Posted by marykeating on July 15, 2010 under Employment benefit issues | 
The Supreme Court will decide an important issue in employee benefits in its next term. Under the federal law that governs employee benefits (ERISA), employees are entitled to get a copy of a summary plan description as well as notification of any important changes to the plan. The summary plan descriptions almost always state that the actual “plan” governs in cases of any differences in language. Although participants in the plan are entitled to obtain the full document upon request, they are not routinely given out without the request. Because pension plan document can easily run more than 100 pages, there are critical differences in language in plenty of cases. The plan amendments are even more difficult to comprehend, sometimes, since they can’t be understood without sitting down with the plan document itself to know how a change to Article IX might affect an employee’s entitlement to disability benefits, for example.
The Supreme Court took this case for a typical reason: different federal circuit courts of appeals used different standards to decide when employees may sue over the discrepancy between the summary plan description and the language of the longer plan. In the case before the Supreme Court, employees charged that CIGNA changed the pension plan, telling employees that it had “enhanced” the plan; in reality, the future benefits available upon retirement would be less favorable. The trial court found that by spinning its communications, CIGNA “wished to avoid the employee backlash likely to result from a thorough discussion of these aspects” of its changes to the plan. Still, the District Court concluded that it could not force the plan to reinstate the old benefits. The employees ask the Supreme Court to make clear that the trial courts are free to provide meaningful remedies for violation of the law.
Posted by marykeating on May 25, 2010 under Employment benefit issues |
The Supreme Court usually ends its term in June with the real blockbuster decisions (though the decision holding that corporations have free speech rights, issued in February, may prove to be the most significant).
Yesterday a unanimous court ruled that the Fourth Circuit was wrong in denying a disability claimant the right to recover attorney’s fees and costs.
I commented on this pending case here, Hardt v. Reliance Standard Life Ins. Co.
The Fourth Circuit denied attorney’s fees to the long-term disability claimant, on the theory that she did not show that she was a “prevailing party.” Her long-term disability carrier had denied benefits, she appealed internally, was denied repeatedly, and finally filed suit. The court found fault with the insurance company’s reasoning, which had ignored much of the available evidence, and ordered it to reconsider. If it failed to reconsider all of the evidence, the court warned that it would enter judgment in favor of the claimant. On reconsideration, the insurance company finally changed its decision and paid the plaintiff her disability benefits. Therefore the only further court proceedings involved the claimant’s attorney fee request, which the trial court granted, and the Fourth Circuit vacated.
The Supreme Court rejected the idea that the claimant had to qualify as a “prevailing party.” That usually means that a judgment is entered in favor of the person. The words of the statute did not require prevailing party status (although many others do). Instead, the Court borrowed from an early case interpreting the Environmental Protection Act (Ruckelshaus v. Sierra Club, 463 U. S. 680, 694 (1983)), and held that “a fees claimant must show ‘some degree of success on the merits’ before a court may award attorney’s fees under §1132(g)(1).” Justice Stevens disagreed with using a different law to guide the interpretation of ERISA, but agreed with the result.
This decision is important to employees who are so often rejected on their first claims for benefits under disability policies. Navigating the requirements for benefit claims can be a major undertaking. The decisionmakers, often the insurance companies that ultimately will pay the benefits, require medical records, interviews, questionnaires, medical tests, and often have short timelines for these requirements. Appeals at the administrative level must be handled with a lot of attention to detail, so that if necessary a federal court can be persuaded that the claimant has the bulk of the evidence on her side. Then, if the claimant is successful, the only damages that ERISA allows are the benefits themselves! The hardship of living without income, the burden of complying with all of the demands of the insurance company, the emotional toll – none of these can be elements of damage in court. But the attorney’s fees and litigation costs are available, IF the claimant “shows some degree of success” on the merits. The Supreme Court cut off an easy escape hatch for the insurance company. It was certain to lose in court if it persisted, and by relenting on the benefits it hoped to deny the claimant attorney’s fees. Her persistence paid off, at least by not costing her additional money for pursuing benefits for which her employer had paid premiums.
Posted by marykeating on April 24, 2010 under Economic situation, Employment benefit issues |
Last week, Congress again extended the reach of the COBRA subsidy. As reported here before, the subsidy was part of the legislation designed to jump start the economy and ease the pain of the unemployed. Instead of paying the full freight of health insurance (plus a two percent administrative fee), the newly unemployed person could pay only 35% of the health insurance premium. The employer paid the rest, and could take an offset from the withholding tax owed to the federal government. In other words, the government pays for the majority of the premium.
This program has been extended not only to last for fifteen months, from the earlier nine, but also applies to those laid off in April or May of 2010. The subsidy is available for people who lose their jobs, not those who quit.
