June 2013 Archives

June 27, 2013

Employment-Supreme Court Rules That Retaliation Claims Under Title VII Must Be Proved By A But-For Reason

The case of University of Texas Southwestern Medical Center v. Nassar, No. 12-484 (S.Ct. 2013), may be summarized as follows. The defendant, a university medical center ("University") that is part of the University of Texas system, specializes in medical education. It has an affiliation agreement with Parkland Memorial Hospital ("Hospital"), which requires the Hospital to offer vacant staff physician posts to University faculty members. Plaintiff Nassan, a physician of Middle Eastern descent who was both a University faculty member and a Hospital staff physician, claimed that Dr. Levine, one of his supervisors at the University, was biased against him on account of his religion and ethnic heritage. He complained to Dr. Fitz, Levine's supervisor. But after he arranged to continue working at the Hospital without also being on the University's faculty, he resigned his teaching post and sent a letter to Fitz and others, stating that he was leaving because of Levine's harassment. Fitz, upset at Levine's public humiliation and wanting public exoneration for her, objected to the Hospital's job offer to Nassan , which was then withdrawn.

Nassan then filed suit, alleging two discrete Title VII violations. First, he alleged that Levine's racially and religiously motivated harassment had resulted in his constructive discharge from the University, in violation of 42 U. S. C. §2000e-2(a). That section prohibits an employer from discriminating against an employee because of such individual's race, color, religion, sex, and national origin (commonly referred to here as "status-based discrimination"). Second, he claimed that Fitz's efforts to prevent the Hospital from hiring him were in retaliation for complaining about Levine's harassment, in violation of 42 U. S. C. §2000e-3(a). That section prohibits employer retaliation because an employee has opposed an unlawful employment practice or made a Title VII charge. The jury at the district court found for University on both claims. The Fifth Circuit Court of Appeals vacated as to the constructive-discharge claim, but affirmed as to the retaliation finding, on the theory that retaliation claims brought under §2000e-3(a)--like §2000e-2(a) status-based discrimination claims--require onlya showing that retaliation was a motivating factor for the adverse employment action, not its but-for cause. Further, it found that the evidence supported a finding that Fitz was motivated, at least in part, to retaliate against respondent for his complaints about Levine. Thus, the Fifth Circuit upheld the jury decision on the retaliation claim.

In reviewing Nassan's retaliation claim, the Supreme Court ruled (5-4) that Title VII retaliation claims must be proved according to traditional principles of but-for causation, not the lessened motivation factor test. As such, the Supreme Court vacated the Fifth Circuit's decision and remanded the case for further proceedings.

June 26, 2013

Employee Benefits-Supreme Court Strikes Down DOMA, Creating Important Considerations For Employee Benefit Plans

The Case. In United States v. Windsor, Executor of the Estate of Spyer, No. 12-307 (S.Ct. 2013), the U.S. Supreme Court struck down §3 of DOMA as being unconstitutional. The case may be summarized as follows.

The State of New York recognizes the marriage of New York residents Edith Windsor and Thea Spyer, who wed in Ontario, Canada, in 2007. When Spyer died in 2009, she left her entire estate to Windsor. Windsor sought to claim the federal estate tax exemption for surviving spouses, but was barred from doing so by §3 of the federal Defense of Marriage Act ("DOMA"). That section-which provides rules of construction for over 1,000 federal laws and the whole realm of federal regulations--defines "marriage" and "spouse" as excluding same-sex partners. Windsor paid $363,053 in estate taxes and sought a refund, which the Internal Revenue Service denied. Windsor brought this refund suit, contending that DOMA violates the principles of equal protection incorporated in the Fifth Amendment. The district court ruled against the United States, finding §3 unconstitutional and ordering the Treasury to refund Windsor's tax with interest. The Second Circuit affirmed. The United States has not complied with the judgment.

Upon reviewing the case, the U.S. Supreme Court first held that it had jurisdiction to consider the case's merits. It then held that §3 of DOMA is unconstitutional as a deprivation of the equal liberty of persons that is protected by the Fifth Amendment. As such, the Supreme Court affirmed the Second Circuit's decision. Presumably, the Treasury will be required to refund Windsor's tax with interest.

Implications For Employee Benefits. Federal laws and regulations provide numerous tax-advantages for and rights to benefits under employee benefits plans which are dependent on an individual being married to or being the spouse of an employee. Individuals, whose marriages could not be recognized for federal law purposes due to§3 of DOMA (such as same-sex marriage partners), were deprived of these advantages and rights. Now that §3 of DOMA has been struck down, these individuals may now enjoy these previously denied advantages and rights, and employers must now consider the effects that this will have on their employee benefits plans. The implications for employee benefit plans from §3 of DOMA being struck will be discussed in future blogs.

