Opinion
01 Civ. 9673 (CSH)
September 23, 2002
MEMORANDUM OPINION AND ORDER
Plaintiff Jelion H. Williams brings this action under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et. seq., against her employer, American International Group, Inc. ("MG"), seeking a retroactive grant of "regular" employment status in order to recover employee benefits and the right to participate in certain employee benefit plans.
Specifically, Williams alleges that as a result of her classification as a temporary employee, she was deemed ineligible for the following benefits and plans provided by MG to its regular employees: (1) Retirement Plan; (2) Comprehensive Medical Expense Benefits Plan; (3) Health Care and Dependent Care Reimbursement Accounts Plan; (4) Personal Accident Insurance Plan; (5) Long Term Disability Benefits Plan; (6) Survivor Protection Program Plan; and (7) Employee Stock Option Plan. Complaint ¶ 9. The case is before the Court on the motion of the defendant to dismiss the action.
Identifying the claim or claims that plaintiff asserts requires something of an effort. Plaintiff's complaint alleges that AIG's actions violated § 502 of ERISA, 29 U.S.C. § 1132. Complaint ¶ 1. However, plaintiff's Memorandum of Law in Opposition to Defendant's Motion to Dismiss ("Opposition Brief") ignores the § 502 claim on which her complaint was premised and introduces a new claim, namely, an alleged violation of § 510 of ERISA, 29 U.S.C. § 1140.
While plaintiff's complaint refers to § 502 of ERISA, I infer from the failure of her brief to respond to AIG's contention that a claim based on that section should be dismissed that plaintiff has in fact abandoned such a claim. And it is logical that she do so. Section 502 furnishes a remedy for any employee who has been improperly been denied benefits under a plan covered by ERISA. But the gravamen of plaintiff's complaint is that AIG, by designating her as a temporary rather than regular employee, has prevented her from participating in the company benefit plans. In that circumstance, § 502 has no office to perform and plaintiff cannot base a claim upon it. To the extent that plaintiff's complaint should still be read as invoking § 502 of ERISA, it must be dismissed under Rule 12(b)(6), Fed.R.Civ.P., for failure to state a claim upon which relief can be granted.
Therefore I need not consider AIG's alternative contention that plaintiff failed to exhaust her administrative remedies, normally a prerequisite to filing suit on a § 502 claim. See, e.g., Kennedy v. Empire Blue Cross Blue Shield, 989 F.2d 588, 594 (2d Cir. 1993).
Regarding her § 510 claim, plaintiff cannot introduce a new claim by means of a brief of counsel. Asoma Corp. v. Pelagos Shipping, Ltd., 2001 U.S.Dist.LEXIS 20537, *6 n. 1. Her proper recourse would be to request leave to amend her complaint pursuant to Rule 15(a) of the Federal Rules of Civil Procedure. Although a motion to amend is not presently before me, I will in the interest of judicial efficiency address in this opinion the question whether the plaintiff could amend her complaint to include a § 510 claim of ERISA.
Background
Since May 11, 1998, plaintiff Williams has been employed by MG as a Remarketing Coordinator at AI Credit Corp., a subdivision of MG. Complaint ¶ 5. Williams alleges that although she has at all times been a de facto regular employee, she has been classified as a "temporary" employee throughout her employment. Id. ¶ 8. She contends that this classification denies her opportunities to participate in various employee benefit plans, promotional opportunities, paid vacations, paid holidays, and other such benefits that are available to those classified as regular employees. Id. ¶ 21. Williams "has periodically protested AIG's treatment and classification of her" without result, and she states the continued classification of her as "temporary" and her ensuing ineligibility for certain benefits and pension plans constitute a willful violation of ERISA. Id. ¶ 8.
Plaintiff brings this action for herself and purportedly on behalf of other similarly situated employees and seeks class certification.
Discussion
As noted supra, to assert an ERISA § 510 claim plaintiff must obtain leave of the Court to amend her complaint. Rule 15(a), Fed.R.Civ.P., governs motions to amend pleadings.