Posted by marykeating on April 22, 2010 under Employment benefit issues |
“People make mistakes.” Says the Chief Justice of the Supreme Court. He’s not talking about himself, but about ERISA plan administrators.
The case of Conkright v. Frommer sees Chief Justice Roberts singing the praises of employee benefit plans that give deference to their administrators to interpret plan provisions, coverage, and other issues. In this case, a pension plan administrator had made a calculation of pension benefits that the court found unreasonable. In their return to court, the pension plan participants objected to the replacement calculation. They urged the trial court to deny discretion to the plan administrator’s new calculation method, and to itself determine the appropriate level of benefits. The trial court agreed, and determined a method of calculating benefits as proposed by the pension beneficiaries.
The Supreme Court overturned the decision, faulting the trial court for not granting discretion to the administrator. In doing so, it expressed with approval the “efficiency” of granting the administrator discretion, since it prevents different courts from having a role, which could lead to different decisions. The opinion omits any benefit to the participants by having impartial courts determining their entitlement to benefits, many of which are paid for by the employees. Under the Court’s majority opinion, the administrator must commit multiple breaches of trust before the court can step in and take away its discretion. In any event, one free mistake is now the rule.
This approach tilts the scale too heavily in favor of the benefit plan trustee. In the pension situation, the trustee ideally attempts to pay out all beneficiaries at the levels promised by the plan, investing the funds prudently yet profitably so that retirement funds are available. In this ideal situation, there are no winners or losers, everyone gets what they should get.
Contrast another common ERISA case subject: the long-term disability plan. In those cases, the employer, with or without employee contribution, pays premiums for a long-term disability policy. Under the policy, an employee is entitled to obtain benefits if she becomes totally disabled. As with all insurance products, the insurance company underwriting the policy is hoping that premiums will outweigh the benefits paid. In many cases, the insurance company is also the administrator of the plan, invested with discretion to decide if someone is disabled, or otherwise qualifies for the benefits. Is there any surprise that long-term disability benefits are frequently denied?
Justice Breyer, who delivered the majority opinion in 2008’s Metropolitan Life Ins. Co. v. Glenn, dissented.
Posted by marykeating on April 17, 2010 under Employment benefit issues |
The Supreme Court will decide a case centering on the award of attorney’s fees in a long-term disability appeal. The Fourth Circuit, which hears appeals from federal courts in Maryland, decided that the successful claimant could not obtain attorneys’ fees from the insurance company. While the case will focus on a narrow provision of one law, ERISA, it has widespread ramifications. The case is called Hardt v. Reliance Standard Life Ins. , and discussed here.
ERISA is the acronym for the Employee Retirement and Income Security Act. This law governs employee benefit plans, including not only pensions but health insurance, life insurance, and long-term disability insurance. Among its provisions is a requirement that the benefit plan offer an internal administrative appeal procedure when claims are denied.
Long-term disability plans are frequently offered as fringe benefits. As many people have found, however, the administrators of these plans can be very suspicious of claims, and may deny benefits to claimants on dubious grounds. The administrators are often the same insurance companies who will pay the claim if they decide the claim is valid. A disabled person can go to court only after “exhausting” the administrative remedies (the word used by the courts is especially appropriate here). Then the court will review the decision of the administrator by comparing the definitions of the plan, the medical evidence, and the administrator’s reasoning. Ordinarily the disabled employee cannot add more information in court, so developing a good administrative record is key. 
Bridget Hardt’s experience followed a path I’ve seen many times. Her injuries and subsequent health issues prevented her from working, according to her and her doctors. The Social Security Administration agreed that she was unable to work and granted her benefits, but the long-term disability plan administrator did not agree. She filed suit under ERISA, and the federal court instructed the administrator to reconsider the evidence. It relented at that point, and gave her benefits through retirement age.
Under ERISA, a court may order a party to pay the other person’s attorney’s fees if the case was successful. These fee-shifting statutes are designed, in part, to encourage attorneys to take cases for people who might not be able to afford representation. The federal court in Ms. Hardt’s case awarded attorney’s fees to her; but the appeals court disagreed, holding that the administrator’s reconsideration did not result in a judgment in favor of the claimant, so Ms. Hardt did not qualify as a prevailing party. In other words, her success on the claim was not the result of a court order telling the administrator to pay the claim.
