Employee Benefit Plan Review – From the CourtsDecember 21, 2016 | |
Implied-in-Fact CBA Excluded Time Spent Donning and Doffing Work Clothing from Compensable Time, Eighth Circuit Decides
Since at least 1967, hourly employees working at the battery manufacturing facility in Joplin, Missouri, operated by EaglePicher Technologies, LLC, were represented by a union, presently known as the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers Union, Local 812.
The employees donned either coveralls or smocks, along with safety glasses, while working at the facility. At times, they also wore various forms of personal protective equipment to perform their job duties.
Beginning in 1989, collective bargaining agreements between the union and EaglePicher included language about employees changing into and out of work clothing outside of the scheduled work period. The language consistently was interpreted as excluding from compensable time the donning and doffing of work clothing outside of the regular paid shift.
The last signed collective bargaining agreement between EaglePicher and the union commenced in May 2004 and expired on May 2, 2008.
In 2008, the company and the union attempted to negotiate a successor collective bargaining agreement. During those negotiations, the union made no proposal regarding compensation for the donning or doffing of work clothes.
In a letter dated May 28, 2008, EaglePicher declared that the negotiations had “been at an impasse in bargaining for quite some time.” The company wrote that, effective June 2, 2008, it would unilaterally implement its “Last, Best and Final Offer” as the governing terms and conditions of employment for the members of the union.
EaglePicher proceeded to implement those terms. The union did not declare a strike, and the general counsel of the National Labor Relations Board advised in a letter that EaglePicher was privileged to implement its last, best, and final offer. The implemented terms contained identical language to the 1989 collective bargaining agreement about the donning and doffing of work clothing.
In subsequent negotiations in 2011, the union provided EaglePicher with a list of proposals that the union sought to include in a new collective bargaining agreement. Among those proposed terms was a subsection providing that “[e]mployees who are required to wear personal protective equipment or clothing will be allowed fifteen (15) minutes with pay at the beginning of each shift for donning of such equipment or clothing and fifteen (15) minutes with pay just prior to the end of each shift for doffing of such equipment or clothing.”
EaglePicher rejected this proposed language, and the union withdrew the proposed subsection from its list of bargaining proposals. In negotiations the following year, the union did not propose payment for time spent donning and doffing. The parties had not negotiated and signed a written collective bargaining agreement since the expiration of the 2004 agreement in May 2008.
Thereafter, current and former hourly production employees at the Joplin facility filed a lawsuit against EaglePicher, alleging that it had failed to compensate them for straight time and overtime. They claimed, among other things, that EaglePicher had violated the federal Fair Labor Standards Act (FLSA) by failing to compensate them fully for time spent donning and doffing work clothing and protective equipment.
The employees recognized that Section 203(o) of the FLSA excluded from “hours worked” by an employee “any time spent in changing clothes or washing at the beginning or end of each workday which was excluded from measured working time during the week involved by the express terms of or by custom or practice under a bona fide collective-bargaining agreement applicable to the particular employee.” The employees argued, however, that Section 203(o) applied only to time that was excluded from measured working time “under a bona fide collective bargaining agreement.” The employees asserted that because the 2004 collective bargaining agreement had expired before the period covered by their lawsuit, there was no bona fide collective bargaining agreement to support EaglePicher’s defense under Section 203(o).
The U.S. District Court for the Western District of Missouri ultimately concluded that none of the time at issue was compensable, because it was excluded from the definition of “hours worked” under the FLSA. The district court, therefore, granted summary judgment for EaglePicher, and the employees appealed to the U.S. Court of Appeals for the Eighth Circuit.
The Eighth Circuit affirmed.
In its decision, the circuit court explained that, under Eighth Circuit precedent, when an employer imposed unilateral terms and conditions after the parties reached a bargaining impasse, the continuation of work by a company’s employees did not, by itself, establish the existence of an interim labor agreement between the parties. The circuit court added, however, that an interim labor agreement might exist if an employer made an offer and the union accepted that offer by means “over and above the fact that union members continued to work.” Evidence of “offer and acceptance” had to relate to the union-employer bargaining relationship to prove that a contract was formed, the circuit court stated.
