Employee Benefit Plan Review – From the CourtsDecember 7, 2017 | Norman L. Tolle | |
Plaintiffs’ Claimed Violation of California’s “Day of Rest” Law Fails
The plaintiffs in this case, former California employees of Nordstrom, Inc., a retail department store, sued the company, alleging that it had violated the provision of the California Labor Code granting employees a right to one “day’s rest” in seven.
One of the plaintiffs alleged that, while employed at Nordstrom, he had worked more than six consecutive days on three occasions. He said that, on each of those occasions, he originally was not scheduled to work more than six consecutive days, but he did so after being asked by either his supervisor or a co-worker to fill in for another employee.
The other plaintiff asserted that she had worked more than six consecutive days on one occasion; on two of those days, she had worked fewer than six hours.
The U.S. District Court for the Central District of California held a bench trial. It then ruled:
- California’s day-of-rest statute, California Labor Code Section 551, applied on a rolling basis to any consecutive seven-day period, rather than by the workweek;
- Nordstrom was exempt from that requirement under California Labor Code Section 556 because each plaintiff had worked fewer than six hours on at least one day in the consecutive seven days of work; and
- Even if the exemption did not apply, Nordstrom had not caused either plaintiff to work more than seven consecutive days within the meaning of California Labor Code Section 552 because there had been no coercion, and the plaintiffs had waived their rights under Section 551 by accepting additional shifts when they were offered.
The district court dismissed the action, and the plaintiffs appealed to the U.S. Court of Appeals for the Ninth Circuit. To help it decide the plaintiffs’ appeal, the Ninth Circuit certified three questions of California law to the California Supreme Court.
The first question that the Ninth Circuit asked the California Supreme Court to decide was:
Is the day of rest required by [S]ections 551 and 552 calculated by the workweek, or does it apply on a rolling basis to any seven-consecutive-day period?
The California Supreme Court responded:
A day of rest is guaranteed for each workweek. Periods of more than six consecutive days of work that stretch across more than one workweek are not per se prohibited.
The second question that the Ninth Circuit asked the California Supreme Court to decide was:
Does the [S]ection 556 exemption for workers employed six hours or less per day apply so long as an employee works six hours or less on at least one day of the applicable week, or does it apply only when an employee works no more than six hours on each and every day of the week?
The California Supreme Court responded:
The exemption for employees working shifts of six hours or less applies only to those who never exceed six hours of work on any day of the workweek. If on any one day an employee works more than six hours, a day of rest must be provided during that workweek, subject to whatever other exceptions might apply.
Finally, the third question that the Ninth Circuit asked the California Supreme Court to decide was:
What does it mean for an employer to “cause” an employee to go without a day of rest (Section 552): force, coerce, pressure, schedule, encourage, reward, permit, or something else?
The California Supreme Court responded:
An employer causes its employee to go without a day of rest when it induces the employee to forgo rest to which he or she is entitled. An employer is not, however, forbidden from permitting or allowing an employee, fully apprised of the entitlement to rest, independently to choose not to take a day of rest.
After the California Supreme Court answered the three questions asked by the Ninth Circuit, the Ninth Circuit was able to decide the plaintiffs’ appeal in the Nordstrom case. It affirmed the district court’s decision.
The Ninth Circuit explained that, as the California Supreme Court had made clear, the district court had answered the first two questions incorrectly. The circuit court ruled, however, that because neither plaintiff had worked more than six consecutive days in any one Nordstrom workweek, their individual claims under Sections 551 and 552 failed. It concluded, therefore, that the district court had reached the correct conclusion, albeit for the wrong reasons. [Mendoza v. Nordstrom, Inc., 2017 U.S. App. Lexis 14249 (9th Cir. Aug. 3, 2017).]
Comment: The Ninth Circuit noted in its opinion that nothing in the district court’s order and the Ninth Circuit’s opinion prevented a “proper plaintiff” from bringing a new action to vindicate his or her rights in the future.
Employer Could Not Force Case to Arbitration Based on Worker’s Agreement with Staffing Agency, Seventh Circuit Says
In August 2013, in Beaver Dam, Wisconsin, the plaintiff in this case applied to work at Richelieu Foods, which had outsourced its staffing needs to Remedy Intelligent Staffing, a temporary staffing agency. The application form that the plaintiff signed with Remedy for placement with Richelieu contained an arbitration agreement.
She was assigned to work for a time for Richelieu, but that assignment ended after some months.
About a year after she first had applied, Remedy placed the plaintiff with Fromm Family Foods. The plaintiff subsequently alleged that, while working at Fromm, her supervisor had sexually harassed her.
