Chris Lazarini Examines When Claims Are Preempted by ERISA

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Bass, Berry & Sims attorney Chris Lazarini examined a case questioning when claims are preempted by ERISA. The court applies a two-prong test to determine when claims are preempted:

  1. Does the complaint arise only because of the terms of an ERISA-regulated employee benefit plan?
  2. Does the complaint allege the violation of any legal duty independent of ERISA or the plan terms?

Chris provided the analysis for Securities Online Litigation Alert (SOLA). The full text of the analysis is below and used with permission from the publication.

Kilfoyle vs. Hill, No. 1:19-CV-01831 (N.D. Ohio, 1/10/20)

*ERISA preempts state law claims that duplicate, supplement, or supplant ERISA’s remedies.

**Courts use a two-prong test to determine if a claim is preempted by ERISA — (1) does the complaint arise only because of the terms of an ERISA-regulated employee benefit plan, and (2) does the complaint allege the violation of any legal duty independent of ERISA or the plan terms?

Plaintiff, a registered representative of the Guardian Life Insurance Company of America (“GLICA”), sued Defendant, GLICA, and others (collectively “Defendants”) on multiple claims, including that Defendants denied him the right to fully participate in GLICA’s retirement program. The case was filed in state court, and Defendants removed it to the Court claiming complete ERISA preemption of the retirement program claim and supplemental jurisdiction over the other claims. Plaintiff moved for remand arguing he is an independent contractor, not an employee, and ERISA is not applicable to his claim.

The Court finds Plaintiff’s retirement program claim is not preempted by ERISA and remands the case to the state  court. The Court notes there is a two-prong test to determine whether a retirement plan claim is preempted or not. The first prong is met where a plaintiff complains about the denial of retirement benefits under the terms of an ERISA-regulated employee benefit plan, and the second prong is met where the plaintiff does not allege the violation of legal duties independent of ERISA or the plan’s terms. Referencing Defendants’ Plan Handbook, the Court finds Defendants have not met the first prong of the test because they failed to show that GLICA’s retirement program covered any employees. The only workers covered by the program, the Court explains, are Defendants’ field representatives who, like Plaintiff, are independent contractors, not employees. The Court rejects Defendants’ arguments that Plaintiff should be considered an employee for ERISA purposes because the IRS treats him as such for tax purposes. The Court notes the Supreme Court has found that ERISA’s definition of employee captures only common law employees and finds no basis for making an exception here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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