Opinion
CIVIL ACTION NO. 97-1164
February 4, 2003
RULING
A bench trial in this Employee Retirement Income Security Act ("ERISA") dispute began on July 9, 2002 and ended July 12, 2002. Having considered the admissible evidence, the credibility of the witnesses' testimony, the arguments of counsel presented at trial, and the relevant law, this Court grants judgment in favor of the Georgia Gulf Corporation ("Defendant") and against Joseph Braud and C.J. Lorio, ("Plaintiffs") for the reasons more fully explained below.
I. FACTUAL BACKGROUND AND SUMMARY OF ARGUMENTS
Defendant operates a petrochemical facility (the "Plant") in Plaquemine, Louisiana. Like many members of the petrochemical industry, Defendant chooses to staff certain functions at the Plant by contracting labor out under cost-plus arrangements to independent companies ("contractors") who specialize in performing certain tasks, such as maintenance. Among the maintenance contractors engaged by Defendant at various times were Gulf Coast Engineers ("Gulf Coast") and Master Maintenance. It is not uncommon for contractors to be engaged by multiple members of the petrochemical industry, and both Gulf Coast and Master Maintenance provided services to entities other than Defendant even though Defendant's contracts with these two contractors represented a large proportion of their respective business.
The maintenance contracts between Defendant and its contractors could be terminated for cause, or upon 24 hours notice by either party. Although many of the contractors participated in contracts with Defendant for long periods of time and Gulf Coast's successor Master Maintenance still provides maintenance for Defendant, changes in contractors did occur. The terms of the contracts between Defendant and its contractors were renegotiated year to year, and arranged for work on an as-needed hourly basis plus a mark-up and profit rate. Among the items expected to be included in the mark-up and profit rate is overhead expenditures, such as accounting and contract management functions. The contractors maintain general offices, secretarial and accounting staff, and some tools and equipment off the Plant premises that are used in performing the contract, although the Defendant provides office space, supplies, clerical support, equipment and some tools to individual contractor employees directly at the Plant. All of Defendant's contractors maintain their own internal hierarchy at the Plant, and the general procedure for a particular contract employee to report any issues arising from his work is to his contractor foreman or contract supervisor.
Additionally, contractors are generally free to hire, pay, and fire or reassign their employees provided that doing so does not alter the negotiated contract terms by adding additional employee classifications, and there is sufficient evidence to suggest that the contractors did just that as some contractor employees were terminated without Defendant's input and some were paid more than the negotiated contract rates. However, in this case, there was significant interface between Defendant's maintenance supervisors and the line contractor employees, and one of Defendant's maintenance supervisors, Sam Sances, requested information from contractors that would ordinarily not be appropriate — such as how contract rate increases would be allocated. Apparently, Sam Sances' interference with the inner workings of contractors and their management of their own contract employees was perceived as so oppressive, that one contractor, Gulf Coast, obtained a legal opinion to "brush him back" in 1991. It was undisputed by the parties that this letter served its intended purpose.
Both Defendant's regular employees and contract employees work the same hours, take the same lunches, and are subject to emergency recalls. Defendant employs some of its own employees in the same capacity as the employees of contractors on the maintenance contracts, and individual contractor employees frequently remain at the Plant for long periods of time — changing employers when contractors sold or quit providing maintenance service to Defendant. Defendant supplies contract employees with safety training and procedures to perform certain tasks, and requires the submission of written reports detailing the status of work.
Plaintiff Joseph Braud began working at the Plant in 1982 as a contract employee of Gulf Coast, and rose in seniority at Gulf Coast until he was supervising other contract employees at the Plant. As a supervisor for Gulf Coast, he interviewed, hired, and fired contract employees for Gulf Coast who worked at the Plant. Additionally, the owner of Gulf Coast, Boolus Boohaker, frequently interfaced with Defendant's employees in order to manage and renegotiate the maintenance contract as did Norman Deumite, the owner of Master Maintenance.
In 1992, Gulf Coast sold its contract to Master Maintenance, and Gulf Coast employees were encouraged to fill out applications for employment with Master Maintenance so that they could continue working at the Plant. Plaintiff Joseph Braud was among one of those employees and he continued working at the Plant as a Master Maintenance employee until 1997.