It then ruled that the evidence in this case showed the existence of an “interim labor agreement.” It explained that the interim labor agreement was an “implied-in-fact contract” between EaglePicher and the union regulating employment conditions, wages, benefits, and grievances.
The Eighth Circuit observed that EaglePicher’s implementation of its last, best, and final offer was an offer to form an implied-in-fact contract, and that the union so understood it. The Eighth Circuit reasoned that the union had accepted the offer by continuing to work without striking and by taking further actions relating to the bargaining relationship. For example, it noted, union members had filed 182 grievances alleging contractual violations since the last, best, and final offer terms had been implemented.
The circuit court was not persuaded by the employees’ claim that the union’s acceptance of the terms extended only to the grievance procedures. It pointed out that the union had grieved 31 disputes seeking to enforce the implemented terms pertaining to wages or hours worked and that none of the grievances had challenged the absence of pay for donning and doffing.
The circuit court then found that donning and doffing time was excluded from measured working time by “custom or practice” under the implied-in-fact contract. Before the agreement, it observed, previous collective bargaining agreements had consistently been interpreted as excluding pre-and post-shift donning and doffing time from compensable working time. “The union did not object to this interpretation or suggest payment for that time until several years after the last formal collective bargaining agreement expired. It therefore acquiesced in this implied term of the labor agreement,” the Eighth Circuit ruled.
Accordingly, it concluded that there was an implied-in-fact bona fide collective-bargaining agreement between EaglePicher and the union; that a custom or practice under that agreement excluded time spent donning and doffing work clothing from measured working time; and that the district court had correctly ruled that Section 203(o) excluded that donning and doffing time from “hours worked” for which compensation was due. [Jackson v. Old EPT, LLC, 2016 U.S. App. Lexis 15416 (8th Cir. Aug. 23, 2016).]
Seventh Circuit Upholds Decision Excluding Executive Board Payments from Employee’s Compensation for Pension Purposes
The plaintiff in this case worked full time as a business representative for the Chicago Regional Council of Carpenters. By virtue of his position, he also served on the council’s executive board. The plaintiff received quarterly payments of $2,500 for his service on the board; the council made these quarterly payments in checks separate from those for the plaintiff’s weekly salary as its business representative.
When he retired, the plaintiff qualified for a pension from the United Brotherhood of Carpenters Pension Fund, an employee benefit plan governed by the Employee Retirement Income Security Act of 1974 (ERISA). After receiving a letter detailing his annual retirement benefit, the plaintiff noticed that the compensation amount on which the fund had calculated his annual retirement benefit did not include approximately $10,000 he had received each year from the council, with the result that his retirement payments would be lower than he thought they should be.
The plaintiff surmised that the fund had not counted the $10,000 per year he had received by virtue of his service on the executive board. He appealed the fund’s calculation of his annual benefit to the fund’s appeals committee, and he argued that the executive board payments were “compensation” under the plan because his service on the board was required as part of his job duties.
The fund’s plan administrator responded in a memorandum to the appeals committee that the council had informed her it did not make contributions to the fund for executive committee “wages.” The fund’s plan administrator also included a letter from the council’s legal counsel, who took the position that the payment for executive board service was a “stipend,” not a wage payment and, therefore, was properly not included in the plan’s definition of compensation.
The fund’s appeals committee denied the plaintiff’s appeal, and he sued the fund, seeking to recover the pension benefits that he maintained were due to him.
The fund moved for summary judgment, and the U.S. District Court for the Northern District of Illinois granted its motion. The plaintiff appealed to the U.S. Court of Appeals for the Seventh Circuit, which affirmed.
In its decision, the Seventh Circuit decided that it was reasonable for the plan administrator to interpret the plan’s terms to exclude from “Compensation” (as defined in the plan) the payments that the plaintiff had received for serving on the executive board. The circuit court noted that the plan made clear that not all wages were “Compensation” under the plan’s definition. As one example, it pointed out, the plan specifically excluded overtime from “Compensation.” The plan also explicitly stated that excluded from “Compensation” were “other non-wage payments, even if such payments are considered income for tax purposes.” As the circuit court pointed out, although overtime payments would be considered wages for tax purposes, and overtime payments generally were thought of as compensation, it was the plan’s definition that mattered. Not all “compensation” was “Compensation” under the plan, it declared.