The plaintiff sued Fromm – but not Remedy – under Title VII of the Civil Rights Act of 1964 for sexual harassment and retaliation. During discovery, the plaintiff disclosed her initial application form to Remedy, which included the arbitration agreement.
Fromm then argued that, given the arbitration agreement, the plaintiff should be compelled under the contract law principle of equitable estoppel to arbitrate her claims against it.
The U.S. District Court for the Western District of Wisconsin denied Fromm’s motion, and Fromm appealed to the U.S. Court of Appeals for the Seventh Circuit.
The Seventh Circuit affirmed the district court’s decision, ruling that Fromm, which did not have a written arbitration agreement with the plaintiff, could not enforce against her the arbitration clause in her agreement with the staffing agency.
In its decision, the circuit court explained that equitable estoppel did not apply because Fromm had not relied on, or even had known of, the fact that the plaintiff had signed an agreement with an arbitration provision when it had accepted her assignment from Remedy. Fromm, the circuit court concluded, “could not have relied upon an agreement it did not know about” and, therefore, it could not enforce the arbitration provision in that agreement against the plaintiff. [Scheurer v. Fromm Family Foods LLC, 863 F.3d 748 (7th Cir. 2017).]
Sixth Circuit Affirms Decision Rejecting ERISA Suit by Former Chrysler Employee
The plaintiff in this case, who had worked for Chrysler for more than 40 years, was injured in a car crash in July 2008. After the crash, he was diagnosed with post-traumatic stress disorder, post-concussion syndrome, double vision and hearing loss.
Chrysler placed the plaintiff on disability leave until he retired in May 2011. At that point, the plaintiff began to receive a disability pension.
Six days after retiring, the plaintiff filed a claim for additional benefits under Chrysler’s accident insurance plan. The insurer then administering the plan, MetLife, construed the plaintiff’s claim as one for “Traumatic Brain Injury Benefit[s]” as defined by the insurance policy in effect in July 2008, which was when the plaintiff had been injured.
MetLife denied the claim on the ground that the plan in effect in July 2008 did not provide coverage for the plaintiff’s injury. MetLife upheld its decision when the plaintiff appealed.
The plaintiff responded by requesting a copy of the 2008 policy – first from MetLife, and then from Benefits Express, another company that helped Chrysler administer its employee-benefit plans.
Before he received the policy, the plaintiff consulted the plan’s latest summary plan description. Thereafter, the plaintiff wrote to MetLife, asserting that he was entitled to “Total Permanent Disability Benefit[s]” under the summary. MetLife responded that Chrysler’s accident insurance policy did not include such a benefit.
The plaintiff filed a lawsuit under the Employee Retirement Income Security Act of 1974 (ERISA), alleging, among other things, that Chrysler had violated ERISA by improperly denying him benefits and failing to provide him with plan documents.
The U.S. District Court for the Eastern District of Michigan granted summary judgment in favor of Chrysler. The district court held that Chrysler’s accident insurance did not cover total and permanent disabilities, and that nothing in the summary plan description should have led the plaintiff to believe otherwise.
The district court also held that the plaintiff’s requests for a copy of the 2008 policy did not trigger Chrysler’s statutory duty to produce the document.
The plaintiff appealed to the U.S. Court of Appeals for the Sixth Circuit, which affirmed.
In its decision, the circuit court explained that a document that the parties referred to as the “MetLife Certificate” was “part of the . . . policy” that had been in effect when the plaintiff had been injured. That document listed each of the benefits included in Chrysler’s accident insurance, the Sixth Circuit noted. It then pointed out that a benefit for total and permanent disabilities was “not among them,” which meant that the policy did “not include that benefit.”
The Sixth Circuit also pointed out that the summary plan description that the plaintiff had reviewed stated that, if the summary conflicted with the accident insurance policy, then “the terms of the . . . policy” prevailed. Because the policy did not list the benefit that the plaintiff sought, he could not recover it, regardless of whether the summary listed the benefit, the circuit court said.
Finally, the circuit court was not persuaded by the plaintiff’s argument that Chrysler had violated ERISA because, he contended, it had taken three months to produce the MetLife Certificate on March 11, 2013. It pointed out that the plaintiff’s letter to MetLife in December 2012 requesting a copy of the group certificate and the group policy did not necessarily trigger Chrysler’s duty to produce, because that duty only arose when a plan participant asked the employer for plan documents. In any event, the circuit court concluded that any delay by Chrysler to produce documents had not prejudiced the plaintiff, and, therefore, that the district court had not erred by refusing to award him damages on that claim. [Butler v. FCA US, LLC, 2017 U.S. App. Lexis 16302 (6th Cir. Aug. 22, 2017).]