Plaintiff C.J. Lorio was employed at the Plant as a Gulf Coast employee in 1988 and, like Plaintiff Joseph Braud, transferred to Master Maintenance when it bought Gulf Coast's maintenance contract in 1992 when he was interviewed and hired by Plaintiff Joseph Braud. Plaintiff C.J. Lorio remained working at the Plant in that capacity until 1995.
Contractor employees like the Plaintiffs receive their paychecks from their respective contractors, file their state and federal tax forms as employees of their respective contractors, and were never told or believed that they were actually employees of Defendant. Conversely, Defendant paid its regular employees directly and processed the relevant tax forms for its regular employees. Additionally, contractors offer benefits directly to their respective employees. It is undisputed that the benefits offered by the contractors to their employees pale in comparison to the benefits offered by Defendant to its own employees.
Among the benefits that Defendant offers to its own employees are the Salaried Employee Retirement Plan and the Savings and Capital Growth Plan (the "Plans"). In order to participate in the Plans, one must be an "eligible employee" of Defendant. The definition in the Plans for "eligible employee" excludes "leased employees" unless the "leased employee" becomes a "common law employee" of Defendant. Although the definition of "common law employee" is a legal definition, subject to de novo judicial review, the Plans grant discretionary authority to the Plan Administrator to interpret the provisions of the Plans. No contractor employee has ever been determined by the Plan Administrator to be eligible to participate in the Plans.
See Penn v. Howe-Bakers Eng'rs. Inc., 898 F.2d 1096, 1100 (5th Cir. 1990).
In order for the Plans to maintain their tax exempt status, they must comport with the non-discrimination rules under section 401 of the Internal Revenue Service Code (the "non-discrimination rule." The non-discrimination rule forbids employers wishing to maintain tax exempt status for their benefit plans to exclude more than 30 percent of its non-management employees from participation in those plans if all of the employer's highly compensated workers are included in the plans. Seeing that some employers might be tempted to avoid the strictures of the non-discrimination rule by contracting out positions to employment agencies that were usually filled by their own employees, Congress passed the "leased employee" rule. See Standard Federal Tax Reports, 3766, CCH; 26 U.S.C. § 414 (n). The "leased employee" rule requires the employer to include any leased employees in making its non-discrimination calculations. See 26 U.S.C. § 414 (n)(2).
Plaintiffs submitted credible evidence suggesting that Defendant undercounted the number of contractor employees present at the plant in 1988, 1995, 1996 and 1997. The Court finds that these undercounted employees would most likely be considered leased employees according to the relevant Internal Revenue Service ("IRS") rules.
On January 23, 1996, Plaintiffs notified Defendant, through counsel, of their intent to make a claim for benefits under the Plans. In July of 1996 Plaintiffs submitted, through counsel, a formal claim for benefits. This claim was denied by the Plans' Administrator on September 5, 1996. Plaintiffs appealed this denial on November 6, 1996, and Defendant denied Plaintiffs' appeal on February 4, 1997. As a result, this suit was filed shortly thereafter.
The crux of Plaintiffs' arguments is that: (1) they are due benefits under the Plans because they are in fact common law employees of Defendant; and (2) even if they are not common law employees of Defendant, Defendant's failure to ensure that the Plans meet certain IRS requirements with respect to non-discrimination percentages and the relevant language of the Plans with regard to tax exempt status permit this Court to order the Plaintiffs included in the Plans.
Conversely, Defendant argues that: (1) the Plaintiffs are not its common law employees, and thus not eligible for participation in the Plans; (2) even if it failed to adhere to IRS requirements with regard to non-discrimination percentages necessary to maintain tax exempt status for the Plans, the Court cannot order Plaintiffs' inclusion into the Plans; (3) even if the Plaintiffs were common law employees of Defendant, the plain language of the Plans still excludes them from participation; (4) Plaintiffs' claims are barred by the applicable statute of limitations; and, (5) Plaintiffs are equitably estopped from recovering damages. Defendant's arguments with regard to the statutes of limitations, laches, and judicial estoppel have already been dismissed by this Court in prior rulings (doc. 35 doc. 176), and this Court finds that Defendant has presented no new or compelling reason for this Court to reconsider its prior findings.