The circuit court concluded that it was not unreasonable to believe that if the council truly were increasing the plaintiff’s salary by $10,000 a year for his board service, it would have done so by increasing the amount paid in his separately issued weekly salary checks. [Rabinak v. United Brotherhood of Carpenters Pension Fund, 2016 U.S. App. Lexis 14738 (7th Cir. Aug. 10, 2016).]
Plan Participant’s Failure to Furnish Objective Medical Evidence Establishing Her Disability Doomed Her Claim for “Total Disability” Benefits, Sixth Circuit Rules
The plaintiff in this case, a former Procter & Gamble employee, asserted that her health problems began in April 2012, when she underwent surgery for a ruptured ectopic pregnancy. Although her surgeon originally scheduled her to return to work on April 30, 2012, the plaintiff said that she began experiencing additional, unexplained pain and did not go back to work. She sought a diagnosis and effective treatment for over a year, to no avail. No doctor officially extended the plaintiff’s work restrictions, but the third party administrator for the Procter & Gamble Health and Long-Term Disability Benefit Plan continually approved her disability benefits.
After the plan switched third party administrators in July 2013 to GENEX Services, Inc., GENEX contacted the plaintiff’s doctors to confirm her eligibility for benefits. On August 1, 2013, a physical therapist who treated the plaintiff from June 2012 through July 2013 indicated that there were no medical restrictions on her ability to work “at this time.”
According to GENEX, subsequent follow-up with the plaintiff and with her other doctors’ offices failed to reveal any work restrictions on file. Without a doctor’s note stating that the plaintiff could not work, the GENEX case manager recommended terminating her disability benefits.
The plaintiff appealed, attaching records from her treating physician as well as records from a psychiatrist, her acupuncturist, and her physical therapist. These new records contained evidence of pain, but little to indicate how that pain restricted the plaintiff’s abilities. For example, one of the doctors diagnosed the plaintiff with “[a]typical pain syndrome, of uncertain etiology,” based on “tender[ness] to light/medium touch throughout the right hemithorax.” He concluded that “because of the severity of her pain, and relative refractoriness to treatment, . . . she is unable to remain mentally focused enough to perform any form of work activities.” This physician’s examination also revealed that the plaintiff’s “[m]entation [was] clear,” and she had “[g]ood recent and remote recall” with “[n]ormal affect.” Her muscle tone and gait were normal, and she was “able to take care of” her two-year-old child.
Before deciding the plaintiff’s appeal, GENEX sought an opinion from an independent physician. He acknowledged the lack of “specific clinical documentation that [the plaintiff’s] condition ha[d] changed,” but he concluded that there was “not objective medical information documented to substantiate an inability to work in any capacity, including sedentary, at P&G or with another employer.”
GENEX denied the plaintiff’s appeal, and she sued the plan. The U.S. District Court for the Southern District of Ohio ruled in favor of the plan, and the plaintiff appealed to the U.S. Court of Appeals for the Sixth Circuit.
The circuit court affirmed, deciding that the plaintiff had not met her burden of presenting objective evidence to support a finding that she was disabled within the terms of the plan.
In its decision, the circuit court explained that the plan defined “total disability” not according to whether the plaintiff could perform her job but as:
a mental or physical condition resulting from an illness or injury which is generally considered totally disabling by the medical profession and for which the Participant is receiving regular recognized treatment by a qualified medical professional. Usually, total disability involves a condition of such severity as to require care in a hospital or restriction to the immediate confines of the home.
It then pointed out that the plaintiff had not directly argued that she was disabled according to this definition. Rather, the circuit court continued, she identified her condition as “complex regional pain syndrome.” The Sixth Circuit said that the plaintiff did “not specifically explain” how this condition disabled her. For example, she did not dispute her ability to drive or perform other activities of daily living.
The circuit court added that although the plaintiff cited several forms of objective evidence to support her diagnosis – the results of “several objective tests” that “demonstrated a physical disorder”; her doctors’ findings regarding her pain; the medications she was prescribed; and her doctors’ multiple referrals to neurologists and pain specialists – her arguments “merely attack[ed]” the board’s reasoning rather than its ultimate decision.
