I 

108TH CONGRESS 

1ST SESSION H. R. 1397

To amend the Employee Retirement Income Security Act of 1974 to ensure 

that employees are not improperly disqualified from benefits under pension plans and welfare plans based on the misclassification or reclassification of their status. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 20, 2003

Mrs. MCCARTHY of New York (for herself and Mr. ANDREWS) introduced the 

following bill; which was referred to the Committee on Education and the 

Workforce 

A BILL

To amend the Employee Retirement Income Security Act 

of 1974 to ensure that employees are not improperly 

disqualified from benefits under pension plans and welfare plans based on the misclassification or reclassification of their status.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Employee Benefits 

5 Protection Act of 2003’’. 
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1 SEC. 2. FINDINGS AND PURPOSE. 

2 (a) FINDINGS.—Congress makes the following find3 ings: 

4 (1) The intent of the Employee Retirement In5 come Security Act of 1974 to protect the pension 

6 and welfare benefits of workers is frustrated by the 

7 practice of mislabeling or relabeling employees to im8 properly exclude them from employee benefit plans. 

9 Employees are wrongly denied benefits when they 

10 are misclassified or reclassified as temporary em11 ployees, part-time employees, leased employees, 

12 agency employees, staffing firm employees, and inde13 pendent contractors. If their true employment status 

14 were recognized, these misclassified and reclassified 

15 employees would be eligible to participate in em16 ployee pension and welfare benefit plans because 

17 such plans are offered to other employees per18 forming the same or substantially the same work 

19 and working for the same employer. 

20 (2) Mislabeled employees are often paid through 

21 staffing, temporary, employee leasing, or other simi22 lar firms to give the appearance that the employees 

23 do not work for their employer. Employment con24 tracts and reports to government agencies also are 

25 used to give the erroneous impression that mis26 labeled employees work for staffing, temporary, em-
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1 ployee leasing, or other similar firms, when the facts 

2 of the work arrangement do not meet the common 

3 law standard for determining the employment rela4 tionship. Employees are also mislabeled as contrac5 tors and paid from non-payroll accounts to give the 

6 appearance that they are not employees of their em7 ployer. These practices violate the Employee Retire8 ment Income Security Act of 1974. 

9 (3) Employers are amending their employee 

10 benefit plans to add provisions that exclude mis11 labeled employees from participation in the plan 

12 even in the event that such employees are deter13 mined to be common law employees and otherwise 

14 eligible to participate in the plan. These plan provi15 sions violate the Employee Retirement Income Secu16 rity Act of 1974. 

17 (4) As a condition of employment or continued 

18 service, employees are often required to sign docu19 ments that purport to waive their right to partici20 pate in employee benefit plans. Such documents in21 accurately claim to limit the authority of the courts 

22 and applicable Federal agencies to correct the 

23 mislabeling and relabeling of employees and to en24 force the terms of plans providing for their partici-
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1 pation. This practice violates the Employee Retire2 ment Income Security Act of 1974. 

3 (5) As a condition of continued employment or 

4 service, employees are often required to sign docu5 ments that purport to waive their right to bring a 

6 lawsuit under the Employee Retirement Income Se7 curity Act of 1974. Such documents inaccurately 

8 claim to limit the ability of the courts and applicable 

9 Federal agencies to obtain any payments or benefits 

10 in the event that the waiver is found not to be know11 ing and voluntary. This practice violates the Em12 ployee Retirement Income Security Act of 1974. 

13 (b) PURPOSE.—The purpose of this Act is to clarify 

14 applicable provisions of the Employee Retirement Income 

15 Security Act of 1974 to ensure that employees are not im16 properly excluded from participation in employee benefit 

17 plans as a result of mislabeling or reclassifying their em18 ployment status. 

19 SEC. 3. ADDITIONAL STANDARDS RELATING TO MINIMUM 

20 PARTICIPATION REQUIREMENTS. 

21 (a) REQUIRED INCLUSION OF SERVICE.—Section 

22 202(a)(3) of the Employee Retirement Income Security 

23 Act of 1974 (29 U.S.C. 1052(a)(3)) is amended by adding 

24 at the end the following new subparagraph:
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1 ‘‘(E) For purposes of this section, in determining 

2 years of service and hours of service—

3 ‘‘(i) service shall include all service for the em4 ployer as an employee under the common law, irre5 spective of whether the individual—

6 ‘‘(I) is paid through a staffing firm, tem7 porary help firm, payroll agency, employment 

8 agency, or other such similar arrangement, 

9 ‘‘(II) is paid directly by the employer 

10 under an arrangement purporting to charac11 terize an employee under the common law as 

12 other than an employee, or 

13 ‘‘(III) is paid from an account not des14 ignated as a payroll account, and 

15 ‘‘(ii) in any case in which an employer, plan 

16 sponsor, or fiduciary (including any administrator, 

17 officer, trustee, or custodian) changes the job classi18 fication of any person from employee to leased em19 ployee, agency employee, staffing firm employee, 