Therefore, the salient issues remaining before the Court in this case are whether a common law employment relationship exists between the parties and whether the IRS' non-discrimination rule compels this Court to order Plaintiffs, and all other contractor employees who would meet the IRS' definition of "leased employee," included in Defendant's Plans.
II. ANALYSIS AND CONCLUSIONS
Plaintiffs' success in this ERISA action brought pursuant to 29 U.S.C. § 1132 turns on the critical issue of whether Plaintiffs were common law employees of Defendant. It is not seriously argued that the Plans would exclude Plaintiffs even if the Court found that Plaintiffs were in fact common law employees for the relevant time periods. Moreover, any economic justification that Defendant claims exonerates its business practices is utterly irrelevant should this Court determine that Plaintiffs were common law employees of the Defendant.
Despite devoting an overwhelming majority of its argument to defending its employment practices on economic grounds, Defendant has not identified any legal authority that would support its contention that some mythical "economic benefit" exclusion exists to current ERISA law. Moreover, this Court is aware of no such exclusion. Just because a practice is economically beneficial does not excuse a failure to abide by the well established law. To the extent that Defendant's argument invites this Court to sit as a super-legislature or a Supreme Court and substantially' rewrite ERISA law and precedent based on a policy justification such as the economic desirability of a particular business decision for a certain industry, the Court declines such an invitation.
The determination of whether Plaintiffs are common law employees and therefore due benefits under Defendant's Plans is based upon, inter alia, a 13-factor test based upon the common law agency doctrine adopted by the United States Supreme Court in Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323-24, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992). The Darden test requires this Court to consider the following factors:
(1)[Defendant's] right to control the manner and means by which the work is accomplished. . . . (2) the skill required; (3) the source of the instrumentalities and tools; (4) the location of the work; (5) the duration of the relationship between the parties;(6) whether [the Defendant] has the right to assign additional projects to the hired party; (7) the extent of the hired party's discretion over when and how long to work; (8) the method of payment; (9) the hired party's role in hiring and paying assistants; (10) whether the work is part of the regular business of the [Defendant]; (11) whether the [Defendant] is in business; (12) the provision of employee benefits; (13) and the tax treatment of the hired party.See Darden, 503 U.S. at 323-24 (quoting Community for Creative Non-Violence v. Reid , 490 U.S. 730, 751-52, 109 S.Ct. 2166, 104 L.Ed.2d 811 (1989)). Additionally, the Darden Court cited with approval a 20-factor test set forth in Revenue Ruling 87-41, 1987-1 C.B. 296 ("IRS test"). Darden at 324. Because both of these tests are based on common law agency principles and many of the relevant factors coincide, this Court will follow the Darden test and supplement its analysis whenever the IRS test differs significantly. of course, the Court recognizes that common law and leased employees may share many of the same characteristics because of the nature of leased employees. Therefore, some of the factors of the Darden test may not weigh significantly in favor of either party in any given case. However, the less rigid application of the Darden test in cases where leased employees are involved, such as this one, does not permit this Court to accept the Defendant's argument that the Darden test is completely inapplicable. See Darden, 503 U.S. at 324 (stating that the common law test applies and in the application of the test "all incidents of the [employment] relationship must be assessed and weighed with no one fact being decisive") (internal citations omitted); see also Roth v. Am. Hosp. Supply, 965 F.2d 862, 866-67 (5th Cir. 1992) (applying the Darden factors to evaluate which entity was the actual employer for ERISA purposes when the employee in question was not an independent contractor).
A. The Darden Test with IRS Test Considerations 1. Control and Direction
The Darden test identifies this factor singly, although the IRS Test parses the control and direction factor into five separate factors: instructions, training, integration, order or sequence of set, and reports. See Rev. Rul. 87-41. All of these additional factors in the IRS Test will be analyzed as part of this single Darden factor.
