II

106TH CONGRESS

2D SESSION S. 2946

To amend title I of 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 a miscategorization

of their employee status.

IN THE SENATE OF THE UNITED STATES

JULY 27, 2000

Mr. KENNEDY (for himself, Mr. TORRICELLI, and Mr. HARKIN) introduced

the following bill; which was read twice and referred to the Committee

on Health, Education, Labor, and Pensions

A BILL

To amend title I of 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 a miscategorization of their

employee 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 Eli5 gibility Fairness Act of 2000’’.
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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 employees to improperly ex8 clude them from employee benefit plans. Employees

9 are wrongly denied benefits when they are mis10 labeled as temporary employees, part-time employ11 ees, leased employees, agency employees, staffing

12 firm employees, and contractors. If their true em13 ployment status were recognized, mislabeled employ14 ees would be eligible to participate in employee ben15 efit plans because such plans are offered to other

16 employees performing the same or substantially the

17 same work and working for the same employer.

18 (2) Mislabeled employees are often paid through

19 staffing, temporary, employee leasing, or other simi20 lar firms to give the appearance that the employees

21 do not work for their worksite employer. Employ22 ment contracts and reports to government agencies

23 also are used to give the erroneous impression that

24 mislabeled employees work for staffing, temporary,

25 employee leasing, or other similar firms, when the

26 facts of the work arrangement do not meet the com-
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1 mon law standard for determining the employment

2 relationship. Employees are also mislabeled as con3 tractors and paid from non-payroll accounts to give

4 the appearance that they are not employees of their

5 worksite employer. These practices violate the Em6 ployee Retirement Income Security Act of 1974.

7 (3) Employers are amending their benefit plans

8 to add provisions that exclude mislabeled employees

9 from participation in the plan even in the event that

10 such employees are determined to be common law

11 employees and otherwise eligible to participate in the

12 plan. These plan provisions violate the Employee Re13 tirement Income Security Act of 1974.

14 (4) As a condition of employment or continued

15 employment, mislabeled employees are often required

16 to sign documents that purport to waive their right

17 to participate in employee benefit plans. Such docu18 ments inaccurately claim to limit the authority of

19 the courts and applicable Federal agencies to correct

20 the mislabeling of employees and to enforce the

21 terms of plans providing for their participation. This

22 practice violates the Employee Retirement Income

23 Security Act of 1974.

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

25 applicable provisions of the Employee Retirement Income
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1 Security Act of 1974 to ensure that employees are not im2 properly excluded from participation in employee benefit

3 plans as a result of mislabeling of their employment sta4 tus.

5 SEC. 3. ADDITIONAL STANDARDS RELATING TO MINIMUM

6 PARTICIPATION REQUIREMENTS.

7 (a) REQUIRED INCLUSION OF SERVICE.—Section

8 202(a)(3) of the Employee Retirement Income Security

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

10 at the end the following new subparagraph:

11 ‘‘(E) For purposes of this section, in determining

12 ‘years of service’ and ‘hours of service’, service shall in13 clude all service for the employer as an employee under

14 the common law, irrespective of whether the worker—

15 ‘‘(i) is paid through a staffing firm, temporary

16 help firm, payroll agency, employment agency, or

17 other such similar arrangement,

18 ‘‘(ii) is paid directly by the employer under an

19 arrangement purporting to characterize an employee

20 under the common law as other than an employee,

21 or

22 ‘‘(iii) is paid from an account not designated as

23 a payroll account.’’

24 (b) EXCLUSION PRECLUDED WHEN RELATED TO

25 CERTAIN PURPORTED CATEGORIZATIONS.—Section 202
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1 of such Act (29 U.S.C. 1052) is amended further by add2 ing at the end the following new subsection:

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

4 be treated as failing to meet the requirements of this sec5 tion if any individual who—

6 ‘‘(A) is an employee under the common law,

7 and

8 ‘‘(B) performs the same work (or substantially

9 the same work) for the employer as other employees

10 who generally are not excluded from participation in

11 the plan,

12 is excluded from participation in the plan, irrespective of

13 the placement of such employee in any category of workers

14 (such as temporary employees, part-time employees, leased

15 employees, agency employees, staffing firm employees,

16 contractors, or any similar category) which may be speci17 fied under the plan as ineligible for participation.

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

19 preclude the exclusion from participation in a pension plan

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

21 period or minimum age which is required under the terms

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

23 requirements of this section.’’
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1 SEC. 4. WAIVERS OF PARTICIPATION INEFFECTIVE IF RE2 LATED TO MISCATEGORIZATION OF EM3 PLOYEE.

4 Section 202 of the Employee Retirement Income Se5 curity Act of 1974 (29 U.S.C. 1052) (as amended by sec6 tion 3) is amended further by adding at the end the fol7 lowing new subsection:

8 ‘‘(d) Any waiver or purported waiver by an employee

9 of participation in a pension plan or welfare plan shall

10 be ineffective if related, in whole or in part, to the

11 miscategorization of the employee in 1 or more ineligible

12 plan categories.’’

13 SEC. 5. OBJECTIVE ELIGIBILITY CRITERIA IN PLAN IN14 STRUMENTS.

15 Section 402 of the Employee Retirement Income Se16 curity Act of 1974 (29 U.S.C. 1102) is amended by adding

17 at the end the following new subsection:

18 ‘‘(c)(1) The written instrument pursuant to which an

19 employee benefit plan is maintained shall set forth eligi20 bility criteria which—

21 ‘‘(A) include and exclude employees on a uni22 form basis;

23 ‘‘(B) are based on reasonable job classifications;

24 and

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

26 the instrument itself for the inclusion or exclusion
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1 (other than the mere listing of an employee as in2 cluded or excluded).

3 ‘‘(2) No plan instrument may permit an employer or

4 plan sponsor to exclude an employee under the common

5 law from participation irrespective of the placement of

6 such employee in any category of workers (such as tem7 porary employees, leased employees, agency employees,

8 staffing firm employees, contractors, or any similar cat9 egory) if the employee—

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

11 common law,

12 ‘‘(B) performs the same work (or substantially

13 the same work) for the employer as other employees

14 who generally are not excluded from participation in

15 the plan, and

16 ‘‘(C) meets a minimum service period or min17 imum age which is required under the terms of the

18 plan.’’

19 SEC. 6. ENFORCEMENT.

20 Section 502(a)(3)(B) of the Employee Retirement In21 come Security Act of 1974 (29 U.S.C. 1132(a)(3)(B)) is

22 amended—

23 (1) by striking ‘‘or’’ in clause (i) and inserting

24 a comma,
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1 (2) by striking the semicolon at the end of

2 clause (ii) and inserting ‘‘, or’’, and

3 (3) by adding at the end the following: ‘‘(iii) to

4 provide relief to employees who have been

5 miscategorized in violation of sections 202 and

6 402;’’.

7 SEC. 7. EFFECTIVE DATE.

8 The amendments made by this Act shall apply with

9 respect to plan years beginning on or after the date of

10 the enactment of this Act.

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