June 25, 2013

Employment-Eighth Circuit Rules That Plaintiff Has Offered Sufficient Evidence To Avoid Summary Judgment On His Claim Of Age Discrimination

In Ridout v. JBS USA, LLC, No. 12-3220 (8th Cir. 2013), the plaintiff Lyle Ridout ("Ridout") was appealing the district court's grant of summary judgment to the defendant JBS USA, LLC ("JBS") on Ridout's claim of age discrimination in violation of the Age Discrimination in Employment Act (the "ADEA"). In this case, Ridout, a rendering superintendent at a pork processing plant owned by JBS, was discharged by JBS after an incident arising from an equipment failure, and was later replaced by two employees substantially younger than he. This suit ensued.

In analyzing the case, the Eighth Circuit Court of Appeals (the "Court") noted that the summary judgment will be overturned if Ridout has produced sufficient evidence to allow a rational jury to find in his favor. Upon reviewing the case, Court ruled that Ridout had produced such evidence. The Court applied the McDonnell Douglas test, under which (1) the plaintiff has the burden of establishing a prima facie case of age discrimination, (2) if the plaintiff is successful, the burden of the case shifts to the employer to articulate a legitimate nondiscriminatory reason for its actions, and (3) if the employer succeds, the burden of the case returns to the plaintiff to demonstrate that the employer's proffered reason for its actions is a mere pretext for age discrimination.

Here, the case has reached prong (3). As to prong (2), JBS had met its burden of articulating a legitimate nondiscriminatory reason for Ridout's termination, by offering evidence that the termination was due to his declining performance and insubordination. However, the Court ruled that Ridout has made a sufficient showing that JBS's proffered reasons are a mere pretext for age discrimination, by offering evidence that: (a) he was meeting JBL's expectations as to his performance, (b) termination was not JBL's policy for the type of insubordination of which Ridout was accused, (c) younger employees exhibiting the same or worse conduct as Ridout had been treated more leniently, and (d) a number of older workers were terminated at the same time as Ridout. As a result, summary judgment is avoided, and the Court overturned the district court's decision and remanded the case back to the district court.

June 24, 2013

Executive Compensation-First Circuit Rules That The Committee Administering A Bonus Plan Had The Authority To Determine Whether A Participant Was Terminated For Cause And Therefore Lost His Right To A Bonus

In Weiss v. DHL Express, Inc., Nos. 12-1853, 12-1864 (1st Cir. 2013), the defendant, DHL Express, Inc. ("DHL"), was contesting a jury verdict in the district court in favor of the plaintiff, Jeremy Weiss ("Weiss").

In this case, Weiss's employment at DHL had been terminated, ostensibly for his failure to properly investigate, document, and ameliorate the misconduct of an employee under his supervision. The termination occurred just months before Weiss was to receive a $60,000 bonus. Weiss filed suit to recover the bonus on the grounds that he was terminated without good cause, which under the terms of the bonus plan (the "Plan") entitled him to a full payout. Thus, Weiss had brought a breach of contract claim. The district court allowed the claim to go to a jury, which found for Weiss. DHL appeals the jury verdict.

In analyzing the case, the First Circuit Court of Appeals (the "Court") noted that, under the terms of the Plan, if Weiss was terminated for good cause, he would not be entitled to the bonus. Further, the plain language of the Plan designates DHL's Employee Benefits Committee (the "Committee") as the sole arbiter of whether a Plan participant is terminated for good cause. As a result, whether Weiss was terminated for good cause and thus lost his right to the bonus was a decision within the ambit of the Committee's sole and final decision-making authority. Here, the Committee did in fact determine that Weiss was terminated for good cause. As such, the Court overturned the jury verdict in Weiss' favor.

June 21, 2013

Employment-Seventh Circuit Holds That Plaintiff Makes Out A Case Of Discrimination And Termination In Violation Of The ADA

In Cloe v. City of Indianapolis, No. 12-­1713 (Seventh Circuit 2013), plaintiff Nancie J. Cloe ("Cloe") started working for the City of Indianapolis (the "City") in April 2007. In March 2008, she was diagnosed with multiple sclerosis ("MS"), a chronic, incurable neurological disorder that rendered her disabled and significantly impaired her day­to­day life. On June 29, 2009, the City terminated her, ostensibly for poor performance. Cloe brought this suit under the Americans with Disabilities Act (the "ADA"), alleging that the City (1) discriminated against her because of her disability, (2) failed to reasonably accommodate her disability, and (3) retaliated against her for requesting accommodations for her disability. The district court granted summary judgment to the City, and Chloe appeals.