Plaintiffs' claim to common law employee status by relies heavily on their evidence suggesting that Defendant maintained substantial control of their work at the Plant. Plaintiffs contended that they were subject to Defendant's instructions and rules in virtually all of their daily work, and presented some testimonial evidence indicating that Sam Sances, Defendant's one time Maintenance Superintendent, often went far beyond mere contract management by requesting a breakdown on how rate increases were to be spent and information on what holiday benefits would be provided. So pervasive was Sam Sances' practices, in 1991, Gulf Coast's owner requested a legal opinion to "brush back" Defendant's micro-management of Gulf Coast's employees leased to Defendant. By all accounts, this legal opinion worked.
In addition, Plaintiffs provided some evidence that they received training and more than nominally supervised by Defendant's regular employees. Evidence at trial adduced that some contractor employees were required to submit reports to employees of Defendant and that Defendant provided safety and other training to contractor employees.
Defendant argues that most, if not all, leased employees are subject to the control and direction of the recipient of their services. Moreover, Defendant established that many of the instructions Plaintiffs were required to follow were mandated as a matter of federal occupational health and safety laws and that both Gulf Coast and Master Maintenance employed and utilized their own internal hierarchy at the Plant.
Because of the Supreme Court's mandate in Darden, this Court cannot wholly ignore the direction and control factor, merely because of the overlapping characteristics of common law and leased employees. However, it cannot avoid concluding that some degree of control and direction is inherent in any employment relationship, particularly in the leased employee context. There is no doubt that the control and direction exercised by Defendant was at times substantial, and that Defendant is in a position whereby another Maintenance Superintendent like Sam Sances could easily push Defendant's leased employees over the line into the common law employee world — especially where the contractors like Gulf Coast and Master Maintenance do not establish and use their own internal hierarchy at the Plant. Nevertheless, this Court finds that after considering all evidence in the record that the control and direction factor does not weigh decisively in favor of or against a finding of common law employee status.
2. The Skill Required
There was no doubt that Plaintiffs possessed specialized skills, which would ordinarily weigh against a finding of common law employee status. However, the Fifth Circuit has already determined that this factor does not weigh in favor of or against a finding of common law employee status in a leased employee context. See Roth, 965 F.2d at 867. Therefore, this Court concludes that the specialized skills factor does not weigh in either party's favor.
3. Source of Instrumentalities and Tools
While at work at the Plant, Plaintiffs used Defendant's tools, office space, office supplies, furniture, computer system, and e-mail without charge. There is also some evidence that Defendant reimbursed some of its contractors like Gulf Coast and Master Maintenance for certain tool and equipment expenses. Defendant argues that these practices were necessary and economical. However, the economic benefits of a particular employment arrangement do not currently provide Defendant a safe harbor from ERISA laws. Thus, this factor weighs in favor of finding that Plaintiffs were common law employees of Defendant.
4. Location of the Work
Work by the Plaintiffs was performed on Defendant's premises. Work performed on the Defendant's premises usually implies the existence of a common law employment relationship. See Rev. Rul. 87-41. However, the importance of this factor depends on the nature of the work, and whether or not it must be done on the Defendant's premises. See id. In this case, maintenance services for Defendant's Plant must necessarily be performed at the Plant. Consequently, this Court concludes that this factor does not weigh in either party's favor.
5. Duration of the Relationship Between the Parties
Plaintiff Joseph Braud began working at the Plant in 1982 and worked there continuously until 1997. Plaintiff C.J. Lorio began working at the Plant in 1988 and worked there continuously until 1995. While the contractors employing Plaintiffs and other leased employees changed overtime, the Plaintiffs and other leased employees remained working at the Plant without interruption. The existence of a long term relationship like that which existed between Plaintiffs and Defendant is a factor "that supports" a finding of a common law employment relationship. See Barnhart v. New York Life Ins. Co., 141 F.3d 1310, 1313 (9th Cir. 1998). Thus, this Court concludes that this factor weighs in favor of a finding that Plaintiffs were common law employees of Defendant.
6. Defendant's Right to Assign Additional Projects to the Hired Party
The nature of the relationship between Defendant and its contractors such as Gulf Coast and Master Maintenance indicates that Defendant had to be able to assign maintenance tasks when such tasks came up because maintenance needs could not be reasonably predicted in advance much like the fact that maintenance services for the Plant could not be reasonably be provided off Defendant's Plant premises. Moreover, the Fifth Circuit declined to find that this factor weighs in favor of or against a finding of common law employment status when considering the implications of this factor where a leased employee was involved. See Roth at 866-67. Thus, this Court concludes that this factor does not weigh in favor of either party in this case.