The Sixth Circuit decided that even accepting that the plaintiff suffered from unexplained, severe, and constant pain, she had not submitted “objective evidence” that she was disabled as defined by the plan. In other words, she had not demonstrated that her pain was “considered totally disabling” and that she was “receiving regular recognized treatment” for it. The circuit court further noted that because the plaintiff’s pain “admittedly does not restrict her to her home environment, her task of demonstrating total disability is that much harder.” The circuit court also rejected the plaintiff’s contention that because her condition had not changed, the plan had erred in terminating her benefits after awarding them for over a year. The circuit court reasoned that following the plaintiff’s logic, “no disability plan would ever be able to terminate benefits that had been erroneously approved at some prior time.”
The circuit court concluded by stating that the plan was not required to continue paying out benefits to the plaintiff indefinitely without objective evidence to support her disability simply because a prior third-party administrator had done so and her non-disabling condition had not changed. [Saunders v. Procter & Gamble Health and Long-Term Disability Benefit Plan, 2016 U.S. App. Lexis 15743 (6th Cir. Aug. 23, 2016).]
Florida Court Rules That Plan’s Pre-Existing Condition Provision Warranted Denial of Long-Term Disability Benefits to Plaintiff
In this case, the plaintiff began working with Thorntons, Inc., as a real estate manager on March 12, 2012. Thorntons held a group insurance plan that included a provision for long-term disability benefits, issued by United of Omaha Life Insurance Company. Under the Omaha plan, the plaintiff became eligible to receive benefits on March 13, 2013.
On September 25, 2013, the plaintiff filed a short-term disability claim form with Omaha that listed the nature of his illness as “severe back pain & muscle spasms.” The short-term disability claim form also indicated that the plaintiff’s pain had “started in February [2013,] & got progressively worse.” He indicated on the same form that his disability had begun on July 1, 2013.
The plaintiff’s physician submitted a statement on September 18, 2013 in connection with the plaintiff’s application for disability that listed the diagnosis as “sciatica” and “back pain/spasm.” The physician further indicated that the plaintiff’s symptoms had first appeared on October 16, 1998, after a fall. The fall in October 1998 resulted in fractures to the plaintiff’s spinous processes of the T6, T7, and T8 vertebrae, the physician indicated.
Because the plaintiff filed his claim within one year of becoming insured, Omaha conducted a review to determine whether the plan’s pre-existing condition exclusion applied. That exclusion stated that benefits would not be provided for disability caused by, contributed to by, or resulting from a pre-existing condition, which it defined as an injury or sickness for which the participant had received medical treatment, advice, or consultation in the three months before the participant became insured. The three month look-back period ran from December 12, 2012 through March 11, 2013.
Omaha discovered that on August 29, 2012 (prior to the look-back period), the plaintiff had gone to his physician to “have [his] back checked,” and had been prescribed Vicodin and Voltaren Gel. During the look-back period, Omaha found, the plaintiff had gone to his physician on January 7, 2013, January 31, 2013, and March 4, 2013 and he also had prescriptions filled for Tramadol, Hydrocodone, and Volatren.
Moreover, according to Omaha, the plaintiff continued to seek medical treatment for his back pain after the look-back period. On August 23, 2013, he treated with a physician at the National Institute of Pain; the doctor’s new consultation note indicated that the plaintiff had presented with “chronic mid back pain . . . involv[ing] . . . the lower thoracic and upper lumbar facet joints.”
Then, on September 13, 2013, the plaintiff treated with another medical doctor, who noted that the plaintiff’s chief complaint was “[m]id to lower back pain” and who said that he reviewed MRI images of the plaintiff’s lumbar spine; that his gait and station were normal; and that his lumbar spine presented “[n]o erythema, ecchymosis, or edema. No tenderness of spine or SI joints. [There was also] [f]ull, painless range of motion of the lumbar spine.”
