Employee Benefit Plan Review – From the CourtsJanuary 5, 2018 | Norman L. Tolle | |
Release Did Not Bar Injured Worker from Bringing FMLA Claims Against Former Employer, Third Circuit Rules
The plaintiff in this case alleged that he was injured on or about August 12, 2014 while working as an employee of Boscov’s Inc. at a farmers’ market in Reading, Pennsylvania. The plaintiff immediately filed a worker’s compensation claim, and received work leave.
The plaintiff returned to work on August 14 but, on August 17, he requested an additional week of medical leave. Boscov’s human resources manager granted the request, and the plaintiff returned to work on August 26.
On September 10, Boscov’s fired the plaintiff.
On April 8, 2015, Boscov’s and the plaintiff signed a compromise and release agreement (C&R) that settled his worker’s compensation claims.
Then, on July 9, 2015, the plaintiff sued Boscov’s under the federal Family and Medical Leave Act of 1993 (FMLA) and Pennsylvania common law. He alleged that Boscov’s had interfered with his FMLA rights by failing to notify him of those rights and by not designating his leave as FMLA protected; that Boscov’s had retaliated against him for exercising his FMLA rights; and that Boscov’s had retaliated against him for filing a worker’s compensation claim in violation of Pennsylvania common law.
Boscov’s moved to dismiss the complaint, arguing that the plaintiff had waived his FMLA and common law rights because the C&R was a general release of any claims he had against Boscov’s. The U.S. District Court for the Eastern District of Pennsylvania dismissed the plaintiff’s complaint. The district court relied on the first sentence of the nineteenth paragraph of the C&R, which stated that the plaintiff and Boscov’s intended for the C&R “to be a full and final resolution of all aspects of the 8/12/2014 alleged work injury claim and its sequela whether known or unknown at this time.”
The plaintiff appealed to the U.S. Court of Appeals for the Third Circuit, which reversed.
In its decision, the circuit court ruled that the plaintiff had not waived his FMLA and common law claims in the C&R. It pointed out that the term “sequela,” which was included in the sentence of the C&R on which the district court had relied, was a singular noun meaning a “suit,” and that it did not mean, as Boscov’s contended, “all claims arising out of the injury.” Accordingly, the circuit court said, the first sentence of the nineteenth paragraph only prohibited the plaintiff from bringing an additional “work injury claim” lawsuit.
The circuit court then observed that the plaintiff was seeking to bring a lawsuit against Boscov’s for failing to notify him of his FMLA rights, for not designating his leave as FMLA protected, and for firing him for exercising his FMLA rights and worker’s compensation claim. The plaintiff was not bringing an additional “work injury claim,” such as a worker’s compensation claim or a tort lawsuit, the circuit court noted. Therefore, the circuit court continued, the C&R did not prohibit the causes of action he asserted against Boscov’s in the lawsuit he filed against the company.
The circuit court also decided that the C&R only prevented the plaintiff from seeking benefits and monies from a work injury claim. The court noted, however, that the plaintiff’s lawsuit against Boscov’s sought benefits and monies from FMLA and common law claims. As a result, it ruled, the C&R did not cover the claims he asserted against Boscov’s in his lawsuit.
Finally, the Third Circuit pointed out that the C&R stated that its purpose related to the plaintiff’s “alleged work injuries, disability and need for medical treatment as well as the overall compensability of the claim.” In light of that language, the circuit court found that the C&R’s purpose was resolving the plaintiff’s “work injuries, disability and need for medical treatment” – and that neither party had intended to release claims that allegedly emanated from a lack of notice, a failure to properly designate leave, and acts of retaliation, such as the plaintiff’s FMLA and common law claims.
Accordingly, the circuit court concluded that the C&R did not prohibit the plaintiff from bringing FMLA or Pennsylvania common law claims against Boscov’s. [Zuber v. Boscov’s Inc., 871 F.3d 255 (3d Cir. 2017).]
Employer’s FLSA Violation Had Not Been “Willful,” Third Circuit Affirms
The plaintiffs in this case were among a class of individuals who worked for Lackawanna County, Pennsylvania, in two separate part-time capacities. In 2011, the county became aware that it had not been aggregating the hours in both jobs, resulting in a failure to pay the plaintiffs for the hours they worked in excess of 40 hours per pay period.
In June 2013, the plaintiffs sued the county, alleging that it had violated the federal Fair Labor Standards Act (FLSA) by not paying them for their overtime. By 2015, it was undisputed that the county had violated the FLSA’s overtime provisions at various times from 2008 to 2012. The parties disputed, however, whether the county’s violation had been “willful.”