In analyzing the case, the Seventh Circuit Court of Appeals (the "Court") found that as to allegation (2)-failure to accommodate- Chloe did not identify a reasonable accommodation, such as a parking spot, a printer or a proofreader that Chloe requested or that the City did not provide in a timely manner when Chloe requested it. Thus allegation (2) fails.

As to allegation (3)-retaliation- Cloe has chosen to prove retaliation by using the direct method, under which she must show that (a) she has engaged in a statutorily protected activity, (b) she suffered an adverse action and (c) there is a causal connection between the two. Chloe engaged in a protected activity by requesting reasonable accommodation and was subsequently fired, so (a) and (b) were met. Also, the Court found that (c) was met. A causal connection is found when the plaintiff provides evidence that the protected activity-here requesting reasonable accommodation- was a substantial or motivating factor for the adverse action, here the termination. In this case, Chloe provided this evidence, by showing a close timing between her request and the termination and evidence of hostility towards her. Therefore, allegation (3) survives summary judgment.

As to allegation (1)-discrimination-the Court found that the City forfeited its argument on this allegation by failing to make it in district court. Therefore, allegation (1) survives summary judgment. As such, the Court overturned the district court's summary judgment on allegations (1) and (3), and remanded the case back to the district court to make a determination on those allegations.

June 20, 2013

ERISA-Seventh Circuit Rules That Plaintiff Seeking Health Benefits Could Be Entitled To Monetary, Equitable Relief Under ERISA For Breach Of Fiduciary Duty.

The case of Kenseth v. Dean Health Plan, Inc., No. 11-1560 (7th Cir. 2013), involved the second appeal of plaintiff Deborah A. Kenseth ("Kenseth") in her suit under ERISA against Dean Health Plan, Inc. ("Dean"), her health insurer, seeking a remedy for an asserted breach of fiduciary duty. The district court had twice granted summary judgment in favor of Dean. However, after the district court ruled against Kenseth for the second time, but before Kenseth filed this appeal, the Supreme Court issued its opinion in Cigna Corp. v. Amara, clarifying the relief available for a breach of fiduciary duty under ERISA. Upon reviewing this appeal, the Seventh Circuit Court of Appeals (the "Court") concluded that, under Amara, Kenseth has a viable claim for equitable relief under section 502(a)(3) of ERISA, and it again vacated the district court's decision and remanded the case back to the district court for further proceedings.

In this case, Kenseth's doctor advised her to have an operation to resolve severe acid reflux and other serious health problems that were the result of complications from an earlier surgery. At the time of this operation, Kenseth was covered at work by a health care plan (the "Plan"), which was insured and administered by Dean. Prior to the operation, Kenseth called Dean's customer service number and spoke with a customer service representative. The representative told Kenseth that the operation was covered by the Plan, subject to a $300 co-payment. The representative did not warn Kenseth and she could not rely on the representative's statement about the operation.

The operation was performed on December 6, 2005. On the next day, Dean decided to deny coverage for the operation, and all associated services, based on language in the Plan's Certificate of Coverage. Kenseth was discharged from the hospital on December 10, 2005, but was readmitted from January 14 through January 30, 2006, for complications from the operation, including an infection. Dean denied coverage for the second hospitalization as well. Kenseth was sent a bill for $77,974 for the operation and related services. Kenseth subsequently filed suit against Dean under ERISA, alleging primarily that Dean had breached its fiduciary duty because (1) the customer representative provided Kenseth with wrong information about Plan coverage, (2) Dean failed to provide an authoritive way to obtain a determination as to whether surgery was covered and (3) Dean provide and unclear and misleading Certificate of Coverage for the Plan.

In analyzing the case, the Court concluded-as it did in the first appeal- that the foregoing allegations establish the possibility of a fiduciary breach, so that the case survives summary judgment. The issue now: could Kenseth be entitled to receive monetary damages (to pay the $77,000 plus bill) to make her whole for this fiduciary breach? The Court said the following. In Amara, the Supreme Court significantly altered the understanding of equitable relief available under section 1132(a)(3) of ERISA. Among other things, the Supreme Court indicated that "surcharge" against fiduciary-a monetary remedy- is a potential remedy under that section. The fiduciary could be surcharged only upon a showing of actual harm. This harm might consist of detrimental reliance or the loss of a right protected by ERISA. The district court needs to make a determination as to whether surcharge is available to Kenseth in this case. Surcharge will be available if she can in fact demonstrate that Dean breached its fiduciary duty to her and that the breach caused her damages.