7. Hired Party's Discretion in Setting Hours of Work
Plaintiffs have produced sufficient evidence to prove that their work at the Plant was identical with the Plant's normal hours of operation and that they worked the same hours as Defendant's regular employees and took lunch breaks that were scheduled by Defendant. Plaintiffs have also adduced sufficient evidence that Defendant was involved in the granting of some overtime and vacation leave to Plaintiffs, and that Defendant interfered with Plaintiff Joseph Braud's taking of vacation time in at least one instance. However, despite this significant control over the hours of work, there is also significant and credible evidence that due to the nature of maintenance work at a plant, that Defendant's setting the hours of work was necessary to ensure operation of the Plant and to curtail inconvenience to Defendant's regular employees. Therefore, this factor does not appear to be indicative of any particular employment status.
8. Payment
There is no evidence before the Court that suggests that Plaintiffs were paid by any other entity other than Gulf Coast or Master Maintenance. Although Plaintiffs argue that Defendant had substantial input into what they and other employees of Gulf Coast and Master Maintenance were paid as part of the contract negotiations, there was no evidence that Defendant had the final say in the matter. In fact, some contractor employees like Plaintiff Joseph Braud were not only paid more than the contract rate agreements between Defendant and Gulf Coast, and later Master Maintenance, contractors' employees also received end of year bonuses that were not paid for by Defendant or reimbursable under the maintenance contracts. Not only do Plaintiffs admit that Defendant was not the entity that issued their paychecks, they have made no showing that Defendant's regular employees were paid in any manner other than directly by Defendant. For these reasons, the Court finds that this factor weighs against a finding in favor of common law employment status.
9. Hired Party's Role in Hiring and Paying Assistants
Although Plaintiffs argued that Defendant did in fact exercise substantial control in the hiring and payment of assistants, the evidence in the record does not support this contention. Certainly Defendant could dictate whether or not additional work was needed and whether in the abstract an additional body could be hired due to increased maintenance needs, but there was no evidence that Defendant actually interviewed Plaintiffs for their jobs or was involved in the hiring process for new Gulf Coast or Master Maintenance employees. In fact, both Plaintiffs admit that they were interviewed and hired by the contractors Gulf Coast and Master Maintenance as were all other contract employees without any apparent input on the behalf of Defendant. Moreover, the Fifth Circuit has questioned the applicability of this factor when the employee in question is a leased employee. See Roth at 867. Therefore, although the evidence suggests that this factor would not weigh in favor of the Plaintiffs' claim of common law employment status, the Court finds that this factor does not weigh in either party's favor.
10. Work as Part of Defendant's Regular Business
Maintenance of Defendant's facilities cannot be said to be alien to its core business. Moreover, Defendant employed some maintenance workers directly and at times replaced its existing employees with contract workers like Plaintiffs. Thus, this factor tilts in favor of finding that Plaintiffs were common law employees.
11. Whether or Not the Defendant is in Business
Similarly, and for the same reasons, Defendant is clearly in the business of maintaining its production facilities, otherwise it would not be able to produce its products. Thus, this factor also weighs in favor of a finding that Plaintiffs were Defendant's common law employees.
12. Employee Benefits
Receipt of employee benefits is traditionally associated with an employer-employee relationship. See Barnhardt, 141 F.3d 1310. The undisputed evidence is that none of Defendant's contractor employees ever received any of the benefits that Defendant offered to its own regular employees. Moreover, it is undisputed that contractors such as Gulf Coast and Master Maintenance offered benefits to their respective employees, however minimal those benefits might have been. Thus, this factor weighs heavily in favor of a finding that Plaintiffs were not common law employees of Defendant. This is not to say that this factor will always weigh in favor of a defendant when another entity is a benefit provider to a plaintiff in an ERISA action such as this one, there are extraordinary circumstances that may tip the balance the other way. See Barnhardt at 1313. However, no such extraordinary circumstances exist in this particular case.