Because other federal courts have taken the opposite view, and because ERISA cases frequently arise in federal court, the Supreme Court has decided to resolve the question. It would be unfortunate if the Supreme Court takes the narrow view adopted by the Fourth Circuit. It is difficult for someone to battle an insurance company, and sometimes the nature of the employee’s disability makes it even harder to jump through the company’s hoops. A lawyer can be helpful to formulate the arguments and amass the evidence that might lead the insurance company to agree with the person’s doctor that she’s disabled. When the administrator agrees during that administrative process, attorney’s fees are not recoverable. But if they make a federal case out of it, it seems fair to make the insurance company pay for the successful person’s fees, even if the success does not stem from a judgment.
The decision should be issued by the end of June.
Posted by marykeating on April 16, 2010 under Discrimination in employment, Employment benefit issues |
If you were unable to follow the twists and turns of the health care reform effort for the past year, you have my sympathy. I try to hold back and wait until a law has been enacted to study up on it, to avoid confusion. But it could be that even the lawmakers and those that enforce the laws will be playing catch-up to come to grips with new employee protections.
The Patient Protection and Affordable Care Act of 2010 makes changes to the Fair Labor Standards Act and the Family and Medical Leave Act. These changes apply to employers with 200 or more full-time employees. (Warning, this document is 906 pages long, without the “fixes!”)
First, all new hires must be automatically enrolled in a health insurance plan. This requirement is consistent with the underlying goal of enrolling everyone into a health plan so that health insurance companies are not stuck insuring only the sick. The employees may opt out of the coverage (for example, married couples may have two options for couples or family health insurance). This provision is in section 1511 of the new law.
Second, these larger employers have to provide information to the employees about their coverage options and the availability of health insurance exchanges that may provide a more attractive plan.
Third, Section 1558 prohibits retaliation against employees for obtaining a subsidy or tax credit for their health insurance, or for providing information about violations of this new law The fifth provision is particularly strong: retaliation is prohibited against an individual who
objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee (or other such person) reasonably believed to be in violation of any provision of this title (or amendment), or any order, rule, regulation, standard, or ban under this title (or amendment).
Fourth, the law specifically incorporates the nondiscrimination provisions of the civil rights laws, barring discrimination on the basis of age, race, gender, religion, national origin, and disability. It provides that no individual shall “be excluded from participation in, be denied the benefits of, or be subjected to discrimination under” health program or activity if it receives federal financial assistance.
Fifth, and most widely reported, the new health care law, in section 4207, requires employers to allow nursing mothers to pump milk at work. If an employer has more than 50 employees, it must provide a private place (not a bathroom) and time (not necessarily paid) for up to a year after the baby’s birth. Smaller employers may claim an exemption if providing this space and time “would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employer’s business.”
Posted by marykeating on March 24, 2010 under Employment benefit issues, Pending legislation |
Congress keeps tweaking COBRA subsidies to deal with the sustained unemployment rate. In December the COBRA subsidy was extended until the end of February. People eligible for the subsidy will have to pay only 35% of the monthly premium, while the employer pays the rest, and takes the cost of the 65% premium as a credit against withholding taxes. Congress added a month, and has not been trying to extend it further. Last week the House of Representatives passed a bill to extend COBRA subsidies until the end of April. Meanwhile the Senate passed a bill to extend the subsidy period through to the end of 2010. Both bills must be passed by the other house, though it looks as though there will be no problem making the April extension into law in time. American Workers, State and Business Relief Act of 2010.
Posted by marykeating on February 9, 2010 under Employment benefit issues, Uncategorized, disability discrimination |
The Americans with Disabilities Act has faced a formidable battle in achieving its original goals of outlawing discrimination, and improving the employment rates for disabled people. Originally signed into law by the first President Bush, the ADA forbade discrimination against individuals who had a disability, so long as they could perform the essential functions of their job, with or without a reasonable accommodation. One would have predicted that the “reasonable accommodation” language would have led to the most controversy, but in reality, the courts systematically limited the availability of ADA’s protections by narrowing the definition of “disabled,” so few employees qualified.
Congress made some helpful changes last year, specifically legislating around one Supreme Court decision. Yet it remains a difficult law, in part because of the often cited principle that “attendance is an essential function” of nearly every job. So people who are disabled and need a period of recuperation or hospitalization are especially vulnerable when strict attendance policies lead to termination. Often they are told that light duty is not an option (though they report that other people do get light duty), or that they cannot have more leave time.
The EEOC has been pursuing Sears Roebuck for just such a discriminatory policy since 2004. Last week, it reached a large settlement, $6,200,000 with the retailer, which will benefit 235 of its former employees. All 
complained that they were damaged by Sears’ inflexible policy requiring an employee to return to work within one year after an injury, and failed to accommodate their disabilities to enable their return. In addition, Sears is ordered by the Court not to discriminate in the future, must post a notice in its stores for three years explaining the consent decree, and is required to report regularly to the EEOC on the progress of its accommodations of injured employees. The consent decree also alters Sears’ policies of communicating with its disabled employees, and requires a centralized leave management team to oversee the requests for and grants of accommodations.