20 independent contractor, or any similar category, in 

21 determining years of service and hours of service, 

22 service shall include all service for the employer that 

23 the person performs subsequent to such reclassifica24 tion.’’. 
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1 (b) EXCLUSION PRECLUDED WHEN RELATED TO

2 CERTAIN PURPORTED CATEGORIZATIONS.—Section 202 

3 of such Act (29 U.S.C. 1052) is amended further by add4 ing at the end the following new subsection: 

5 ‘‘(c)(1) Subject to paragraph (2), a pension plan shall 

6 be treated as failing to meet the requirements of this sec7 tion if the plan excludes from participation any person 

8 who performs the same work (or substantially the same 

9 work) for the employer as other employees who generally 

10 are not excluded from participation in the plan, irrespec11 tive of the placement of such person in any category of 

12 workers (such as temporary employees, part-time employ13 ees, leased employees, agency employees, staffing firm em14 ployees, independent contractors, or any similar category) 

15 which may be specified under the plan as ineligible for 

16 participation. 

17 ‘‘(2) Nothing in paragraph (1) shall be construed to 

18 preclude the exclusion from participation in a pension plan 

19 of individuals who in fact do not meet a minimum service 

20 period or minimum age which is required under the terms 

21 of the plan and which is otherwise in conformity with the 

22 requirements of this section.’’. 
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1 SEC. 4. OBJECTIVE ELIGIBILITY CRITERIA IN PLAN IN2 STRUMENTS. 

3 Section 402 of the Employee Retirement Income Se4 curity Act of 1974 (29 U.S.C. 1102) is amended by adding 

5 at the end the following new subsection: 

6 ‘‘(d)(1) The written instrument pursuant to which an 

7 employee benefit plan is maintained shall set forth eligi8 bility criteria which—

9 ‘‘(A) include and exclude employees on a uni10 form basis; 

11 ‘‘(B) are based on reasonable job classifications 

12 other than the mere labeling of a job position as 

13 something other than an employee; and 

14 ‘‘(C) are based on objective criteria stated in 

15 the instrument itself for the inclusion or exclusion 

16 (other than the mere listing of an employee as in17 cluded or excluded). 

18 ‘‘(2) No employee benefit plan may permit an em19 ployer or plan sponsor to exclude any person from partici20 pation irrespective of the placement of such employee in 

21 any category of workers (such as temporary employees, 

22 leased employees, agency employees, staffing firm employ23 ees, contractors, or any similar category), if the em24 ployee—

25 ‘‘(A) is an employee of the employer under the 

26 common law; 
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1 ‘‘(B) performs the same work (or substantially 

2 the same work) for the employer as other employees 

3 who generally are not excluded from participation in 

4 the plan; and 

5 ‘‘(C) meets a minimum service period or min6 imum age which is required under the terms of the 

7 plan. 

8 ‘‘(3) In any case in which the employer of an indi9 vidual who is a participant in an employee benefit plan, 

10 the plan sponsor of such plan, or a fiduciary of such plan 

11 requires such individual to convert to the status of a tem12 porary employee, leased employee, agency employee, staff13 ing firm employee, contractor, or any similar category as 

14 a condition of continuing in the service of the employer, 

15 such individual shall not cease to be treated under such 

16 plan or this title as a participant in such plan by reason 

17 of such conversion.’’. 

18 SEC. 5. ENFORCEMENT. 

19 Section 502 of the Employee Retirement Income Se20 curity Act of 1974 (29 U.S.C. 1132) is amended—

21 (1) in paragraphs (3)(B) and (5)(B) of sub22 section (a), by striking ‘‘other appropriate equitable 

23 relief’’ and inserting ‘‘other appropriate relief, in24 cluding such additional relief as a court of equity 

25 might have awarded in a case involving the enforce-
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1 ment or administration of a trust, other equitable 

2 relief, compensatory relief, or remedial relief’’; 

3 (2) in subsection (a)(3)(B), by striking ‘‘or’’ at 

4 the end of clause (i) and inserting a comma, by 

5 striking the semicolon at the end of clause (ii) and 

6 inserting ‘‘, or’’, and by adding at the end the fol7 lowing: ‘‘(iii) to provide restitution and other appro8 priate relief to employees who have been excluded 

9 from participation or have been misclassified or re10 classified in violation of section 202 or 402’’; 

11 (3) by striking ‘‘or’’ at the end of subsection 

12 (a)(8), by striking the period at the end of sub13 section (a)(9) and inserting ‘‘; or’’, and by adding at 

14 the end the following new paragraph: 

15 ‘‘(10) by a participant or beneficiary to obtain 

16 a judicial declaration concerning whether a waiver of 

17 rights arising under this title or a plan, including a 

18 waiver of participation in a plan, was knowing and 

19 voluntary under the totality of the circumstances.’’; 

20 (4) in subsection (g)(1), by inserting ‘‘, reason21 able expert fees,’’ before ‘‘and costs’’ and by insert22 ing before the period at the end the following: ‘‘, ex23 cept that the court shall award such fees and costs 

24 to a prevailing party in the case of an action 

25 brought to enforce section 510, unless the court de-
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1 termines that it would be unjust to do so under the 

2 circumstances’’; and 

3 (5) by adding at the end of section 502 the fol4 lowing new subsection: 

5 ‘‘(n) In an action under this section, if the court finds 

6 that any participant or beneficiary has been discharged, 

7 fined, suspended, expelled, disciplined, or discriminated 

8 against in violation of section 510, relief under this section 

9 may include enjoining such unlawful conduct and ordering 

10 such affirmative action as may be appropriate. Such ac11 tion may include, but is not limited to, reinstatement or 

12 hiring and an award of back pay and lost benefits.’’. 

