So yesterday, I made a convincing case that employees who smoke outside the workplace can’t be treated differently than your non-smokers. 

But what about your health insurance plans? Doesn’t the state law prohibit your plan from imposing higher premium costs on those smokers?

Well on first glance it appears yes.  The state law would seem to apply.

But, dig deeper (and without getting too technical) and you’ll understand that there is a federal law — ERISA — that trumps that state law when it comes to insurance plans. 

Indeed, back in 2006, the Office of Legislative Research (one of the underappreciated government offices) wrote a report that said exactly that:

You asked if Connecticut law prohibits insurers or employers from factoring in whether a person smokes when determining insurance premiums or employee contributions for health care benefits. …

Connecticut law prohibits employers from discriminating against any individual who smokes outside the workplace with respect to compensation, terms, conditions, or privileges of employment (CGS § 31-40s). The Connecticut Department of Labor (DOL) interprets this law as not prohibiting an employer from having smokers contribute more toward health benefits than non-smokers due to preemption by the federal Employee Retirement Income Security Act (ERISA). To our knowledge, this issue has not been litigated in a Connecticut court. …

Since that time, the question remains undecided, but there is little reason to doubt the conclusion. Indeed, there’s much more to this area than a simple blog post can provide.  But employers who believe in healthy workplaces and want to keep their insurance premiums down do have a small arrow in their quiver to make it happen.

For a few years now, I’ve been following the case if CIGNA v. Amara – an important employee benefits case that went before the U.S. Supreme Court last December.  You can find all the posts here. 

Today, in an 8-0 decision (download here), the Court clarified an area of the law in need of understanding and will have huge implications in the ERISA arena.

At issue was the following question:

Must participants who are members of a class action suit prove detrimental reliance on an inaccurate summary plan description in order to receive a remedy under ERISA, or is the mere proof of “likely harm” enough to justify equitable relief?

Or to put in "Plain English" from the SCOTUSBlog:

Federal law requires employers that offer their workers employment benefits to lay out the terms of the benefit plan in a detailed plan document, but also to provide workers with a summary plan description. When the summary describes more generous benefits than the actual plan document, is the worker entitled to the more generous benefits only if she shows that she relied on the erroneous summary, or is it enough for the worker to show that employees were likely harmed by the discrepancy?

The Court here said that "detrimental reliance" need not be shown but also said that there are multiple types of approaches that could be used.  Thus, to obtain relief for some ERISA violations, a plan participant or beneficiary must show that the violation caused injury, but need show only actual harm and causation, not detrimental reliance.

The decision isn’t the easiest to go through for a snap judgment and the implications for employers so I’m going to take some time to review it further and comment as appropriate. 

(As I’ve disclosed before, while I have no involvement in the matter, I do know one of the named plaintiffs in the case. )

Picture: The original U.S. Supreme Court in Philadelphia, PA

It’s rare for a case from Connecticut to make it all the way to the United States Supreme Court. But this week, a case did just that.

I’ve previously discussed the case of Cigna v. Amara in many posts which you can read here.  The case ultimately concerns the receipt of retirement benefits and whether documents about those benefits were misleading. But the narrower issue the court is now deciding concerns the type of proof and allegations that need to be presented in a class action of this type and what remedies are available. 

The American Bar Association has prepared a summary of the case and has summed up the issue that the court is to decide:

Must participants who are members of a class action suit prove detrimental reliance on an inaccurate summary plan description in order to receive a remedy under ERISA, or is the mere proof of “likely harm” enough to justify equitable relief?

Oral argument from that case is now available online.  A decision is expected sometime this spring. 

For those involved deeply with ERISA issues, it’s definitely worth a read.  There was an interesting back-and-forth discussion about what should happen when a summary plan description conflicts with the underlying plan documents.  Indeed, as noted in the argument, CIGNA conceded that its summary plan descriptions were deficient. But the issue, according to CIGNA, is what is the proper remedy:

My point I guess in this is that, yes, Justice Kagan, the statute requires the SPD to contain certain information.  We accept the fact of the conclusions of the court below in this case that they did not do so. There are two SPDs. They failed to live up to the requirements of ERISA. There is a remedy for that.

For everyone else, keep an eye on this case. It may provide some guidance to employers about how to oversee some plan issues when the case is decided next year. 

(Note: See a prior post for my familiarity with one of the class representatives. I have no involvement whatsoever in the case.) 

Employee benefit cases (better known as ERISA cases, after the Employee Retirement Income Security Act) aren’t the most exciting topic in the world.  At this point, just by my very mention of ERISA, I’m imagining your mouse wandering off to view another page.