The success of this litigation may swing the pendulum away from shutting the doors to injured or ill employees. Whether the motivation is fear that the “damaged goods” will never do the job efficiently, that health insurance premiums will rise, or simply to punish the person who has taken “too much” of the sick leave benefits offered, employers will have to watch their policies and practices in light of the Sears decision.
Posted by marykeating on December 25, 2009 under Employment benefit issues |
Yesterday morning, on Christmas Eve, the Senate passed its version of the Patient Protection and Affordable Care Act. Whether the law will be good in the short or long term is now unknown, but it will allow many more people to obtain health insurance who were otherwise considered uninsurable.
And earlier this week, on December 21, the President signed a law extending the COBRA subsidy. The subsidy is available for a maximum of 15 months. As discussed here a few months ago, the COBRA subsidy reduces the premium for the terminated individual to 35% of the full freight; the employer pays the remaining 65%, but receives a dollar-for-dollar credit against withholding taxes, so it’s really just an advance. Employees who were eligible for the original COBRA subsidy can extend their coverage at the reduced cost through February. (These were employees involuntarily terminated between September 1, 2008, and December 31, 2009; now the termination cutoff date is extended through February.) Employees who dropped the coverage as too expensive will be given the option to rejoin the plan.
Posted by marykeating on December 23, 2009 under Employment benefit issues, Maryland wage law |
Workers are entitled to be paid for the hours they work. So, even if they are fired, the employer has to pay for the time spent in its employ. If the worker was pulling a Wally in Dilbert’s company, and working harder on avoiding work than actually doing any work, the employer still has to pay for those hours, and deals with the lack of productivity by firing the “Wally.”
Things get more complicated for other types of compensation. Some people are paid entirely or in large part by commission; others get a significant portion of their annual compensation by bonus. What rights does the departing employee have to commissions for sales brought in before he left? What right does the employee leaving in November have to her year-end bonus, if her numbers were stellar until she was laid off or quit?
The best way to deal with these questions is in advance, with a contract. Highly compensated, gifted salespeople are more likely than other non-union workers to have contracts. The end of the relationship should be addressed in the employment agreement. Unless the employee leaves only because the company goes defunct, there will be some work in progress that may merit commission or partial compensation.
Without a clear provision in the employment contract, the employee should look to the commission structure and any policies that have been written about it. Fortunately, some of the more draconian policies are unenforceable under Maryland law. Consider, for example, a policy that states “no commission is payable unless the employee is currently employed on the date of payment of the commission.” The Maryland Court of Appeals rejected this policy in the case of a salesperson who had performed all of the tasks necessary to earn the commission, other than being present on the date of the payment to him. If the deal has been struck, delivery made, and the client paid the bill, the salesperson has earned that commission. In a structure like this, there will always be some uncompensated work, but when there is nothing left for the sales force to do, the whole commission should be paid. On the other hand, if the salesperson has done only a part of the work to conclude the sale, and someone else must step in to finalize the deal, he can legally be denied the commission.
Questions about bonuses can be murkier. One question is whether anyone should be paid a year-end or Christmas bonus if the worker is no longer employed; another is whether the amount of the bonus can be determined. These questions are related, and usually come down to this: how much of the bonus is based on objective numerical criteria? A court cannot enforce a deal if it has to guess how much a worker’s bonus should have been.
Often, bonuses are paid based on a handful of factors, including the company’s productivity and the worker’s specific goals. Some bonus plans allot a bonus pool to a department, and the manager has the discretion to dole out the bonus among the department members. When an element of subjectivity is allowed to define the amount of the bonus, the unhappy worker cannot mount a claim (unless there is proof that the subjective factor is an illegal one, such as the recipients’ race).
Other bonus plans are almost completely subjective. These may weigh the employee’s attitude and contribution to team spirit, for example. Moreover, they may be intended not just to reward past performance, but to provide an incentive to stay. The amount of these types of bonuses cannot be figured out until they are paid.
On the other hand, if a bonus is based solely on the employee’s performance, then an employee who reached her goals in eleven months should not be deprived of the bonus. This is akin to the commission structure, though it’s paid not on one deal but the year’s effort.
If an employer withholds bonuses or commissions without a genuine dispute about whether it has been earned, the employee is entitled to get attorney’s fees for the enforcement action, and can request the court to double or triple the amount owed, under the Maryland Wage Payment and Collection Act.
Bonus or no, enjoy your end of year holidays.