The question of the county’s “willfulness” in failing to pay overtime mattered because a finding of willfulness expanded the FLSA’s limitations period for claims under the FLSA from two years to three, bringing another year of lost pay within the scope of the plaintiffs’ claims and, in essence, permitting them to receive larger awards.
In November 2015, the case went to trial on the willfulness question. At the close of the plaintiffs’ case, the county moved for judgment as a matter of law, arguing that the plaintiffs’ evidence was insufficient to create a jury question on willfulness. The district court ruled in favor of the county on the willfulness question, and the plaintiffs appealed to the U.S. Court of Appeals for the Third Circuit, which affirmed.
In its decision, the circuit court explained that “willfulness” included situations when the employer, at the time of its FLSA violation, either “knew” its conduct was prohibited by the FLSA or “showed reckless disregard for the matter.” Acting only “unreasonably,” the Third Circuit said, was “insufficient” because “some degree of actual awareness” of FLSA violations was required.
The circuit court found that the plaintiffs had not demonstrated that the county had violated the FLSA willfully as to them. It reasoned that although the plaintiffs had demonstrated that the county had been aware of the FLSA “on a basic level,” willful FLSA violations required “a more specific awareness of the legal issue.”
The Third Circuit decided that an FLSA violation had to have “a degree of egregiousness” that was “lacking” in the county’s case. It found nothing to indicate that the county’s violation could be attributed to “recklessness or ill will.” Moreover, the circuit court said, even if the county had been aware of an overtime problem generally at the time of the plaintiffs’ violations, it had not indicated “an awareness of an FLSA overtime problem specifically” as to these plaintiffs.
Accordingly, the Third Circuit concluded that the plaintiff’s “willfulness” claims had been properly rejected by the district court. [Souryavong v. Lackawanna County, 871 F.3d 122 (3d Cir. 2017).]
Long-Term Leave of Absence Is Not a Reasonable ADA Accommodation, Seventh Circuit Says
From 2006 to 2013, the plaintiff in this case worked for Heartland Woodcraft, Inc., a fabricator of retail display fixtures. In early June 2013, the plaintiff took a 12-week medical leave under the Family Medical Leave Act (FMLA) to deal with serious back pain.
On the last day of his leave, he underwent back surgery, which required that he remain away from work for another two or three months.
The plaintiff asked Heartland to continue his medical leave, but by then he had exhausted his FMLA entitlement. The company denied his request and terminated his employment; it invited him to reapply when he was medically cleared to work.
About three months later, the plaintiff’s doctor lifted all restrictions and cleared him to resume work, but the plaintiff did not reapply to Heartland.
Instead, he sued Heartland, alleging that it had discriminated against him in violation of the federal Americans with Disabilities Act (ADA) by failing to provide a reasonable accommodation – in particular, a multi-month leave of absence after his FMLA leave had expired.
The U.S. District Court for the Eastern District of Wisconsin awarded summary judgment to Heartland, and the plaintiff appealed to the U.S. Court of Appeals for the Seventh Circuit.
The circuit court affirmed.
In its decision, the circuit court explained that the ADA “is an antidiscrimination statute, not a medical-leave entitlement.” The ADA forbids discrimination against a “qualified individual on the basis of disability,” the circuit court added. It then observed that a “qualified individual” with a disability was a person who, “with or without reasonable accommodation, can perform the essential functions of the employment position.”
Thus, the circuit court continued, the term “reasonable accommodation” was “expressly limited to those measures that will enable the employee to work.” An employee who needs long-term medical leave cannot work and, therefore, is not a “qualified individual” under the ADA, the Seventh Circuit noted.
Because a multi-month leave of absence was beyond the scope of a reasonable accommodation under the ADA, the district court had properly ruled in favor of Heartland, the Seventh Circuit concluded. [Severson v. Heartland Woodcraft, Inc., 872 F.3d 476 (7th Cir. 2017).]
Pre-Existing Condition Limit Barred Employee’s Long-Term Disability Claim, Colorado Court Decides
In December 2014, the plaintiff, a truck driver employed by McLane Company, Inc., began experiencing cloudy vision. On December 4, 2014, he was diagnosed with posterior vitreous detachment (PVD), generally a benign and asymptomatic condition that occurs when the vitreous gel that fills the eye separates from the retina.