But yesterday, the U.S. Supreme Court agreed to hear an important case that arises out of Connecticut about retirement benefits and alleged misrepresentations by the company of those benefits.  The case, CIGNA v. Amara, has been decided in the employees’ favor at the lower court and appellate court thus far, but the issues that it raises are incredibly complex.  (The decision at the District Court level was 122 pages!

I’ve discussed this case in various posts over the last three years here, here and here.  The District Court said in early 2008 in words that would ring true even more:

Difficult, time-consuming, and expensive litigation with uncertain results – such as this case represents – is assuredly not a sensible way to manage the Nation’s retirement system for either employers or employees. Sadly, at least for now, litigation appears to be the only option available to them.

So, what’s the case about? Lawmemo does a good job recapping it here with copies of the briefs filed by the parties:

After CIGNA converted its traditional defined benefit pension plan to a cash balance plan, it issued a summary plan description (SPD) to plan participants. Amara brought a class action claiming that CIGNA failed to comply with ERISA’s notice requirements and SPD provisions. The trial court held for Amara; the 2nd Circuit affirmed. The finding was that the SPD misrepresented the terms of the plan itself. Although CIGNA argued that the plaintiffs failed to show injury, the court found that the participants had shown "likely harm" and that CIGNA had failed to establish harmless error.

The U.S. Supreme Court agreed to hear the case during its 2010-2011 term. The issue to be decided is as follows:

Whether a showing of “likely harm” is sufficient entitle participants in or beneficiaries of an ERISA plan to recover benefits based on an alleged inconsistency between the explanation of benefits in the Summary Plan Description or similar disclosure and the terms of the plan itself.

In other words, what is the proper standard for a court to use to determine whether there should be a recovery for an alleged discrepancy between a SPD and the actual plan itself? It remains to be seen where the court will come out on this but for those employers who converted their pension plans to 401(k) plans, the case will have national significance. 

(In the interests of full disclosure, I should note that I am familiar with one of the named plaintiffs, although I have not discussed the case with her in any detail, nor do I have any role in the litigation.)

The Connecticut Bar Association’s Labor & Employment Section (led by my colleague Joshua Hawks-Ladds) has begun posting its quarterly newsletter online.  I expect to see more of this as the CBA moves to a new website next month.

In the meantime, you can check out the latest issue here.  It features articles on: 

  • Attorneys Fees in Arbitration Proceedings: The Practical Effects of the Second Circuit’s Decision in Reliastar Life Insurance Co.
  • The Standard of Review in ERISA Benefit Denials: Metropolitan v. Glenn in the Second Circuit
  • Can you Recover Exemplary (Double) Damages Under by the FLSA and CMWA? 

Back in February, a federal court in Connecticut dismissed a lawsuit brought by three former wrestlers who contended, among other things, that they were improperly classified as independent contractors.

The case garnered national attention (see, for example, this post by Zach Lowe at The American Lawyer) for a variety of reasons, including the disclosure of the wrestlers contracts. (If you’d like to see the details on the contract, you can view them here.)

But after that, two of the three wrestlers (Scott Levy and Christopher Klucsarits) filed a motion to amend the judgment or otherwise set it aside to allow them an replead (or refile) their claims.  Notably, one of the wrestlers — Michael Sanders — did not join in this motion.

On July 31, 2009, the District Court denied the wrestlers’ motions, finding that even if it allowed the amendments at this late date, such amendments would be "futile". In other words, even if the court allowed the amendment, the wrestlers would STILL lose on the merits.  You can download the decision here. 

The wrestlers contended that they could still make a claim under the federal law governing benefit plans. But the court said that even that claim would fail. 

In the proposed amended complaint, Plaintiffs assert that “they are participants in
defendant [World Wrestling Entertainment, Inc.’s] ERISA plans and are entitled to the full
benefits of such plans.”  However,  this claim relies on the reiteration of Plaintiffs’ argument espoused in the first complaint. Plaintiffs assert that they were unaware of Defendants’ intention to treat them as independent contractors and that an employer-employee relationship developed between themselves and  Defendants.

However, this Court has already rejected Plaintiffs’ argument that their relationship with  defendants evolved to employer/employee status. The Booking Contracts that outline the terms and conditions of the relationship  between WWE and each wrestler specifically stipulate that Plaintiffs are independent contractors.  Furthermore, Plaintiffs cite no authority to support their employer-employee claim and did not show that the Booking Contracts were invalid. Thus, an amendment to assert an ERISA  claim premised upon an employer-employee relationship between Plaintiffs and Defendants  would be futile as it fails to state a cognizable cause of action.

The wrestlers now have the option of appealing the matter to the Second Circuit Court of Appeals.  But given how the district court disposed of the matter, the results of such an appeal may be as preordained as a professional wrestling match.

The slow season of employment law news continues, which makes this a perfect time to roll-out the occasional Quick Takes post to discuss interesting nuggets and updates to recent posts.

