required its employees to travel away from home and stay in hotels near remote job sites for four-to-eight-week intervals. Employees then returned home for about two-to-four-week intervals before again traveling to remote locations.

Employees often worked more than 40 hours per week while at the remote locations, and CGG paid them overtime based on their regular rates of pay. When CGG’s employees worked away from home, CGG also provided each of them $35 per day for meals, including on days spent traveling to and from the remote job locations. CGG did not pay the $35 when employees worked from their home locations or when food was provided at the remote locations.

In determining the plaintiffs’ regular rates of pay, CGG did not include the daily $35 payments. Contesting this calculation method, the plaintiffs filed a collective action against CGG asserting that CGG had violated the federal Fair Labor Standards Act (FLSA) by calculating their overtime pay on undervalued regular rates of pay.

The U.S. District Court for the Northern District of Oklahoma granted summary judgment for CGG, agreeing with CGG that the $35 payments were exempt from the regular rates of pay under the FLSA.

The plaintiffs appealed, and the U.S. Court of Appeals for the Tenth Circuit affirmed.

In its decision, the circuit court first noted that, under the FLSA, the regular rate of pay “shall be deemed to include all remuneration for employment paid to, or on behalf of, the employee,” subject to eight exceptions. It then found that the FLSA exception for traveling expenses from an employee’s regular rate of pay included the cost of food. It reasoned that the cost of food away from home was an additional expense that an employee incurred while traveling for the employer’s benefit and, therefore, was exempt.

The circuit court next rejected the plaintiffs’ argument that they were no longer “traveling over the road” once they had reached their remote job site, so the $35 could not be excluded as travel expenses. It decided that the issue was whether the $35 payments were for reimbursement of travel expenses incurred in furtherance of the employer’s interests – not whether the employee was in transit at any given moment when the employee had traveled to a remote job site.

The circuit court said that the plaintiffs had traveled to remote job sites away from home to perform lengthy work stints for CGG and that, while away from home, the plaintiffs had incurred meal expenses while serving CGG as employees and while furthering CGG’s interests. The meal expenses, the circuit court concluded, did not have to be included in the plaintiffs’ regular rate of pay under the FLSA. [Sharp v. CGG Land (U.S.) Inc., 840 F.3d 1211 (10th Cir. 2016).]

Offering Health Benefits Is Enough to Permit Employers to Pay Lower Minimum Wage, Nevada Supreme Court Rules

The Minimum Wage Amendment (MWA) to the Nevada Constitution guarantees a base wage to Nevada workers. Under the MWA, if an employer “provides” health benefits, it may pay its employees a lower minimum wage than if no such health benefits were provided.

The MWA also provides that health benefit premiums must be capped at 10 percent of the employee’s gross taxable income “from the employer.”

Various employees of a number of companies went to court, arguing that employers had to do more than offer health benefits to be eligible to pay the lower-tier minimum wage; they argued that employers actually had to enroll employees in health benefit plans. They further argued that the 10-percent cap did not include tips in its calculation of taxable income.

The dispute reached the Nevada Supreme Court.

In its decision, the court first considered whether “provides” meant that an employer must “enroll” an employee in a qualifying health benefit plan to pay the lower wage, or if an employer need only “offer” a qualifying health plan. The court determined that, under the MWA, employers need only offer a qualifying health plan.

It reasoned that the support for workers provided through the passage of the MWA “simply requires that employees who have the option to receive health benefits take advantage of those rights.” In essence, the court said, obtaining relief “rests with the workers.”

The court then considered whether the MWA’s requirement that health benefit premiums be capped at 10 percent of the employee’s gross taxable income “from the employer” allowed the employer to include tips in the calculation of taxable income. The court decided that tips were not included as they did not come “from the employer” and that the MWA’s 10-percent cost cap on insurance premiums “must be computed solely on taxable income from the employer and must exclude tips.” [MDC Restaurants, LLC v. Eighth Judicial District Court of Nevada, 383 P.3d 262 (Nev. 2016).]

Disability Insurer Could Not Remove Suit to Federal Court Without Auto Insurer’s Consent, Michigan Federal District Court Rules

The plaintiff in this case filed a one-count complaint in a Michigan state court against Metropolitan Property and Casualty Insurance Company – the plaintiff’s automobile insurance company – and UniCare Life & Health Insurance Company – the plaintiff’s disability income insurer.

In her complaint, the plaintiff alleged that she had been injured in an automobile accident and that “as a direct and proximate result” of this automobile accident, she had “sustained serious injuries which necessitated medical treatment and resulted in [her] disabilities from normal daily routine, including work.”

The plaintiff further alleged that her injuries “qualify [her] for personal injury protection benefits, disability benefits, as well as uninsured motorist benefits” pursuant to the insurance policies issued by UniCare and Metropolitan, but that they had failed to provide her with the benefits to which she was entitled.

UniCare removed the plaintiff’s action to the U.S. District Court for the Eastern District of Michigan, alleging federal question jurisdiction pursuant to the Employee Retirement Income Security Act of 1974 (ERISA). Metropolitan, however, did not join in and did not consent to removal of the action.

UniCare contended that Metropolitan’s consent was not required and, therefore, that Metropolitan’s non-consent should not be deemed an impediment to removal. In particular, UniCare argued that Metropolitan’s consent was not required because the plaintiff had asserted a federal ERISA claim against UniCare, and that the state law claims against Metropolitan were not within the supplemental jurisdiction of the district court.

