Employees’ mistaken acknowledgment of independent contractor status precludes ERISA and COBRA claims

ERISA and COBRA claims brought by employees against Superior Healthplan, Inc., and Centene Corporation were dismissed by the U.S. District Court for the Western District of Texas, based on an agreement the employees had signed that acknowledged they were independent contractors, not common law employees. The employees were allowed to proceed with claims under the Fair Labor Standards Act (FLSA), however.

The employees had pointed out that their independent contractor status had later been determined to be improper. Therefore, they argued, they were common law employees entitled to participate in the employer’s ERISA plans.

The court agreed that its decision “may appear unfair,” but it explained that, in order to bring an action for benefits under an ERISA plan, the employees had to not only show that they were common law employees, they had to be eligible to receive benefits in accordance with the language of the plan (citing Bauer v. Summit Bancorp, (CA-3), 325 F.3d, 155, 159, 2003.

The plan had been drafted to exclude anyone who signed an independent contractor agreement even if they were later “adjudicated to be a common law employee.” Therefore, individuals who were really company employees could be barred from the employer’s health plan merely because they had previously agreed that they were independent contractors.

The court explained that ERISA has few limitations on who employers may exclude from their plans, and the limitations are primarily for age and length of service. Excluding individuals who are erroneously categorized as independent contractors is apparently allowed by ERISA, according to the court.

SOURCE: Martinez v. Superior Healthplan, Inc., (DC TX), No. SA-16-CV-870-XR, January 23, 2018.
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