The 62 year-old plaintiff was fired from his job as Chief Financial Officer of a shoe importing company. The defendant argued that plaintiff was fired for cost-cutting reasons. The district court thought the jury could only find that cost-cutting was the real reason, not the plaintiff’s age. But the plaintiff produced evidence that he was willing to work for a lower salary and that the corporate vice president repeatedly told the president that plaintiff was too old and that the president capitulated to the vice president’s wishes that plaintiff be terminated. Management had also openly joked about plaintiff’s age on several occasions. Plaintiff was also replaced by a 26 year-old.

  • Will the Employee Free Choice Act pass in the new Congress? World of Work blog suggests that EFCA is not a done deal
     
  • A new blog, Minding the Workplace, made its debut this month.  Written by Suffolk University Law Professor, David Yamada, the target audience of the blog is workplace dignity, bullying and psychological health topics.  It’s worth taking a look at for a different perspective on the issues.
     
  • The New York Law Journal today reports on a new Second Circuit case that enacts a less deferential standard of review under the Employee Retirement Income Security Act where the plan administrator is conflicted because it both evaluates eligibility and pays benefits. In McCauley v. First Unum Life Insurance Co.

Coming tomorrow: A Year-End Wrap Up…

Continuing a theme this week of followups to older posts, back in February the U.S. Supreme Court, in Larue v. DeWolff, ruled that the Employee Retirement Income Security Act (ERISA) allows an employee to sue his employer because of a fiduciary breach that resulted in individual losses to his 401(k) plan.

Some predicted that the "Court’s ruling will result in a slew of meritless litigation from employees whose 401(k) plans aren’t doing as well in a shaky economy."

Yet, I was a bit skeptical of that prediction

Count me in the group as "not yet convinced" and still puzzled whether this will truly impact 401(k) administration.

Why? Because while the court did open the door to more lawsuits — probably on a breach of fiduciary duty claim — on an individual basis, the standard for proving such lawsuits remains the same and still high. Without being too technical, a participant in a breach of fiduciary duty case needs to show, for example, that the plan did not discharge its duties with the same "care, skill, prudence, and diligence" that a prudent person would use under similar circumstances.

So what’s happened since then? The Workplace Law Prof blog reports that there hasn’t been a rush of new cases.  Even the named plaintiff, Mr. Larue, decided to drop his case after determining it was not "financially feasible" to proceed:

You may recall that after the Supreme Court in LaRue v. DeWolff, Boberg, and Associates found that individuals could bring breach of fiduciary claims against their plans for mismanagement of their 401(k) accounts, there were many who predicted that such 401(k) suits would overwhelm the courts and generally spell disaster for the judiciary of this country (I didn’t predict that, but I thought the principle of the holding was an important one).

Now, that coming avalanche of litigation might still happen in some world where the sky is green, but interestingly I just received word from DeWolff, Boberg’s Supreme Court advocate, Tom Gies of Crowell and Moring, that Mr. LaRue has voluntary dismissed his claim in the action recognizing that it was too expensive to proceed.  Yup, that’s right. These claims are now so easy that Mr. LaRue decided he couldn’t proceed.

So, perhaps the next time you hear prognosticators predict that a Supreme Court decision will have a massive impact, view it with a healthy bit of skepticism. Sometimes, it takes some time to determine the real impact of a Supreme Court decision.

UPDATE 10/8/08 – I have posted a FAQ on the lawsuit this morning due to the extraordinary interest in this subject. You can find it here

UPDATE 10/7/08 – Welcome various wrestling fans (who are visiting by the thousands this morning)!  The links to the contracts are below. 

One note to clarify some of the reports on this: These contracts were not "leaked". They were filed by WWE in federal court in Connecticut and are publicly available on the court’s website.  I have merely downloaded them and have them available here since many people don’t know how to access the court system.  If you have any questions or comments, please feel free to use the comment box.

As expected, WWE filed its motion to dismiss (download here) the lawsuit brought by three wrestlers who claimed that they were improperly classified as "independent contractors" and not employees.  (For prior blog coverage, see prior posts here and here.)

The argument is lengthy but fortunately the WWE has prepared a "summary of argument".  The gist of the argument is that the wrestlers don’t have a a legal claim ancourtesy wikipedia commonsd that even if they did, those claims are barred by statute of limitations.  But reading it, one is also left with the impression that WWE’s arguments have been developed over time and nuanced to withstand judicial scrutiny. 