The district court issued an order directing UniCare to show cause why the case should not be remanded to state court. After reviewing UniCare’s response to the order, the district court concluded that the case has been improvidently removed and it remanded the case back to the Michigan state court.

In its decision, the district court explained that, under federal law, where a non-federal claim in a lawsuit was transactionally-related to the lawsuit’s federal claims, the non-federal claim fell within the federal court’s supplemental jurisdiction. In that case, the district court continued, “all defendants properly joined and served must join in or consent to removal.”

In this case, the district court explained, although there were two insurance contracts that covered different injuries (that is, the plaintiff’s personal bodily injuries and her alleged resulting disability), they arose out of the same automobile accident. Thus, the district court ruled, it was an “appropriate occasion” for it to exercise its supplemental jurisdiction.

The district court concluded, therefore, that UniCare’s removal of the case without the consent of Metropolitan, its co-defendant, was improper, and required that the action be sent back to the Michigan state court. [Askew v. Metropolitan Property and Cas. Ins. Co., 2016 U.S. Dist. Lexis 157595 (E.D. Mich. Nov. 5, 2016).] 

First Circuit Upholds Offset to Long-Term Disability Benefit by Full Amount of Social Security Disability Income Benefit, With No Income Tax Reduction

The plaintiff in this case, a former employee of Electric Boat Corporation, a subsidiary of General Dynamics Corporation (GDC), became disabled in July 2003 and applied for benefits under GDC’s long-term disability (LTD) plan, which was funded and administered by Aetna Life Insurance Company.

From December 2003, when Aetna approved her claim, until April 2010, when Aetna began offsetting her monthly LTD benefits by her gross Social Security income, Aetna issued to the plaintiff monthly payments of $3,350, which equaled 60 percent of $5,583.33, the plaintiff’s monthly gross pre-disability earnings.

In a letter dated April 16, 2010, Aetna informed the plaintiff that it had learned of her monthly $1,783 Social Security disability income award (SSDI), as well as a retroactive lump sum payment. Aetna’s letter reminded the plaintiff that, under the provisions of the plan, her LTD benefits were subject to offset by “other income benefits,” that such benefits included “[b]enefits under the Federal Social Security Act,” and that Aetna had a right to recover overpayments.

After recounting the relevant plan provisions, the letter announced that Aetna would begin offsetting the plaintiff’s monthly LTD benefits by $1,783, the gross amount of her SSDI benefit. Aetna consistently used this $1,783 amount in all of its calculations regarding the offset. Aetna also demanded, and received from the plaintiff, full reimbursement of $126,526 – the amount by which it had overpaid the plaintiff between January 2004 and March 2010 as reflected in the retroactive lump sum payment she had received from Social Security.

The plaintiff subsequently requested that Aetna offset her LTD benefits by the net, rather than the gross, amount of her SSDI benefits. She said that her LTD benefits were tax-free, but that she was required to pay federal and state income taxes on her SSDI benefits.

Aetna denied the plaintiff’s request in a letter that stated, “It is industry standard to offset the . . . gross amount and not the net amount. To adjust the SSDI offset, according to net amount, would involve taxes and we do not get involved in taxation.”

The plaintiff sued Aetna in the U.S. District Court for the District of Rhode Island. She alleged that Aetna had breached its fiduciary duty and sought a declaration “that her past and future LTD benefits should be offset against the SSDI benefits she was awarded minus any income taxes she was assessed on such benefits.”

The district court granted summary judgment in favor of Aetna, and the plaintiff appealed to the U.S. Court of Appeals for the First Circuit.

The circuit court affirmed, upholding Aetna’s interpretation of the plan language.

In its decision, the circuit court explained that the plan stated that LTD benefits would be offset by “other income benefits” that were “payable” to the beneficiary or the beneficiary’s dependents. It noted that the plan defined other income benefits to “include those, due to your disability or retirement, which are payable to: you; your spouse; your children; your dependents.”

The First Circuit also observed that the summary plan description (SPD) said that a beneficiary’s LTD benefits would be reduced by other payments that the beneficiary was “eligible to receive” from other income sources.

According to the circuit court, both the “payable” and the “eligible to receive” language illustrated that the amount that Aetna permissibly could offset was the full SSDI amount that was payable to the plaintiff or, put another way, that the plaintiff was eligible to receive from the Social Security Administration. The plaintiff was eligible for monthly SSDI payments of $1,783, notwithstanding the amount of taxes – if any – that she might have to pay on that sum. Accordingly, the circuit court concluded, the plain language of the plan – which allowed for offsets by other income payable to the beneficiary – supported Aetna’s decision to offset the plaintiff’s LTD benefits by the full amount of SSDI benefits for which she was eligible, rather than by the amount left over after she paid whatever income tax she owed to federal and state governments.

In reaching its decision, the circuit court noted that the plaintiff’s interpretation would require Aetna to take in a staggering amount of personal tax information from the plaintiff and others similarly situated on a yearly basis, resulting in a tremendous increase in Aetna’s administrative burden. The circuit court found it “implausible that a plan would envision such a complex scheme without a single reference to its implementation.” [Troiano v. Aetna Life Ins. Co., 2016 U.S. App. Lexis 22404 (1st Cir. Dec. 21, 2016).]

Reprinted with permission from the March/April 2017 issue of the Employee Benefit Plan Review – From the Courts.  All rights reserved.