On February 25, 2015, the plaintiff sought treatment at an eye care center in Colorado. He was diagnosed with a macula-off retinal detachment of the right eye. The plaintiff underwent three surgeries over the course of six months to treat his right eye, but he ultimately suffered permanent vision loss. The vision loss rendered him unable to work as a truck driver.
The plaintiff, whose effective date of coverage under McLane’s ERISA-governed group disability plan was January 1, 2015, filed a claim for short-term disability (STD) benefits. The plan administrator accepted his claim, and the plaintiff received benefits for the full period under the plan.
After it became clear that the plaintiff would be unable to return to work after receiving the maximum amount of STD benefits, the plan administrator evaluated whether he qualified for long-term disability (LTD) benefits. It decided that he was not entitled to LTD benefits, reasoning that he had been treated on December 4, 2014 and diagnosed with PVD and that his PVD was related to his current disability and, therefore, fell within the plan’s limitation for pre-existing conditions. Under the plan, a pre-existing condition was a condition for which a claimant “incurred expenses, received medical treatment, care or services including diagnostic measures” within three months before the claimant’s most recent effective date of insurance.
The plaintiff submitted an administrative appeal to the administrator, contending that retinal detachment – not PVD – had caused his vision loss. The administrator denied his appeal, stating that the PVD that he developed on December 4, 2014 “was highly likely to have caused a retinal tear” and was “the initial event that led to a retinal tear which subsequently led to the development of the retinal detachment and vision loss.”
The plaintiff sued the administrator, arguing that the administrator’s determination that his PVD was a pre-existing condition precluding disability benefits was arbitrary and capricious. The U.S. District Court for the District of Colorado affirmed the plan administrator’s decision.
The district court first ruled that the plan administrator had substantial evidence that the plaintiff’s PVD had caused, contributed to, or resulted in his vision loss. The district court reasoned that the administrator’s decision was based on the medical opinions of two independent, board-certified ophthalmologists who had been hired by the administrator to provide peer reviews of the plaintiff’s case and who both opined that his PVD had led to the retinal detachment that had caused his disabling vision loss.
The district court then decided that the administrator had substantial evidence that the plaintiff had received treatment for his pre-existing condition within three months of his most recent effective date under the plan.
The district court observed that the plaintiff’s relevant effective date of coverage under the plan was January 1, 2015. Therefore, the three month “look-back” period was from October 1, 2014 to December 31, 2015. The plaintiff had been diagnosed on December 4, 2014 with PVD after he complained of foggy vision. Because this visit was within the look-back period and involved treatment – defined in the plan as including “diagnostic measures” – the district court affirmed the administrator’s denial of the plaintiff’s claim for long-term disability benefits. [Green v. Life Ins. Co. of North America, 2017 U.S. Dist. Lexis 160900 (D. Colo. Sep. 29, 2017).]
Second Circuit Upholds Decision Limiting Plaintiff’s Treatment for Anorexia Nervosa
The plaintiff in this case was undergoing medical treatment for anorexia nervosa as a beneficiary of a health benefits plan governed by the Employee Retirement Income Security Act of 1974 (ERISA). After unsuccessful outpatient treatment, the plaintiff was admitted to a center for a partial hospitalization program (PHP).
The insurer that issued the group insurance policy for the plan initially approved coverage under the policy and continued to approve eight additional pre-certifications submitted for continued PHP treatment for the plaintiff. After 59 days, however, a doctor employed by the insurer’s third-party utilization manager concluded that PHP treatment for the plaintiff was no longer medically necessary.
The insurer then ceased its coverage of the plaintiff’s PHP treatment. The plaintiff appealed the denial of coverage, but three additional third-party doctors also concluded that continued PHP treatment was no longer necessary, and the insurer denied the plaintiff’s appeal. The plaintiff sued the insurer in the U.S. District Court for the Southern District of New York, asserting that it had wrongfully denied her benefits.
The district court granted summary judgment to the insurer, and the plaintiff appealed to the U.S. Court of Appeals for the Second Circuit.
The circuit court affirmed.
In its decision, the circuit court explained that the insurer had full discretion under the policy to determine if a treatment was medically necessary “according to [the insurer’s] criteria, and in [the insurer’s] judgment.” The insurer’s criteria for medical necessity included evaluating the “most appropriate . . . level of service” for the plaintiff, “consistent with the symptoms or diagnosis and treatment of [her] condition.”
