In Scruggs v. ExxonMobil Pension Plan, No. 08-6145 (10th Cir. 2009), the plaintiff, Barbara Scruggs, performed secretarial services for ExxonMobil for twenty-two years until her office in Oklahoma was closed in 2005. During the entire time she worked for ExxonMobil, the plaintiff was never on ExxonMobil’s payroll. Instead, she was paid for her services by a third-party contractor, or was paid directly by ExxonMobil as an independent contractor. After the Oklahoma office closed, the plaintiff filed this action under ERISA, seeking retroactive pension benefits allegedly owed to her under the ExxonMobil Pension Plan (“the Plan”). Since the plaintiff was never on ExxonMobil’s payroll, the plan administrator of the Plan (the “Plan Administrator”) denied her claim for benefits. The Plan Administrator determined that the plaintiff was not a “covered employee”, or even an “employee”, within the meaning of the Plan, so that she was ineligible for the benefits being claimed. The district court granted summary judgment for the Plan. The case found its way to the Tenth Circuit.
In analyzing the case, the Court noted that the Plan documents explicitly state that the Plan Administrator is vested with full and final discretionary authority to determine eligibility for benefits, and to construe and interpret the terms of the Plan as they apply to any participant or beneficiary. Due to this language in the Plan documents, the Court must review the Plan Administrator’s decision to deny benefits under the deferential arbitrary-and-capricious standard, as opposed to the de-novo standard.
In reviewing the Plan Administrator’s decision to deny the benefits, the key issue is the meaning of the term “covered employee”, as used by the Plan. The Court determined that this term means a full-time employee of ExxonMobil, who is compensated in U.S. dollars and is regularly stationed in the United States or Canada. However, the term “employee” itself is not specifically defined in the Plan. The question then becomes the reasonableness of the Plan Administrator’s determination that the plaintiff is not an employee. Here, the Plan Administrator had interpreted the term “employee” to be limited to individuals on ExxonMobil’s payroll, a category that does not include all persons who might be considered employees under ERISA. This limit does not violate ERISA. Given the evidence presented-generally the set up of the company’s payroll and accounts payable systems and employee communications- the Court determined that this interpretation was not arbitrary or capricious. Therefore, the Court ruled that the Plan Administrator’s denial of benefits, on the ground that the plaintiff was not a “covered employee”, was not arbitrary and capricious, and upheld the summary judgment for the Plan granted by the district court.