First, … the plain and unambiguous language of the Booking Contracts does not obligate WWE to pay plaintiffs’ taxes or make withholdings to pay such taxes, nor obligate WWE to provide plaintiffs with the “rights, incidents and benefits of employment.” Second, plaintiffs’ unjust enrichment claims fail as a matter of law because all aspects of plaintiffs’ relationships with WWE are governed by their Booking Contracts, including specifically those aspects of the relationship at issue in the present litigation. Third, plaintiffs’ breach of contract and unjust enrichment claims are barred by the applicable statutes of limitation. Fourth, plaintiffs’ state law claims are disguised attempts to create a private cause of action based upon the application of federal and/or state tax law and to circumvent the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001, et seq. …

Fifth, even if plaintiffs sought leave to amend their state law claims as direct claims under ERISA, such an amendment would be futile since their claims must be dismissed for failure to file their Complaint within the applicable limitations period, for failure to allege exhaustion of administrative remedies, and for failure to allege any facts to support standing to bring direct claims under ERISA. Finally, because plaintiffs’ individual claims against WWE fail, plaintiffs cannot, as a matter of constitutional standing, continue to assert putative class claims on behalf of absent class members.

The wrestlers will now have several weeks to respond, though don’t be surprised to see them ask for an extension of time of at least 30 days to respond further to it. 

While the legal brief may be of interest to in-house counsel and others in the entertainment industry, the exhibits to the motion will be of much greater interest to most.  Why? Because the exhibits contain the booking contracts of each of the wrestlers.

Wrestler Scott Levy’s contract in 2000 (download here) appears to be the richest with guarantee minimums of $75,000, $150,000 and $200,000 for the first three years.  By comparison, wrestler Michael Sanders’ contract in 2001 (download here), called for guarantees of $52,000 and $75,000 in the first two years.  And Chris Klucsarits’ contract in 2002 (download here) called for a guarantee of $100,000 in each contract year.   

Wrestling fans may enjoy reading about their favorite wrestlers but for human resource professionals and others, the contracts are useful to read because they show a serious attempt by WWE to keep the wrestlers as independent contractors and not employees. 

In fact, paragraph 13.1 of the agreement specifically addresses this issue. That provision states "WRESTLER is an independent contractor" and "Nothing in this Agreement shall be construed to constitute WRESTLER as an employee…"  Will this be dispositive?  Probably not since parties cannot avoid legal obligations just by language of a contract, but it will be an obstacle for the wrestlers to overcome. 

Who will ultimately prevail? It’s too early to tell, particularly without seeing the wrestlers’ response.  But one thing is certain — even WWE can’t script the outcome to this fight.

A very big day in labor & employment law and ERISA cases at the U.S. Supreme Court this morning  I’ll post more detailed updates as warranted (and when time allows), but for now, here are the brief highlights (H/T ScotusBlog) .

  • In Meacham v. Knolls Atomic Power Laboratory (06-1505), the court was asked to decide, in an ADEA disparate impact suit, whether workers or employers bear the burden of persuasion in determining whether the employment decision was based on “reasonable factors other than age.” The Court concluded that an employer defending a disparate-impact claim under the ADEA bears both the burden of production and the burden of persuasion for the “reasonable factors other than age” (RFOA) affirmative defense under §623(f)(1). The court also rejects a "business necessity" defense for the employer, saying it has no place under ADEA.  For more background on the case, see the ScotusWiki
  • In MetLife v. Glenn (06-923), the Court was asked to whether a claim administrator of an ERISA plan who also funds the plan benefits constitutes a “conflict of interest” that must be weighed in a judicial review of the administrator’s benefit determination. The Supreme Court concluded that it does.  In the court’s view, a plan administrator’s dual role of both evaluating and paying benefits claims creates the kind of conflict of interest referred to in the Firestone case.   That conclusion is clear where it is the employer itself that both funds the plan and evaluates the claim, but a conflict also exists where, as here, the plan administrator is an insurance company.  Again, for more background, see the ScotusWiki.
  • In Kentucky Retirement Systems v. EEOC (06-1037), the Court was asked to decide on the relevance of age as a potential factor in the distribution of retirement benefits to disabled workers establishes a prima facie case of discrimination under the ADEA. In other words, could "pension status" been seen as a proxy for "age". The Court held, under the circumstances of the case, that pension status was not a proxy for age.  in other words, where an employer adopts a pension plan that includes age as a factor, and that employer then treats employees differently based on pension status, a plaintiff, to state a claim under the ADEA, must adduce sufficient evidence to show that the differential treatment was “actually motivated” by age, not pension status.  As usual, the ScotusWiki has the detailed background on the case.  
  • In Chamber of Commerce v. Brown (06-939), the Court was asked to decide whether federal labor law preempted a California state law that barred employers from using state money to influence union organizing campaigns. The Court found that the California law was pre-empted by federal law, meaning, in essence, that the state law cannot be enforced.  Although Connecticut does not have a similar law, it provides a framework for looking at any other proposed legislation that would place limits on the effect of the NLRA.  Background on that case is available from the ScotusWiki here.