Rule 15(a) states that "leave [to amend] shall be freely given when justice so requires," and as such sets a liberal standard for granting such leave. While reaffirming this liberal standard the Supreme Court articulated grounds that would preclude amendment, "such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of the amendment, etc." Foman v. Davis, 371 U.S. 178, 182 (1962). "An amendment is considered futile if the amended pleading fails to state a claim or would otherwise be subject to a motion to dismiss on some other basis." Chan v. Reno, 916 F. Supp. 1289, 1302 (S.D.N.Y. 1996) (citing S.S. Silberblatt, Inc. v. East Harlem Pilot Block, 608 F.2d 28, 42 (2d Cir. 1979) and Freeman v. Marine Midland Bank-New York, 494 F.2d 1334, 1338 (2d Cir. 1974)). Accordingly, the Court will consider plaintiff's § 510 claim in light of its ability to survive a motion to dismiss.
A. Whether AIG's actions in classifying Williams as a "temporary" employee violate § 510, and if so, whether she has standing to bring the claim.
Plaintiff's § 510 claim could not survive a motion to dismiss because AIG's conduct is not proscribed by the statute. In relevant part, § 510 makes it unlawful to "discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan." 29 U.S.C. § 1140. As clarified by judicial opinion, § 510 protects against the disruption of employment privileges to prevent the vesting or enjoyment of benefit rights, to punish their exercise, or to punish the giving of testimony in a proceeding relating to ERISA or a sister act. Sandberg v. KPMG Peat Marwick, 111 F.3d 331, 334 (2d Cir. 1997). Section 510 "was designed primarily to prevent unscrupulous employers from discharging or harassing employees in order to keep them from obtaining vested pension rights." Id. (internal quotation marks and citations omitted).
Williams does not allege any disruption of her employment that was designed to preclude her from obtaining benefits; instead, she contends that the act of hiring her as a temporary employee, instead of as a regular employee, is itself a violation of § 510. This position is untenable in law. Section 510 "does not prevent an employer from discriminating in the creation of employee benefits" and so "a plaintiff must show more than a lost opportunity to accrue benefits to sustain a § 510 claim." Montesano et al v. Xerox Corp. Retirement Income Guarantee Plan et al, 117 F. Supp.2d 147, 164 (D.Conn. 2000) (internal citations omitted) (emphasis added); see Dister v. Continental Group, Inc., 859 F.2d 1108, 1111 (2d Cir. 1988). In other words, an employer may hire employees under terms that render them ineligible to receive benefits given to other kinds of employees without violating the mandate of § 510. Montesano v. Xerox Corp. Ret. Income Guar. Plan, 256 F.3d 86, 88 (2d Cir. 2001) (affirming district court holding that limiting the tenure of workers to preclude pension rights did not amount to a § 510 violation). While § 510 would prohibit employers from disrupting existing employment privileges to prevent the attainment or vesting of benefits in which those employees already have an interest, plaintiff at bar alleges no disruption of her employment. She alleges that MG hired her as a temporary employee, which then rendered her ineligible to receive certain benefits. There is nothing in the complaint or Opposition Brief to suggest conduct in violation of § 510.
Plaintiff implies that assigning her temporary status is discrimination within the meaning of § 510. A recent Third Circuit decision, with which I agree, makes clear that this claim also fails. See Becker et al v. Mack Trucks, 281 F.3d 372 (3d Cir. 2002). The Third Circuit analyzed the language and intent of § 510 in deciding that Congress did not intend the provision to regulate rehiring decisions. In Becker, plaintiffs had previously worked for Mack Trucks and were let go during a period of downsizing, before their pension rights had fully vested. At some point after their employment termination, Mack Trucks was in a position to increase its workforce, but instead of rehiring its previous employees it hired new employees to avoid the expense of hiring individuals with higher benefits costs. The plaintiffs alleged that Mack Trucks' refusal to rehire was discrimination within the meaning of § 510. Id.