June 19, 2013

Employment-Sixth Circuit Rules That Plaintiff Did Not Make Out A Case Of Age Discrimination Under ADEA

In Marsh v. Associated Estates Realty Corp., No. 12-1594 (6th Cir. 2013), plaintiff Rosemary Marsh ("Marsh") was appealing the district court's order granting summary judgment in favor of defendant Associated Estates Realty Corp. ("AERC"). Marsh sued in the district court after AERC fired her, alleging violations of the Age Discrimination in Employment Act (the "ADEA").

In this case, Marsh was hired as a leasing consultant by AERC in March 2004. Approximately one year later, she voluntarily left her position to pursue employment opportunities elsewhere. She resumed her position with AERC in May 2005. However, Marsh's tenure of employment was shortened when her employment was involuntarily terminated in December of 2007. Marsh was sixty years old when she was initially hired, sixty-one years old when she was rehired, and sixty-three years old when she was terminated. While employed, Marsh had received certain evaluations which were below AERC expectations, and she had violated company policy more than once. Marsh contends that, at the meeting at which she was terminated, it was suggested by an AERC employee that Marsh was getting too old for the job. This suit ensued.

In analyzing the case, the Sixth Circuit Court of Appeals (the "Court") said that, to prevail on an ADEA claim, a plaintiff must prove by a preponderance of the evidence -which may be direct or circumstantial- that age was the "but-for" cause of the challenged employer decision (here the termination). The only evidence of age discrimination here are the suggestions by the AERC employee that Marsh was getting too old. The Court ruled that these suggestions do not constitute direct evidence of age discrimination, primarily since they were made by someone other than a decision maker, or an individual with authority to fire Marsh, at AERC. Also, applying the McDonnell Douglas framework to determine if those suggestions constituted circumstantial evidence of age discrimination, the Court ruled that Marsh failed to meet the requirements of this framework, primarily since AERC rebutted the inference of age discrimination with the evaluations it had made and the violations of company policy it had in its records. As such, given that Marsh had no evidence of age discrimination, the Court concluded that Marsh could not prevail on its ADEA claim, and it affirmed the district court's summary judgment in AERC's favor.

June 18, 2013

ERISA-Fourth Circuit Holds That A Car Crash Occurring When A Plan Participant Drives While Intoxicated Is An Accident For Purposes Of The Plan's AD & D Coverage

In Johnson v. American United Life Insurance Company, No. 12-1381 (4th Cir. 2013), a question arose as to whether accidental death and dismemberment ("AD & D") benefits were payable under a welfare benefit plan (the "plan") to a participant's widow.

In this case, Richard Johnson ("Richard") had participated in the Plan, which provided life insurance and accidental death and dismemberment ("AD & D") benefits through group policies issued by American United Life Insurance Company ("AUL"). When Richard died in a single vehicle crash, his widow Angela Johnson ("Johnson") received life insurance benefits. However, AUL, which also served as administrator for the Plan, refused to pay AD & D benefits. Richard was highly intoxicated at the time of his fatal crash, and AUL concluded that Richard's drunk-driving death was not the result of an "accident" under the Plan. Johnson filed this suit under ERISA, claiming that she was entitled to the AD & D benefits. The district court held for AUL, and Johnson appeals.

The Fourth Circuit Court of Appeals (the "Court") reversed the district court and awarded the AD & D benefits to Johnson. The Court said that the insurance policies underlying the Plan did not define the term "accident", despite its critical importance for determining eligibility for AD & D benefits. Because "accident" is susceptible to more than one reasonable interpretation, the Court construed it against AUL, the drafting party. The Court concluded that a reasonable plan participant under similar circumstances would have understood Richard's alcohol-related crash to be an "accident" under the policy language. Therefore, the AD & D benefits were payable by the Plan.

June 17, 2013

Employment-Fifth Circuit Upholds Dismissal Of Title VII Claim Since The Plaintiff Was Not An Employee

In Juino v. Livingston Parish Fire District No. 5, No. 12-30274 (5th Cir. 2013), the plaintiff, Rachel Juino ("Juino"), was appealing from the district court's dismissal of her claim of sexual harassment under Title VII of the Civil Rights Act of 1964 ("Title VII") and applicable state law. The district court had ruled that Juino, a volunteer firefighter, was not an "employee" within the meaning of Title VII or applicable state law, and thus could not bring a claim thereunder. The question for the Fifth Circuit Court of Appeals (the "Court"): was Juino an employee of the Fire District?

In analyzing the case, the Court said that - to determine employee status-it would apply the "threshold-remuneration test", which generally requires a volunteer to show, as an initial matter, that he or she was receiving remuneration, before the court proceedes to determine whether the individual is an employee under a common law agency test (as opposed to the position taken by other courts that absence of remuneration is only one factor in determining employee status). Remuneration may consist of either direct compensation, such as a salary or wages, or indirect benefits that are not merely incidental to the activity performed.