Employee Fired for Using Medical Marijuana May Sue Massachusetts Employer for Handicap Discrimination, State’s Top Court Rules
After the plaintiff in this case accepted an offer for an entry level position with Advantage Sales and Marketing (ASM), an ASM representative told her that she had to take a mandatory drug test. The plaintiff told the ASM employee who would be her supervisor that she would test positive for marijuana. She explained that she suffered from Crohn’s disease, a debilitating gastrointestinal condition; that her physician had provided her with a written certification that allowed her to use marijuana for medicinal purposes; and that, as a result, she was a qualifying medical marijuana patient under Massachusetts law.
She added that she did not use marijuana daily and would not consume it before work or at work.
(Under the Massachusetts medical marijuana act, a “qualifying patient” is “a person who has been diagnosed by a licensed physician as having a debilitating medical condition”; Crohn’s disease is included within the definition of a “debilitating medical condition.” The Massachusetts law protects a qualifying patient from “arrest or prosecution, or civil penalty, for the medical use of marijuana” provided the patient “(a) [p]ossesses no more marijuana than is necessary for the patient’s personal, medical use, not exceeding the amount necessary for a sixty-day supply; and (b) [p]resents his or her registration card to any law enforcement official who questions the patient … regarding use of marijuana.” The act also provides, “Any person meeting the requirements under this law shall not be penalized under Massachusetts law in any manner, or denied any right or privilege, for such actions.”)
The plaintiff submitted a urine sample for the mandatory drug test and was fired after she completed her first day of work. The plaintiff said that a human resources representative for ASM informed her that she was terminated for testing positive for marijuana. The plaintiff said that the representative told her that ASM did not care if she used marijuana to treat her medical condition because “we follow federal law, not state law.”
(Federal law regards marijuana as a Schedule I controlled substance under the Controlled Substances Act whose possession is a crime, regardless of whether it is prescribed by a physician for medical use. Consequently, a qualifying patient in Massachusetts who had been lawfully prescribed marijuana remained potentially subject to federal criminal prosecution for possessing the prescribed marijuana.)
The plaintiff sued ASM, alleging, among other things, handicap discrimination in violation of Massachusetts law. The trial court dismissed the plaintiff’s handicap discrimination claims, and the case reached the Supreme Judicial Court of Massachusetts.
The court reversed the dismissal of the plaintiff’s handicap discrimination claims. It held that a qualifying patient terminated from employment because of testing positive for marijuana as a result of the patient’s lawful medical use of marijuana had a civil remedy against his or her employer for handicap discrimination under Massachusetts law.
In its decision, the court explained that, under Massachusetts law, it was an “unlawful practice … [f]or any employer … to dismiss from employment or refuse to hire …, because of [his or her] handicap, any person alleging to be a qualified handicapped person, capable of performing the essential functions of the position involved with reasonable accommodation, unless the employer can demonstrate that the accommodation required to be made to the physical or mental limitations of the person would impose an undue hardship to the employer’s business.”
The court noted that the plaintiff alleged that she was a “handicapped person” because she suffered from Crohn’s disease and that she was a “qualified handicapped person” because she was capable of performing the essential functions of her job with a reasonable accommodation to her handicap – that is, with a waiver of ASM’s policy barring anyone from employment who tested positive for marijuana so that she could continue to use medical marijuana as prescribed by her physician.
The court then ruled that the plaintiff had adequately stated a claim for handicap discrimination in violation of Massachusetts law, given her allegations that she had a physical impairment (that is, Crohn’s disease) that substantially limited one or more major life activities and, therefore, that she was a “handicapped person” for purposes of that law.
The court rejected ASM’s contention that the plaintiff had not adequately alleged that she was a “qualified handicapped person” because the only accommodation she sought – her continued use of medical marijuana – was a federal crime and, therefore, was unreasonable.
The court pointed out that, under Massachusetts law, the use and possession of medically prescribed marijuana by a qualifying patient was “as lawful as the use and possession of any other prescribed medication.” According to the court, where, in the opinion of an employee’s physician, medical marijuana was the most effective medication for the employee’s debilitating medical condition, and where any alternative medication whose use would be permitted by the employer’s drug policy would be less effective, an exception to an employer’s drug policy to permit its use was a “facially reasonable accommodation.”