The Third Circuit disagreed. It first noted that the plain language of § 510 omits a refusal to hire or rehire from its list of prohibited acts, id. at 380, suggesting in the case at bar that the act of hiring Williams as a particular category of employee is not regulated by § 510. Regarding the specific claim of discrimination, the Becker court said, "Legislative history reveals that the term `discriminate' was used in order to reach conduct `which does not say that one is fired, but makes living such a hell that a person wishes he did not have to hang on and endure.'" Id. at 382 (quoting 119 Cong. Rec. 30,374 (Statement of Sen. Hartke), reprinted in 2 Legislative History of the Employee Retirement Income-Security Act of 1974, at 1774-75 (1976)). It further noted that the absence of language around discrimination in hiring in § 510, as compared to its inclusion in § 8(a)(3) of the National Labor Relations Act, 29 U.S.C. § 158 (a)(3) — the statute upon which § 510 was modeled — indicated there was no intent to forbid such discrimination. Id. at 380-81. From this, the court concluded that "§ 510 simply does not require that employers blind themselves to the effect on future pension liability when making hiring decisions." Id. at 383 (emphasis added).
This analysis is perhaps even more salient in the case at bar. Unlike the plaintiffs in Becker, Williams was at no time eligible to receive benefits under her "temporary" employment status, and indeed does not allege that her current employment classification entitles her to such benefits. She merely alleges that the decision to hire her as a temporary employee, the effect of which is to make her ineligible for certain benefits, violates § 510. Yet as the extensive inquiry of legislative intent undertaken by the Third Circuit indicates, Congress's comprehensive provision of safeguards to protect existing employment relationships does not indicate that it intended to regulate the hiring process or hiring decisions. See Becker, 281 F.3d at 382 (stating that Congress never intended "to regulate actions taken against a potential employee"). MG was free to hire Williams as a temporary employee without violating § 510 of ERISA.
Plaintiff relies solely on a decision of the 9th Circuit, Vizcaino et al. v. Microsoft Corporation et al., 120 F.3d 1006, 1008 (9th Cir. 1997), in support of her claim that hiring her as a temporary employee violated § 510. Her reliance is misplaced. Vizcaino involved independent contractors whose employment status was examined by the Internal Revenue Service, which decided as a matter of law that they were actually common law employees whose taxes should have been withheld by Microsoft. Id. Microsoft agreed, and in order to facilitate the transition logistically and discontinue their payment through the accounts payable department, it tendered offers to some workers to become acknowledged employees. Microsoft offered other workers, like Vizcaino and other plaintiffs, the opportunity to work for a temporary employment agency which would then supply workers to Microsoft on an as needed basis. Plaintiffs declined the opportunity and then asserted that as common law employees of Microsoft, they should have had the opportunity of participating in the relevant ERISA plan. When plaintiffs asked the plan administrator to deem them eligible for such benefits, the administrative panel ruled that they were not so entitled. Id. at 1008-09.
The Ninth Circuit, however, observed that plaintiffs could be entitled to such benefits because Microsoft and the plan panel conceded, contrary to the explicit terms of their employment contracts, that they were common law employees and were never independent contractors. The court then concluded that "it would appear that the [plaintiffs] are entitled to the benefits of all other employees, or, at least, they are not excluded simply because of the contractual terms." Id. at 1012 (emphasis added).
In the present case before this Court, plaintiff Williams makes an entirely different claim. Plaintiffs in Vizcaino brought a § 502 claim seeking enforcement of the terms of the plan, and sought review of the administrative decision deeming them ineligible because their contracts called them "independent contractors." There, the terms of the plan itself were under interpretative scrutiny to determine whether plaintiffs fell within their scope, and the court determined only that plaintiffs' contracts did not automatically preclude their eligibility. Id. at 1011-14. The court simply reviewed an administrative determination.