The Court noted that Juino contends she received remuneration, since she received the following benefits while working at the Fire District: $2.00 per fire/emergency call; a life insurance policy; a full firefighter's uniform and badge; firefighting and emergency response gear; and firefighting and emergency first-response training. The Court said, however, that the foregoing items do not amount to significant indirect benefits that constitute remuneration. As such, Juino did not receive any remuneration from the Fire District. Therefore, she was not an employee and could not bring a claim under Title VII or applicable state law. Accordingly, the Court upheld the district court's dismissal of Juino's claim.

June 14, 2013

Employment-Sixth Circuit Rules That Employee Who Voluntarily Leaves Employment Does Not Have An FMLA Claim

In Miles v. Nashville Electric Service, No. 12-6028 (6th Cir. 2013) (Unpublished Opinion), plaintiff Miles was alleging that her former employer, defendant Nashville Electric Service ("NES"), interfered with her rights under the Family and Medical Leave Act ("FMLA") in connection with Miles's resignation from NES in May 2011.

In this case, Miles suffered a psychotic break in April 2011 for which she was hospitalized, and for which she took medical leave under the FMLA. The day after returning to NES from her medical leave, Miles informed her supervisor that she would not be coming back to work, and she submitted a resignation letter. Although Miles sought to rescind her resignation three days later, NES refused to reinstate her. Miles then brought this action, contending that her resignation was coerced and that NES did not fulfill its duty under the FMLA to determine whether Miles was requesting further medical leave following her return to work. The district court granted summary judgment to NES, finding that the evidence demonstrated that Miles voluntarily quit her job, and that NES had no duty under the FMLA to second-guess her decision to resign. Miles appeals the decision.

In analyzing the case, the Sixth Circuit Court of Appeals (the "Court") noted that to invoke the protection of the FMLA, an employee must provide notice and a qualifying reason for requesting FMLA leave. Nothing in the statute places a duty on an employer to affirmatively grant FMLA leave in the absence of this notice. In this case, all of the evidence indicates that Miles communicated to NES that she wanted to resign, not take medical leave, and that she made this decision voluntarily, without any coercion. Accordingly, NES did not have a duty to inquire as to whether Miles was requesting leave for a potentially FMLA-qualifying reason. Thus, NES did not violate any of its duties under the FMLA. As such, the Court concluded that the district court was correct in granting summary judgment to NES, and it affirmed the decision.

June 13, 2013

Employment-Second Circuit Rules That Plaintiff's Claims Of Gender Discrimination and Retaliation Under New York City Human Rights Law Survive Summary Judgment

In Mihalik v. Credit Agricole Cheuvreux North America, Inc., Docket No. 11-3361-cv. (2nd Cir. 2013), plaintiff Renee Mihalik ("Mihalik") sued her former employer, defendant Credit Agricole Cheuvreux North America, Inc. ("Cheuvreux"), alleging that her supervisor ran the office like a "boys' club," subjecting her to sexually suggestive comments and twice propositioning her for sex. She alleges that when she refused his sexual advances, he retaliated by berating her in front of other employees and ultimately firing her. Mihalik asserted claims of gender discrimination and retaliation under the New York City Human Rights Law (the "NYCHRL") (N.Y.C Admin. Code § 8-107(1)(a), (7)). The district court granted summary judgment to Cheuvreux, dismissing the complaint.

The Second Circuit Court of Appeals (the "Court") reviewed the case, and concluded that the district court erred in its application of the NYCHRL, primarily since it applied the NYCHRL with analogy to federal law even though the New York City Civil Rights Restoration Act of 2005 (the "Restoration Act") requires a separate, independent and more employee friendly analysis from and than federal law. The Court found that Mihalik presented sufficient evidence to show there are genuine disputes of material fact regarding both her claims under the NYCHRL. Consequently, the Court vacated the district court's judgment and remanded the case back to the district court for trial.

June 12, 2013

Employment-Sixth Circuit Rules That Plaintiff Raises A Genuine Issue As To Whether A Deaf Individual Is Qualified To Be A Lifeguard for ADA Purposes

In Keith v. County of Oakland, No. 11-2276 (6th Circuit 2013), plaintiff, Nicholas Keith ("Keith"), a deaf individual, filed suit alleging that defendant Oakland County had discriminated against him on the basis of disability in violation of the Americans with Disabilities Act ("ADA"), when it failed to hire him as a lifeguard. The district court granted Oakland County's motion for summary judgment, and Keith appeals.