13 SEC. 6. WAIVERS. 

14 Section 502 of the Employee Retirement Income Se15 curity Act of 1974 (29 U.S.C. 1132) (as amended by sec16 tion 5) is amended further by adding at the end the fol17 lowing new subsection: 

18 ‘‘(o)(1) The rights under this title (including the 

19 right to maintain a civil action) may not be waived, de20 ferred, or lost pursuant to any agreement not authorized 

21 under this title with specific reference to this paragraph. 

22 ‘‘(2)(A) Subject to subparagraph (B), paragraph (1) 

23 shall not apply to an agreement providing for arbitration 

24 or participation in any other non-judicial procedure to re25 solve a dispute if the agreement is entered into knowingly
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1 and voluntarily by the parties involved after the dispute 

2 has arisen or is pursuant to the terms of a collective bar3 gaining agreement. 

4 ‘‘(B)(i) No waiver under subparagraph (A) of partici5 pation in an employee benefit plan may be considered 

6 knowing and voluntary if related, in whole or in part, to 

7 the misclassification or reclassification of an individual in 

8 one or more categories ineligible for participation in the 

9 plan. 

10 ‘‘(ii) The party asserting the validity of a waiver 

11 under subparagraph (A) shall have the burden of proving 

12 that the waiver was knowing and voluntary. 

13 ‘‘(iii) A waiver under subparagraph (A) shall not im14 pose any limitation, including any condition precedent or 

15 penalty, adversely affecting the right of an individual to 

16 challenge the waiver by bringing a civil action in a court 

17 of competent jurisdiction. Any provision requiring an indi18 vidual to tender back consideration received and any provi19 sion allowing employers, plan sponsors, and fiduciaries (in20 cluding administrators, officers, trustees, and custodians) 

21 to recover attorney’s fees or damages because of the filing 

22 of a civil action shall be treated as limitations referred 

23 to in the preceding sentence. Nothing in this clause shall 

24 be construed as precluding recovery of a reasonable attor-
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1 ney’s fee or costs of action that may be authorized under 

2 subsection (g)(1). 

3 ‘‘(iv) No individual who brings a civil action shall be 

4 required to tender back any consideration given in ex5 change for a waiver under subparagraph (A) before bring6 ing such civil action. The retention of any consideration 

7 received in exchange for any waiver shall not constitute 

8 ratification of a waiver under subparagraph (A) or fore9 close a challenge thereto. 

10 ‘‘(v) No waiver otherwise permitted under subpara11 graph (A) may affect the Secretary’s rights and respon12 sibilities to enforce this title. No waiver may be used to 

13 justify interfering with the protected right of any person 

14 to participate in an investigation or proceeding conducted 

15 by the Secretary.’’. 

16 SEC. 7. GENERAL PROVISIONS. 

17 (a) IN GENERAL.—Except as otherwise provided in 

18 this Act, the amendments made by this Act shall apply 

19 with respect to plan years beginning on or after January 

20 1, 2004. 

21 (b) SPECIAL RULE FOR COLLECTIVELY BARGAINED

22 PLANS.—In the case of a plan maintained pursuant to one 

23 or more collective bargaining agreements between em24 ployee representatives and one or more employers ratified 

25 on or before the date of the enactment of this Act, sub-
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1 section (a) shall be applied to benefits pursuant to, and 

2 individuals covered by, any such agreement by substituting 

3 for ‘‘January 1, 2004’’ the date of the commencement of 

4 the first plan year beginning on or after the earlier of—

5 (1) the later of—

6 (A) January 1, 2005; or 

7 (B) the date on which the last of such col8 lective bargaining agreements terminates (de9 termined without regard to any extension there10 of after the date of the enactment of this Act); 

11 or 

12 (2) January 1, 2006. 

13 (c) PLAN AMENDMENTS.—If any amendment made 

14 by this Act requires an amendment to any plan, such plan 

15 amendment shall not be required to be made before the 

16 first plan year beginning on or after January 1, 2005, if—

17 (1) during the period after such amendment 

18 made by this Act takes effect and before such first 

19 plan year, the plan is operated in good faith compli20 ance with the requirements of such amendment 

21 made by this Act; and 

22 (2) such plan amendment applies retroactively 

23 to the period after such amendment made by this 

24 Act takes effect and before such first plan year.

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