In Cantrell v. Briggs & Veselka Company, No. 12-20294 (5th Cir. 2013), the case arose out of an employment dispute between Carol and Patrick Cantrell (the “Cantrells”) and their former employer, Briggs & Veselka Company (“B&V”). The district court held that the Cantrells’ deferred compensation arrangements in their Employment Agreement contracts with B&V constitute a plan under ERISA, so that their state law claims against B & V for the payments due under the Employment Agreement are preempted. The Cantrells appeal.
In analyzing the case, the Fifth Circuit Court of Appeals (the “Court”) said that, to determine whether a particular arrangement qualifies as a plan under ERISA, the Court has devised a three-part test, in which the Court asks whether a plan: (1) exists; (2) falls within the safe-harbor provision established by the Department of Labor; and (3) satisfies the primary elements of an ERISA ’employee benefit plan’–establishment or maintenance by an employer intending to benefit employees. Here, the Court found that the deferred compensation arrangements in the Cantrells’ Employment Agreements do not establish the existence of a plan, so prong (1) is not met and the deferred compensation arrangements are not an ERISA plan. Thus, the Court held that the Cantrells’ state law claims are not preempted by ERISA. It reversed the district court’s decision and remanded the case back to the lower courts.
Why did the Court find that a plan did not exist? The Court said that such existence requires an ongoing administrative program to meet the employer’s obligations. The Cantrells’ deferred compensation arrangements neither involve discretionary decisions, nor explicitly give the employer, B&V, authority to make such discretionary decisions. The amount and duration of payments here is fixed, the amount due does not depend on decisions made in underlying ERISA plans, and the deferred compensation agreements do not reference administrative procedures that must be followed. The Court concluded that, since the Cantrells’ deferred compensation arrangements do not necessitate an ongoing administrative scheme, there is no ERISA plan.