In this case, Keith has been deaf since his birth in 1980. After completing courses and obtaining his lifeguard certification, Keith applied for a lifeguard position at Oakland County's wave pool. He was offered a position as lifeguard, subject to his passing a medical exam. The doctor would not unconditionally pass Keith because he was deaf, and the offer of the lifeguard position was revoked by Oakland County. This suit ensued.

In analyzing the case, the Sixth Circuit Court of Appeals (the "Court") said that, to establish that an ADA violation has occurred, a plaintiff must show (among other things) that he is qualified for the sought-after position, either with or without reasonable accommodation. To be so qualified, the plaintiff must be able to perform the position's essential functions, even if reasonable accommodation is required. With regard to the lifeguard position-which involves supervising water activities and lifesaving- Keith has presented evidence, including expert testimony, from which a jury could reasonably find that he can communicate effectively despite his deafness, and that he can otherwise perform the duties required of a lifeguard with reasonable accommodation. Here, at the summary judgment stage, genuine issues of material fact exist regarding whether Keith is qualified to be a lifeguard at Oakland County's wave pool, with or without reasonable accommodation and therefore able to bring a suit based on an ADA violation. Therefore, the Court concluded that the district court's summary judgment was not appropriate. Accordingly, the Court reversed the district court's judgment and remanded the case back to the district court for further proceedings.

June 11, 2013

Employment-Seventh Circuit Rules That Plaintiff Has Established A Case Of Hostile Environment Under Title VII

In Hall v. City of Chicago, No. 11-3279 (7th Cir. 2013), plaintiff, Anna Hall , was a female plumber working in the House Drain Inspectors Division of Chicago's Department of Sewers, in which all other nonsupport staff employees were male. Her complaint alleges that her supervisor, Gregory Johnson, created a hostile work environment under Title VII. Hall argues that, because she was female, Johnson assigned her menial work, prohibited her coworkers from interacting with her, and subjected her to verbal violence. The district court granted summary judgment to the defendant, the City of Chicago, after concluding that: (1) Johnson's conduct was not hostile particularly in comparison to other employees' responsibilities and (2) Hall had failed to produce evidence that Johnson's conduct was because of her sex.

The Seventh Circuit Court of Appeals (the "Court") reversed the district court's decision and remanded the case back to the district court. The Court concluded that a jury could infer, from the totality of the situation, that Johnson's deliberate isolation of Hall was sufficiently pervasive to constitute a hostile work environment in violation of Title VII. On the much closer question of whether Hall's gender played a part in Johnson's actions, the Court ruled that sufficient evidence to that effect can arguably be deduced from Johnson's comments.

June 10, 2013

ERISA-Ninth Circuit Rules That The Moench Presumption Of Prudence Does Not Apply When The Plan Does Not Require Or Encourage The Investment In Employer Stock

In Harris v. Amgen, No. 10-56014 (9th Cir. June 4, 2013), the plaintiffs, who were current and former employees of Amgen, Inc., and an Amgen subsidiary, were appealing the dismissal of their ERISA class action case by the district court. The plaintiffs had alleged that the defendants had breached their fiduciary duty under ERISA with respect to two employer-sponsored retirement plans (the "Plans"), both employee stock ownership plans which were individual account plans. They claimed that the breach resulted from the defendants continuing to offer for investment, by the Plans' accounts, a fund holding employer stock, when they knew or should have known that the stock was being sold at an artificially inflated price due to material omissions and misrepresentations, as well as illegal off-label sales, and the price of the stock later fell.

The Ninth Circuit Court of Appeals (the "Court") reversed the dismissal. It held, among other things, that (1) the Moench Presumption of prudence (adopted by the Court for the Ninth Circuit in Quan v. Computer Sciences Corp.), which could apply when a plan offers investment in an employer stock fund, did not apply here since the terms of the Plans did not require or encourage the defendant fiduciaries to invest the Plans primarily in employer stock, but merely permitted such investment, and (2) in the absence of the Moench Presumption, the plaintiffs sufficiently alleged violation of defendants' fiduciary duties regarding the Plans.

June 7, 2013

Employment-Eighth Circuit Rules That An Employee Who Has Epileptic Seizures At Work Does Not Qualify To Bring An ADA Claim

In Olsen v. Capital Region Medical Center, No. 12-2113 (8th Cir. 2013), the district court granted summary judgment against the plaintiff, Adrea Olsen ("Olsen"), on her claim (among others) of violation of the Americans With Disabilities Act (the "ADA"), and Olsen appealed.