As part of its review of the plaintiff’s claim, Omaha had an independent medical evaluation conducted by another physician. He opined that the plaintiff’s “present musculoskeletal [condition] was initially caused by a slip/fall injury sustained during 1998, with fractures of the spinous processes of T6-7-8.” According to this doctor, “[w]ithin a reasonable degree of medical probability[,] the examinee’s employee obligations . . . exacerbated and/or aggravated his preexisting condition.”
Omaha denied the plaintiff’s long-term disability application, concluding that his “disabling conditions are considered pre-existing.” The plaintiff appealed, Omaha affirmed its denial of long-term disability benefits, and the plaintiff sued.
After the parties moved for summary judgment, the district court ruled in favor of Omaha, agreeing with Omaha’s decision that the plan’s pre-existing condition provision warranted the denial of long-term disability benefits to the plaintiff.
In its decision, the district court pointed out that the plaintiff had treated with his primary care physician before, during, and after the look-back period for back pain, and had prescriptions for pain medicine filled during the look-back period. Furthermore, it continued, two doctors had opined that, within a reasonable degree of medical certainty, the plaintiff’s complaints that formed the basis for his filing a claim of disability were the same as those for which he had sought treatment during the look-back period.
The district court concluded that it could not say that Omaha’s decision to deny benefits based on the pre-existing nature of the plaintiff’s claim was “wrong,” and it upheld the plan administrator’s ruling. [Horneland v. United of Omaha Life Ins. Co., 2016 U.S. Dist. Lexis 111902 (M.D. Fla. Aug. 23, 2016).]
Lawsuit for Disability Benefits Filed After Policy’s Limitations Period Was Untimely, Circuit Court Rules
In July 2008, citing poor work performance, Banner Engineering Inc. terminated the plaintiff’s employment.
In October 2011, after the plaintiff was diagnosed with multiple sclerosis, he applied for long-term disability benefits under Banner’s group employee benefit plan, which was funded by an insurance policy issued by Sun Life Assurance Company of Canada. The plaintiff asserted that the mental health and cognitive problems that had caused his poor work performance at Banner were symptoms of his then-undiagnosed multiple sclerosis.
Sun Life denied the application for disability benefits, as well as the plaintiff’s appeal of the denial, based on a determination that he was not disabled at the time his employment at Banner was terminated.
The plaintiff subsequently sued Sun Life. The U.S. District Court for the District of Minnesota granted summary judgment in favor of Sun Life, and the plaintiff appealed to the U.S. Court of Appeals for the Eighth Circuit.
The Eighth Circuit affirmed.
In its decision, it explained that the Sun Life policy required the plaintiff to provide written notice of his claim within 30 days of the end of a set period of time (referred to as the elimination period), and to provide proof of his claim no later than 90 days after the end of the elimination period. The policy also included a limitations period requiring any lawsuit regarding benefits to be brought within three years of the date that a proof of claim was required.
The circuit court then noted that the plaintiff’s elimination period had ended on September 30, 2008, meaning that his proof of claim had been due by December 29, 2008, and that the contractual limitations period had expired on December 29, 2011.
Because the plaintiff had not filed his lawsuit until March 2013, well after the contractual limitations period had expired, the Eighth Circuit ruled that his lawsuit was untimely.
The circuit court rejected the plaintiff’s contention that, under Minnesota law, his proof of loss was not due until 90 days after his disability had terminated. The circuit court ruled that the statute did not apply to group insurance policies such as the one under which the plaintiff was seeking benefits.
The Eighth Circuit also was not persuaded by the plaintiff’s contention that Minnesota law required that Sun Life prove that it had been prejudiced by not receiving timely notice and proof of claim. The Eighth Circuit reasoned that although, under Minnesota law, an insurer was required to show prejudice before denying a claim for untimely notice, the issue in this case was whether the plaintiff’s lawsuit had been filed within the contractual limitations period. “Minnesota law does not require a showing of prejudice in this context,” it concluded. [Schmitz v. Sun Life Assurance Co. of Canada, 2016 U.S. App. Lexis 15319 (8th Cir. Aug. 22, 2016).]
Reprinted with permission from the December 2016 issue of the Employee Benefit Plan Review – From the Courts. All rights reserved.
- Norman L. Tolle