Moreover, the court added, the fact that the employee’s possession of medical marijuana was in violation of federal law did not make it per se unreasonable as an accommodation because the “only person” at risk of federal criminal prosecution for the possession of medical marijuana was the employee. “An employer would not be in joint possession of medical marijuana or aid and abet its possession simply by permitting an employee to continue his or her off-site use,” the court said.
Although the court ruled that the dismissal of the plaintiff’s claims alleging handicap discrimination had to be reversed, it pointed out that this did not necessarily mean that the plaintiff would prevail in proving handicap discrimination. It noted that ASM could offer evidence to meet its burden to show that the plaintiff’s use of medical marijuana was not a reasonable accommodation because it would impose an undue hardship on its business. For instance, the court said, ASM could prove that the continued use of medical marijuana would impair the plaintiff’s performance of her work or pose an “unacceptably significant” safety risk to the public, the plaintiff, or her fellow employees.
Alternatively, the court concluded, an undue hardship might be shown if ASM could prove that the use of marijuana by the plaintiff would violate its contractual or statutory obligations, and thereby jeopardize its ability to perform its business. [Barbuto v. Advantage Sales and Marketing, LLC, 78 N.E.3d 37 (Mass. 2017).]
One-Year Statute of Limitations Barred Plaintiff’s Section 502(c)(1) ERISA Action, Second Circuit Decides
The plaintiff in this case was a participant in a benefits plan protected by the Employee Retirement Income Security Act of 1974 (ERISA) provided by the William W. Backus Hospital. Aetna, Inc., was a third-party administrator of the plan, and Rawlings Financial Services, LLC, was a contractor hired by Aetna to provide certain services related to the plan.
After the plaintiff was hurt in a motor vehicle accident and filed a personal injury lawsuit, Rawlings sent her a notice of subrogation, informing her that if she received money in her lawsuit she would need to reimburse the plan for medical expenses it had covered; Rawlings also imposed a health insurance lien.
The plaintiff eventually settled her lawsuit, but the settlement money initially was withheld because of the lien. The plaintiff alleged that she asked Rawlings to provide her with documents regarding her health insurance plan on December 13, 2012, but that Rawlings did not respond; that she sent two further requests, one on June 13, 2013, and the other sometime around July 8, 2014; and that Rawlings provided no documents until January 15, 2015 and finished compliance on February 17, 2015.
On October 13, 2015, the plaintiff filed a lawsuit against Rawlings and other defendants, alleging that they had failed to timely comply with her request for documents relating to her health care benefit plan, in violation of ERISA Section 502(c)(1).
The U.S. District Court for the District of Connecticut dismissed her suit. It explained that the plaintiff made her last request for information in July 2014; the plan administrator had to respond to the request within 30 days, which meant that her claim accrued in August 2014; and she filed her complaint in October 2015. The district court then concluded that the plaintiff’s lawsuit was time-barred under Connecticut’s one-year statute of limitations for actions to recover civil forfeitures.
The plaintiff appealed to the U.S. Court of Appeals for the Second Circuit, arguing that a longer statute of limitations applied.
The circuit court affirmed.
In its decision, the circuit court explained that because ERISA did not prescribe a limitations period for Section 502(c)(1) actions, the applicable limitations period was that specified in the most nearly analogous state limitations statute. It then rejected the plaintiff’s argument that it should apply Connecticut’s six-year statute of limitations for breach of contract, or the three-year statute of limitations for claims brought under the Connecticut Unfair Trade Practices Act and the Connecticut Unfair Insurance Practices Act, and agreed with the district court that Connecticut’s one-year statute of limitations for civil forfeiture claims was the most nearly analogous state limitations statute to apply to the plaintiff’s claim. [Brown v. Rawlings Financial Services, LLC, 2017 U.S. App. Lexis 15934 (2d Cir. Aug. 22, 2017).]
ERISA Does Not Invalidate Plan’s Forum-Selection Clause, Seventh Circuit Holds
From 1978 to 1997, the plaintiff worked for Caterpillar, Inc., at its plant in York, Pennsylvania. In May 1997, he experienced serious health issues, and the Social Security Administration declared him disabled as of that date.
Caterpillar covered his health insurance as an employee on long-term disability, billing him accordingly for his portion of the premium.
In September 2012, the plaintiff chose to retire retroactively, effective October 1, 2009. Caterpillar failed to change the plaintiff’s status and did not realize its mistake until the middle of 2013. The company then notified the plaintiff that he owed more than $9,500 in past-due premiums, which reflected the difference between the rate for a long-term disabled employee and the rate for a retired employee. When the plaintiff did not pay that amount, Caterpillar terminated his benefits.