In this case, Olsen was employed by the Capital Regional Medical Center ("CRMC") as a mammography technician. Olsen, who has epilepsy, suffered numerous seizures at work. After Olsen was unable to reduce her seizures with CRMC's office accommodations, CRMC placed Olsen on unpaid administrative leave. CRMC offered to reinstate Olsen after learning Olsen was taking medicine that successfully controlled the seizures. Olsen refused this offer and CRMC eventually terminated her. Olsen then brought this suit claiming an ADA violation.

In analyzing the ADA claim, the Eighth Circuit Court of Appeals (the "Court") noted that, to succeed in a claim of ADA violation, the plaintiff must, among other things, be disabled and be a "qualified individual", that is one who, with or without reasonable accommodation, and despite the disability, can perform the essential functions of her position.
The Court found it undisputed that Olsen was disabled, because Olsen suffered from seizures which, when occurring, incapacitated her and prevented her from performing her job duties. But the Court held that Olsen failed to establish that she is a "qualified individual" for ADA purposes. Even with the CRMC's attempted accommodations, Olsen still suffered from numerous seizures. An essential function of Olsen's job included insuring patient safety. Nothing in the record establishes Olsen could adequately perform that function during the indefinite periods in which she was incapacitated. A hospital need not subject its patients to potential physical and emotional trauma to comply with its duties under the ADA. The Court concluded that, since Olsen was not a qualified individual to perform the job duties with or without accommodation, the district court did not err in granting summary judgment to CRMC on Olsen's ADA claim.

June 6, 2013

ERISA-Sixth Circuit Denies Claim For Higher Pension Benefits Based On Equitable Estoppel

In Stark v. Mars, Inc., No. 12-3956 (6th Cir. 2013) (Unpublished Opinion), for five months in 2009, plaintiff Virginia Stark ("Stark") received benefits that were more than double what she was entitled to receive under her pension plan. She brought suit under ERISA to estop Mars Inc. U.S. Benefit Plans Committee ("the Committee") from thereafter paying Stark her actual benefits instead of the higher benefits, on the grounds of equitable estoppel. The district court granted summary judgment against Stark, and Stark appealed.

In this case, Stark worked for Mars, Inc. ("Mars") from 1982 to 2004, and was a participant in its Associate Retirement Plan (the "ARP") by the time of her retirement in 2004. In August 2008, the Committee informed Stark that she had an account balance in the ARP of $378,763.58, which she could draw from at any time. On a website for the ARP, Stark received various estimates for her payout options, based on the foregoing account balance, including an estimate of $5,365 per month if she selects a five-year-certain annuity. Stark confirmed this amount by placing several calls to the Mars Benefits Service Center and receiving a number of benefit statements. The statements did include a disclaimer that Mars reserves the right to correct any errors, should the estimates on the statements conflict with properly calculated amounts.

Stark elected the five-year certain annuity option on February 24, 2009, on a form in which she acknowledged that she understood the disclaimers on the benefit statements. Stark collected monthly payments of approximately $5,365 beginning in March 2009 and running through July 2009. However, the Committee determined that a programming error in its software had resulted in an excessively high calculation for ARP participants. Stark's monthly payment was recalculated to be about $2,303. When told of the recalculation, Stark filed a claim with the Committee, seeking to continue the monthly payments of $5,365. When the Committee denied the claim, Stark brought this suit under ERISA, on the grounds that equitable estoppel compels the Committee to continue the monthly payments in the requested amount.

In analyzing the case, the Sixth Circuit Court of Appeals (the "Court") stated that an equitable estoppel claim under ERISA consists of the following elements: (1) conduct or language amounting to a representation of material fact; (2) the party to be estopped must be aware of the true facts; (3) the party to be estopped must intend that the representation be acted on, or the party asserting the estoppel must reasonably believe that the party to be estopped so intends; (4) the party asserting the estoppel must be unaware of the true facts; and (5) the party asserting the estoppel must reasonably or justifiably rely on the representation to his detriment. And when-as here-an equitable-estoppel claim arises in the context of an unambiguous pension plan, a plaintiff must further demonstrate: (6) a written representation; (7) plan provisions which, although unambiguous, did not allow for individual calculation of benefits; and (8) extraordinary circumstances in which the balance of equities strongly favors the application of estoppel. The Court found that Stark did not establish all of these elements. In particular Stark did not establish element (2), since the Committee made an honest mistake without actual knowledge of it, or element (5), as Stark did not change her lifestyle or spending habits or otherwise detrimentally rely on the estimates of her benefit. As such, the Court affirmed the district court's summary judgment against Stark.