The Second Circuit then pointed out that four third-party doctors had evaluated the plaintiff’s medical records and had provided explanations that were consistent with application of the insurer’s medical necessity criteria: Each doctor had recommended denying coverage because the plaintiff’s “symptoms or diagnosis” had improved and each doctor recommended that she should be “treated with less intensive outpatient treatment” because PHP was no longer the “most appropriate . . . level of service.”
The circuit court added that the insurer’s decision to deny further coverage for PHP also was supported by substantial evidence. The Second Circuit conceded that the plaintiff had presented the insurer’s reviewers with multiple pieces of evidence in favor of continuing PHP treatment, and that the insurer’s third-party doctors had acknowledged that evidence. The circuit court added, however, that they also had noted significant progress made by the plaintiff – including her steady weight gain, general compliance with treatment, and adherence to her meal plan.
In the circuit court’s opinion, after weighing the conflicting evidence, there was enough “evidence that a reasonable mind might accept as adequate to support” the insurer’s decision to deny coverage for further PHP treatment. It concluded that the insurer’s third-party doctors had not acted arbitrarily in determining that the plaintiff had demonstrated progress after 59 days of treatment, which indicated that PHP was no longer medically necessary as the “most appropriate . . . level of service” and that the plaintiff “[could] be treated with less intensive outpatient treatment.” [Elizabeth W. v. Empire HealthChoice Assurance, Inc., 2017 U.S. App. Lexis 19099 (2d Cir. Oct. 3, 2017).]
Plaintiff Loses Challenge to 1099-R Form He Claimed Had Been Issued in Error
In this case, the plaintiff was a member of a defined benefit retirement plan maintained by Alliant Techsystems Corporation and serviced by Fidelity Investments Institutional Operational Company.
In 2009, Fidelity began sending the plaintiff’s monthly benefit checks. Rather than cash the checks, the plaintiff returned the unopened envelopes to Fidelity. Apparently, the plaintiff believed that a qualified domestic relations order (“QDRO”) entered in his Utah divorce case rendered him liable for any amounts intended for his ex-wife (who had been awarded a portion of the benefits) but accidently mailed to him.
This went on until late 2014, when Fidelity sent the plaintiff a check for $152,890.38, representing a lump-sum payment for all benefits due up to that point. Fidelity filed a corresponding 1099-R form with the Internal Revenue Service reflecting its lump-sum distribution.
As with the prior distributions, the plaintiff returned the unopened envelope containing the check to Fidelity.
Believing that Fidelity had been wrong to file the 1099-R form, the pro se plaintiff sued Fidelity in the U.S. District Court for the District of Utah. He asserted three claims in his complaint:
(1) A claim for declaratory judgment that the 1099-R form that had been filed with the IRS was void;
(2) A fraud claim; and
(3) A claim that Fidelity had violated the Employee Retirement Income Security Act of 1974 (ERISA).
The plaintiff sought, among other things, an order that the 1099-R form was “null and void” because no money had actually been distributed to him.
The district court granted summary judgment in favor of Fidelity. It concluded that it lacked jurisdiction over the plaintiff’s declaratory judgment claim, that he had not alleged or submitted evidence showing that the elements of fraud had been met, and that he had provided no legal or factual support for his suggestion that Fidelity had violated ERISA.
The plaintiff appealed to the U.S. Court of Appeals for the Tenth Circuit, which affirmed.
In its decision, the circuit court first agreed that the district court lacked jurisdiction to void the 1099-R form. The Tenth Circuit explained that the federal Declaratory Judgment Act allows courts to “declare the rights and other legal relations” of parties within its jurisdiction, but generally not “with respect to [f]ederal taxes.” The circuit court was not persuaded by the plaintiff’s argument that even if the district court could not void the 1099-R form, it should have entered an order stating that he had not received any income from Fidelity in 2014, reasoning that the only purpose of such an order would be to determine the plaintiff’s tax liability, which the district court lacked authority to do under the Declaratory Judgment Act.
The circuit court then rejected the plaintiff’s argument that the district court had erred in granting summary judgment on his fraud and ERISA claims “because there were several disputed facts.” The circuit court said that the plaintiff had not identified any disputed facts and, in any event, the question was not whether there were any disputed facts, but whether there was a genuine dispute of material fact – meaning a fact essential to the disposition of his claims. Because the plaintiff had identified no material facts in dispute, the circuit court concluded, the district court’s order granting summary judgment in favor of Fidelity had to be affirmed. [Stephens v. Alliant Techsystems Corp., 2017 U.S. App. Lexis 20713 (10th Cir. Oct. 23, 2017).]
- Norman L. Tolle