13. Tax Treatment of Hired Party
Both parties agree that Plaintiffs were treated as employees of the contractors, Gulf Coast and Master Maintenance, for tax purposes. Moreover, there is no evidence that suggests Plaintiffs objected to this tax treatment. Plaintiffs always filed their W-4s with entities other than Defendant, unlike Defendant's regular employees. Plaintiffs also have filed state and federal income documents that certify, under the penalty of perjury, to be employees of entities other than Defendant.
Federal courts have frequently deemed an employer's tax treatment of employees and the way that employees characterize their tax status as exceptionally indicative of the true nature of employment status. See e.g., Cilecek v. INOVA Health Sys. Serv., 115 F.3d 256-261-62 (4th Cir. 1997); Berger Transfer Storage v. Central States Southeast and Southwest Areas Pension Fund, 85 F.3d 1374 (8th Cir. 1996); Laborers'' Pension Trust Fund Detroit and Vicinity v. Preferred Trenching, Inc., 969 F. Supp. 455, 456-7 (E.D. Mich. 1997); Coonley v. Fortis Benefit, Ins., Co., 956 F. Supp. 841, 859-60 (N.D. Iowa 1997). Therefore, this Court concludes that the tax treatment of Plaintiffs weighs heavily against a finding of common law employment status.
14. Right to Discharge and Discipline
The right to discharge and discipline is not expressly a Darden test factor; it is implicitly subsumed in the control and direction factor. However, it is a separate IRS test factor, and because discharge and discipline is not expressly addressed above, the Court will address this issue separately.
The IRS test states that the right to discharge a worker implies a substantial amount of control over that worker. See Rev. Rul. 87-41. There was no evidence presented at trial that Defendant had any right to discipline or terminate a contractor's employee beyond requesting that a particular individual not work at Defendant's Plant, which left the contractor the opportunity to reassign that individual to another contract at another facility. Moreover, there was no evidence that Defendant actually disciplined or fired one of its contractors' employees. In fact, Plaintiff Joseph Braud admitted that, as Gulf Coast's manager at the Plant, he fired one of the Gulf Coast's employees who was working at the Plant without any input on behalf of the Defendant. Plaintiff Joseph Braud also admitted that he interviewed, hired, and fired workers for Gulf Coast. Additionally, Plaintiffs admitted that they knew their supervisors at both Gulf Coast and Master Maintenance could fire them. In light of these facts, that Plaintiffs had a belief that Defendant had influence over their employment status is not enough to tip the balance of this factor in favor of a finding of common law employment status. Therefore, this Court finds that this factor weighs in Defendant's favor.
B. Overall Weight of the Evidence
After reviewing all of the evidence in the record, of the fourteen factors considered, four weigh in Plaintiffs' favor, four weigh in Defendant's favor, and six are considered neutral. In essence, were that all the Court had to consider and were it not Plaintiffs' burden to prove the existence of common law employment status by a preponderance of the evidence, there would essentially be a tie in this case. of course, because of the relative burdens placed upon the parties, ties do not occur in litigation absent settlement. Moreover, because this Court can also consider how the employment relationship is described by the parties and the relevant employment documents in making a common law employment status determination see Darden, 503 U.S. at 324, the apparent tie is ultimately broken.
Plaintiffs admit that they never thought of themselves as employees of Defendant. Plaintiffs admit that they applied, interviewed, and were hired by contractors of Defendant, were paid by those contractors, and never received a paycheck or any other employment related document indicating that they were actually employees of Defendant. Furthermore, Defendant has shown by a preponderance of the evidence that no contractor employee has ever been considered in the same manner as its regular employees for benefits purposes. Thus, the Court concludes that Plaintiffs have failed to show that they were common law employees of Defendant. Plaintiffs have failed to establish that they are common law employees, albeit just barely, which was the threshold prong of the two-prong test they were required to meet in order to prevail in this case. Thus, the Court needn't consider whether they would be included in the Plans or whether Defendant's decision to deny them benefits on the basis of their status as employees of other entities was arbitrary or capricious, because the evidence is abundantly clear that the Plans exclude individuals who are not common law employees of Defendant.