Williams wants this Court to extract from Vizcaino, which involved a § 502 claim, the idea that all employees functioning as common law employees whose employment contracts state otherwise are being discriminated against within the meaning of § 510. This Court declines to stretch the statutory language to that extent. Had Williams brought a § 502 claim after having exhausted her administrative remedies, Vizcaino might have provided guidance regarding the issue of the relationship between her employment contract, her real-world employment function, and the plan terms. However, for the reasons discussed supra, plaintiff has no viable § 502 claim and Vizcaino has no bearing in this case. Thus, because § 510 prohibits only the disruption of or interference with existing employment, and does not regulate hiring decisions or encompass discrimination in its broadest application, AIG's conduct does not violate this provision of ERISA.
AIG also contends that Williams does not have standing to bring this action because, as per the statute, only a "participant or beneficiary" of a benefit plan may bring a civil action under § 510 of ERISA. 29 U.S.C. § 1132 (a)(1)(B). In relevant part, a "participant" is an employee "who is or may become eligible to receive a benefit of any type from an employee benefit plan," id. § 1002(7), and a "beneficiary" is a "person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder," id. § 1002(8). Assuming that her current employment classification precludes her from being or becoming eligible for obtaining benefits, Williams is neither a beneficiary, nor a participant. There is the open question of whether the phrase "may become eligible" was intended to include existing employees who could be reclassified into plan eligibility, but because there is no case law on this question, and because this Court has already determined that the defendant's actions do not constitute a § 510 violation, it is unnecessary to answer it at this juncture.
B. The Statute of Limitations.
Because the defendant's misconduct does not constitute a § 510 violation, it is not necessary to reach a conclusion on the statute of limitations issue. Furthermore, the absence of a violation makes determining the date on which that violation accrued a purely academic venture. However, in the alternative, this Court finds that Williams has in fact brought the § 510 claim outside the appropriate limitations period. The Second Circuit in Sandberg, 111 F.3d at 335, determined that the relevant statute of limitations period in New York for claims arising under § 510 of ERISA is two years. Defendant AIG contends that the cause of action in this case arose on May 11, 1998, at the commencement of plaintiff's "temporary" employment currently at issue. The Second Circuit has held that "`[a] plaintiff's ERISA cause of action accrues . . . when there has been a repudiation by the fiduciary which is clear and made known to the beneficiaries,'" Davenport v. Harry N. Abrams, Inc., 249 F.3d 130, 135 (2d Cir. 2001) (quoting Miles v. New York State Teamster Conf. Pension Plan and Retirement Fund, 698 F.2d 593, 598 (2d Cir. 1983)). Furthermore, the court clarified that a plaintiff's ERISA cause of action can accrue even where the plaintiff has not filed a formal application for benefits.Id.
The statute of limitations on a § 510 claim would have accrued to Williams upon her application and denial of benefits, or upon an instance of "discharge, fine, suspen[sion]. [expulsion], discipline, or [discrimination]." 29 U.S.C. § 1140. Since Williams contends that her relegation to "temporary" as opposed to "regular" status constitutes the § 510 violation, and she has never applied for benefits, the cause of action would have accrued at the instance whereupon the status was decided — in this case, May 11, 1998. While the record does state that "[p]laintiff has periodically protested AIG's treatment and classification of her," Complaint ¶ 8, there is no information from which to infer that the status was considered and reimposed in some way significant enough to amount to a separate § 510 violation. Furthermore, May 11, 1998 is the appropriate date of accrual because the plaintiff protests her employment assignment, which commenced the very day she was hired. Thus in order to comply with the two-year statute of limitations requirement, Williams would have needed to file suit not later than May 11, 2000.
Conclusion
For the foregoing reasons, the complaint fails to state a cause of action under § 502 of ERISA, and amending the complaint to assert an ERISA § 510 claim would be futile because the claim would not survive a motion to dismiss.
Accordingly the Clerk of the Court is directed to dismiss the complaint in its entirety and without leave to amend.
Plaintiff's application for class certification is denied as moot.
It is SO ORDERED.