Benefits claim of employee who claimed prior misclassification was preempted by ERISA

Granting dismissal of an employee’s (who was a former independent contractor) claim that his prior misclassification resulted in denial of the value of the benefits plan he would have received had he been properly classified, the federal district court in Massachusetts found that this portion of his claim was preempted by ERISA. The state law causes of action under the Massachusetts independent contractor law “related to” the employee benefit plans covered by ERISA, concluded the court, citing First Circuit precedent supporting preemption.

Started as an independent contractor.

Although the employee was ultimately classified as an employee of Restoration Hardware in May 2014, he began working for the company doing store maintenance as an independent contractor in April 2013. In his amended complaint, he sought wages, reimbursement for expenses, and the value of benefits under the employer’s benefits plan that he would have received had he been classified as an employee. Restoration Hardware moved to dismiss only his claim for benefits, arguing it was preempted under ERISA.

Did his claims “relate to” ERISA benefit plans?

And the court agreed. It was undisputed that the benefit plans were covered by ERISA, so the issue came down to whether the state law causes of action that the now-former employee asserted “relate to” the employee benefit plans covered by ERISA. Three categories of state laws “relate to” ERISA plans, the court explained, to the extent that they are preempted: (1) state laws that mandate employee benefit structures or their administration, (2) state laws that bind plan administrators to a particular choice, and (3) state law causes of action that provide “alternative enforcement mechanisms” to ERISA’s enforcement regime.” The third category was the issue here.

“Alternate mechanism for obtaining ERISA plan benefits.”

The operative precedent was a First Circuit decision from 2000: Hampers v. W.R. Grace & Co., Inc., which reasoned that the failure to include an employee in the employer’s benefit plan was the basis both for that employee’s state law contract claim and his ERISA-benefits claim, which the First Circuit said “suggests that the state law claim is an alternative mechanism for obtaining ERISA plan benefits.” Because that employee, in trying to prove that the employer behaved wrongfully, “relied on the terms of” the underlying benefit plan, the First Circuit ruled that his claim was preempted, because “a cause of action ‘relates to’ an ERISA plan when a court must evaluate or interpret the terms of the ERISA-regulated plan to determine liability under the state law cause of action.” Plus, that employee also measured his damages by reference to the benefit plan, and the First Circuit had held that ERISA preempted state law causes of action for damages where the damages must be calculated using the terms of an ERISA plan.”
Also weighing on the court was its own decision in Remington v. J.B. Hunt Transport, Inc., in which the employees also filed claims under the Massachusetts independent contractor statute and the Wage Act, contending that their wrongful misclassification as independent contractors damaged them as to the benefits to which they would have been entitled had they been classified as employees. In that case, the court ruled that the benefits-related portion of the claim was preempted. Although the employee here cited precedent from other circuits holding that a complaint that merely requires reference to the terms of an ERISA-covered plan to determine damages is not preempted by ERISA, the court said that until the First Circuit revisits its view as articulated in Hampers, however, it was bound to follow it.

SOURCE: Lavery v. Restoration Hardware, Inc., (D. Mass.), No. 17-10856, March 28, 2018.
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