C. The IRS Argument
Plaintiffs argue that even if they were not common law employees, they are still due benefits under Defendant's Plans because the Plans include a provision that require those Plans to be interpreted in order to maintain tax exempt status and there was some evidence that Defendant's Plans failed the IRS nondiscrimination test for the exclusion of non-highly compensated employees, which would deny the Plans tax exempt status. Relying on the "leased employee rule" found in the IRS Code, Plaintiffs argue that Defendant's failure to be accurate in calculating the non-discrimination percentage as required by the IRS permits this Court to rewrite the Plans to include the Plaintiffs. In support of this argument, Plaintiffs cite to Crouch v. Mo-Kan Iron Workers, 740 F.2d 805 (10th Cir. 1984), which relied on Renda v. Adam Meldrum Anderson Co. Pension Plan, 806 F. Supp. 1071 (W.D. N.Y. 1992). Both of these cases stand for the rather unusual proposition that failure to meet the requirements of IRS regulations permits a court to order the inclusion of an individual who would be otherwise excluded. See Crouch 740 F.2d at 809; Renda 806 F. Supp. at 1083. Despite these two cases, however, other federal courts have consistently declined to apply their unusual proposition that courts can rewrite ERISA plans broadly. See Montesanto v. Xerox Corp. Retirement Income Guarantee Plan, 117 F. Supp.2d 147, 162-63 (D. Conn. 2000) (citing Bronk v. Mountain States Tel. Tel., Inc., 140 F.3d 1335, 1339 (10th Cir. 1998); Abraham v. Exxon Corp., 85 F.3d 1126 (5th Cir. 1996)) affirmed in part and vacated on other grounds 256 F.3d 86 (2d Cir. 2001). Moreover, Defendants are quite right that the Fifth Circuit has taken somewhat of a jaundiced view of a broad application of the Crouch and Renda analysis that supports the judicial reformation of ERISA plans. See Abraham v. Exxon Co., 85 F.3d at 1130-31 (criticizing the legal underpinnings of Renda and Crouch as well as distinguishing Crouch ). However, the Fifth Circuit has not expressly ruled the analysis in Crouch and Renda to be incorrect as a matter of law, and the facts of this case are similar to those in Crouch because both benefit plans contain the same interpretation provision with regard to maintaining tax eligible status. Thus, the Court finds that it must at least consider Plaintiffs argument.
Unfortunately for Plaintiff and despite this ray of hope for the Plaintiffs lurking in Abraham, this Court still finds Crouch and Renda distinguishable on significant factual grounds and thus declines to order Plaintiffs' inclusion into Defendant's Plans. This is because there was no question that the plaintiff was an employee of the defendant in Crouch and the plaintiff was found to be a common law employee of the defendant in Renda. See Crouch at 806-07; Renda at 1079. As this Court has determined that Plaintiffs have failed to carry their burden of persuasion on the common law employment status issue, it will not reform Defendant's Plans to include Plaintiffs using a somewhat dubious proposition based on significantly distinguishable case law. Under these particular circumstances, it seems that the Fifth Circuit's admonition in Abraham is most fitting: "Failure to meet the requirements of [IRS] regulations results in the loss of beneficial tax status; it does not permit a court to rewrite a plan to include additional employees." 85 F.3d at 1131. This is not to say that Defendant's business practices with regard to counting employees for non-discriminatory purposes appear accurate or honest to this Court, but rather that under these factual circumstances, the determination on Defendant's resulting tax qualified status and the applicability of sanctions or penalties for non-compliance with the IRS Code or Rules is really a matter for the IRS and not this Court.
D. Conclusion
While this case ended unfavorably for the Plaintiffs in this instance, it is abundantly clear to the Court that the contract arrangements between Defendant and its maintenance contractors come perilously close to creating a common law employment relationship. Defendant, and other employers like it, are urged to carefully reconsider their current business practices with respect to contractor employees and the cost/benefits of those practices in the event that the facts in any future case tips the balance of the Darden analysis in an unfavorable direction.
For the above reasons, it is hereby determined by the Court that Plaintiffs were not common law employees of Defendant, and therefore not entitled to any benefits under Defendant's Plans. Judgment for the Defendants will be entered accordingly.