June 5, 2013

ERISA-Second Circuit Rules That Plaintiffs Need Not Exhaust Administrative Remedies To Seek Declaration Of Their Rights To Benefits Under ERISA

In Kirkendall v. Halliburton, Inc., Docket No. 11-2733-cv (2nd Cir. 2013), the plaintiffs had brought suit under ERISA, seeking clarification of benefits to which they might be entitled. The district court dismissed the plaintiffs' case, on the grounds that the plaintiffs had failed to exhaust their administrative remedies. The plaintiffs appealed. The Second Circuit Court of Appeals (the "Court") held that, when a plaintiff reasonably interprets a plan's terms not to require exhaustion of her administrative remedies, and does not exhaust her remedies as a result, she is not required to exhaust her administrative remedies. As such, the Court vacated the district court's dismissal of the case, and remanded the case back to the district court.

In this case, the plaintiffs brought suit under ERISA, to clarify the amount of the benefit they would receive under a pension plan if they retired early. However, the plaintiffs filed this suit without first availing themselves of the procedure described in the plan documents for "benefits claims". The plaintiffs argued that the plan documents did not have a procedure for filing a claim for clarification of future benefits. The Court found that the plan's terms were ambiguous on this matter. It concluded that the plaintiffs reasonably interpreted the plan terms to not require them to file a benefits claim. As such, under case law, plaintiffs were not required to exhaust administrative remedies in pursuing their claim under ERISA of clarifying their benefits .

June 4, 2013

Employee Benefits- DOL Releases Final Rules On Wellness Programs

According to a May 29 News Release, the U.S. Departments of Health and Human Services, Labor and the Treasury have issued final rules on employment-based wellness programs. The new rules may be found here.

The final rules continue to support participatory wellness programs, which generally are available without regard to an individual's health status. These include programs that reimburse for the cost of membership in a fitness center; that provide a reward to employees for attending a monthly, no-cost health education seminar; or that reward employees who complete a health risk assessment, without requiring them to take further action.

The rules also outline standards for nondiscriminatory health-contingent wellness programs, which generally reward individuals who meet a specific standard related to their health. Examples of health-contingent wellness programs include programs that provide a reward to those who do not use, or decrease their use of, tobacco, or programs that reward those who achieve a specified health-related goal, such as a specified cholesterol level, weight, or body mass index, as well as those who fail to meet such goals but take certain other healthy actions.

The News Release says further that the final rules ensure flexibility for employers by increasing the maximum reward that may be offered under appropriately designed wellness programs, including outcome-based programs. The final rules also protect consumers by requiring that health-contingent wellness programs be reasonably designed, are uniformly available to all similarly situated individuals and accommodate recommendations made at any time by an individual's physician, based on medical appropriateness. The final rules will be effective for plan years beginning on or after Jan. 1, 2014.

June 3, 2013

ERISA-Seventh Circuit Rules That A Release Of Claims Signed By A Former Employee In Exchange For A Severance Package Is Valid And Enforceable

In Hakim v. Accenture United States Pension Plan, No. 11-3438 (7th Cir. 2013), the Court faced the question of whether a release of claims signed by a former employee in exchange for a severance package (the "Release") is valid and enforceable.

The plaintiff, Omar Hakim ("Hakim"), was an employee of Accenture LLP (the "Company") for nearly ten years, before being let go as part of a workforce reduction in 2003. During part of his tenure with the Company, he participated in the Company's pension plan (the "Plan"). In 1996, the Company amended the Plan to exclude a number of employees in various departments. Hakim remained eligible to participate in the Plan when the amendment was adopted, but in 1999 he was promoted to a position in which he was excluded from Plan participation under the 1996 amendment.

Upon his termination from the Company in 2003 when he was 39 years old, Hakim signed the Release, in exchange for separation benefits that waived any and all claims that arose prior to signing the Release. In 2008, while he was employed elsewhere, Hakim sought additional pension benefits from the Plan, arguing that the notice of the 1996 amendment to the Plan (which was emailed to employees) was insufficient and therefore violated ERISA's notice requirements(in ERISA Section 204(h)). After his claim was denied by the Company, he brought this suit in district court. The district court granted summary judgment in favor of the Company, holding that Hakim knew or should have known about his claim when he signed the Release, and thus waived his claim.

Upon reviewing the case, the Seventh Circuit Court of Appeals (the "Court") said that it agreed with the district court. The Release purports to cover "any and all claims of any nature whatsoever, known or unknown, which you now have, or at any time may have had" against the Company. Since Hakim knew or should have known about his Section 204(h) claim when he signed the Release, the Release is valid and enforceable. ERISA's anti-alienation rules does not make the Release invalid, since Hakim's claim is for additional Plan benefits to which he is not entitled under the Plan's terms (here additional benefits are sought due to failure to provide proper notice under Section 204(h)). Hakim signed the Release voluntarily and knowingly. Therefore, the Court affirmed the district court's summary judgment.