The plaintiff sued Caterpillar in the U.S. District Court for the Eastern District of Pennsylvania. The plan documents, however, contained a forum selection clause requiring suit to be filed in the U.S. District Court for the Central District of Illinois, so Caterpillar moved to transfer the case there.
The plaintiff opposed the motion, arguing that ERISA’s venue provision invalidated the forum-selection clause in the plan documents. The Pennsylvania district court rejected that argument, and the question of the validity of the plan’s forum-selection clause reached the U.S. Court of Appeals for the Seventh Circuit.
The circuit court ruled that ERISA did not invalidate the forum-selection clause in the Caterpillar plan. It found nothing in ERISA that precluded parties from contractually channeling litigation to a particular federal district. It also noted that a contractual forum-selection clause was not incompatible with ERISA’s policy goals more generally, adding that they promoted “uniformity in plan administration” and reduced administrative costs, and in that sense were “consistent with the broader statutory goals of ERISA.”
Accordingly, it concluded that the forum-selection clause in the Caterpillar plan was enforceable. [In re Mathias, 2017 U.S. App. Lexis 14803 (7th Cir. Aug. 10, 2017).]
FLSA Backpay Could Not be Calculated Using “Fluctuating Workweek” Method, Fifth Circuit Concludes
The plaintiffs in this case were 19 employees or former employees of Entergy Operations, Inc. (EOI), which operated a nuclear power plant near Killona, Louisiana.
Before hiring the plaintiffs, EOI had staffed its Killona plant with security personnel from Wackenhut, a private security contractor. All of the plaintiffs were former Wackenhut security contractors.
In 2009, EOI chose to move its security force in-house. Toward that end, it made full-time job offers to many of the Wackenhut contractors who had been filling the role, including all of the plaintiffs. These job offers all were premised on the plaintiffs being exempt from the overtime rules of the federal Fair Labor Standards Act (FLSA).
The plaintiffs accepted the jobs and became “security shift supervisors” at EOI’s Killona plant.
Thereafter, the plaintiffs came to believe that they were not exempt under the FLSA. They sued EIO, seeking backpay for allegedly underpaid overtime hours.
During the lawsuit, the U.S. District Court for the Eastern District of Louisiana issued a ruling relating to the calculation of backpay if the plaintiffs ultimately were to succeed on their misclassification claim.
The district court decided that the “fluctuating workweek” method would apply to calculate the plaintiffs’ regular rate of pay for the purpose of determining their proper overtime rate of pay. Under this method, an employee’s regular rate of pay was determined by examining each week individually and dividing the salary paid by the number of hours actually worked (because the salary was intended to compensate for whatever number of hours that happened to be). The employee’s regular hourly rate thus varied from week to week, so the employee’s proper overtime compensation similarly varied from week to week.
Two plaintiffs appealed to the U.S. Court of Appeals for the Fifth Circuit, asking the circuit court to reverse the fluctuating workweek ruling.
The Fifth Circuit agreed with the plaintiffs and it reversed the district court’s ruling. The circuit court held that it was inappropriate to use the fluctuating workweek method to determine the plaintiffs’ regular rate of pay, which in turn would determine their overtime rate of pay and overall backpay compensation (if their suit were successful).
The circuit court pointed out that the plaintiffs had agreed to work and have their salary compensate them for an alternating, biweekly schedule of 36 hours every other week and 48 hours every other week. They were all “security shift supervisors” at the power plant, and were expected to work three 12-hour shifts every other week, with every other week consisting of four 12-hour shifts.
It then said that the fluctuating workweek method could be applied only where employees clearly understood that their salary was intended to compensate any unlimited amount of hours they might be expected to work in any given week. The circuit court added that it did not necessarily apply, as a matter of law, to any and all deviation from week to week. In the circuit court’s opinion, although the plaintiffs’ schedule alternated from week to week, it was “fixed” in the sense that the parties had agreed to it at the outset of their employment relationship (as the plaintiffs had testified). This biweekly alternating, but fixed, schedule was not necessarily “fluctuating” as that term was used in the fluctuating workweek method.
The circuit court observed that the fluctuating workweek method could be appropriate if a factfinder were to determine that the plaintiffs had agreed to have their salaries compensate an unlimited amount of hours each week. Whether a factfinder reaches that conclusion remains to be seen. [Hills v. Entergy Operations, Inc., 2017 U.S. App. Lexis 14387 (5th Cir. Aug. 4, 2017).]
- Norman L. Tolle