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 pen-
sion plans and welfare plans based on the misclassification or reclassifica-
tion 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 wel-
fare plans based on the misclassification or reclassifica-
tion of their status.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Employee Benefits 
Protection Act of 2003’’.
SEC. 2. FINDINGS AND PURPOSE. 
(a) FINDINGS.—Congress makes the following find-
ings: 
(1) The intent of the Employee Retirement In-
come Security Act of 1974 to protect the pension 
and welfare benefits of workers is frustrated by the 
practice of mislabeling or relabeling employees to im-
properly exclude them from employee benefit plans. 
Employees are wrongly denied benefits when they 
are misclassified or reclassified as temporary em-
ployees, part-time employees, leased employees, 
agency employees, staffing firm employees, and inde-
pendent contractors. If their true employment status 
were recognized, these misclassified and reclassified 
employees would be eligible to participate in em-
ployee pension and welfare benefit plans because 
such plans are offered to other employees per-
forming the same or substantially the same work 
and working for the same employer. 
(2) Mislabeled employees are often paid through 
staffing, temporary, employee leasing, or other simi-
lar firms to give the appearance that the employees 
do not work for their employer. Employment con-
tracts and reports to government agencies also are 
used to give the erroneous impression that mis-
labeled employees work for staffing, temporary, em-
ployee leasing, or other similar firms, when the facts 
of the work arrangement do not meet the common 
law standard for determining the employment rela-
tionship. Employees are also mislabeled as contrac-
tors and paid from non-payroll accounts to give the 
appearance that they are not employees of their em-
ployer. These practices violate the Employee Retire-
ment Income Security Act of 1974. 
(3) Employers are amending their employee 
benefit plans to add provisions that exclude mis-
labeled employees from participation in the plan 
even in the event that such employees are deter-
mined to be common law employees and otherwise 
eligible to participate in the plan. These plan provi-
sions violate the Employee Retirement Income Secu-
rity Act of 1974. 
(4) As a condition of employment or continued 
service, employees are often required to sign docu-
ments that purport to waive their right to partici-
pate in employee benefit plans. Such documents in-
accurately claim to limit the authority of the courts 
and applicable Federal agencies to correct the 
mislabeling and relabeling of employees and to en-
force the terms of plans providing for their partici-
pation. This practice violates the Employee Retire-
ment Income Security Act of 1974. 
(5) As a condition of continued employment or 
service, employees are often required to sign docu-
ments that purport to waive their right to bring a 
lawsuit under the Employee Retirement Income Se-
curity Act of 1974. Such documents inaccurately 
claim to limit the ability of the courts and applicable 
Federal agencies to obtain any payments or benefits 
in the event that the waiver is found not to be know-
ing and voluntary. This practice violates the Em-
ployee Retirement Income Security Act of 1974. 
(b) PURPOSE.—The purpose of this Act is to clarify 
applicable provisions of the Employee Retirement Income 
Security Act of 1974 to ensure that employees are not im-
properly excluded from participation in employee benefit 
plans as a result of mislabeling or reclassifying their em-
ployment status. 
SEC. 3. ADDITIONAL STANDARDS RELATING TO MINIMUM 
PARTICIPATION REQUIREMENTS. 
(a) REQUIRED INCLUSION
OF SERVICE.—Section 
202(a)(3) of the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1052(a)(3)) is amended by adding 
at the end the following new subparagraph:
‘‘(E) For purposes of this section, in determining 
years of service and hours of service—
‘‘(i) service shall include all service for the em-
ployer as an employee under the common law, irre-
spective of whether the individual—
‘‘(I) is paid through a staffing firm, tem-
porary help firm, payroll agency, employment 
agency, or other such similar arrangement, 
‘‘(II) is paid directly by the employer 
under an arrangement purporting to charac-
terize an employee under the common law as 
other than an employee, or 
‘‘(III) is paid from an account not des-
ignated as a payroll account, and 
‘‘(ii) in any case in which an employer, plan 
sponsor, or fiduciary (including any administrator, 
officer, trustee, or custodian) changes the job classi-
fication of any person from employee to leased em-
ployee, agency employee, staffing firm employee, 
independent contractor, or any similar category, in 
determining years of service and hours of service, 
service shall include all service for the employer that 
the person performs subsequent to such reclassifica-
tion.’’.
(b) EXCLUSION PRECLUDED WHEN RELATED TO 
CERTAIN PURPORTED CATEGORIZATIONS.—Section 202 
of such Act (29 U.S.C. 1052) is amended further by add-
ing at the end the following new subsection: 
‘‘(c)(1) Subject to paragraph (2), a pension plan shall 
be treated as failing to meet the requirements of this sec-
tion if the plan excludes from participation any person 
who performs the same work (or substantially the same 
work) for the employer as other employees who generally 
are not excluded from participation in the plan, irrespec-
tive of the placement of such person in any category of 
workers (such as temporary employees, part-time employ-
ees, leased employees, agency employees, staffing firm em-
ployees, independent contractors, or any similar category) 
which may be specified under the plan as ineligible for 
participation. 
‘‘(2) Nothing in paragraph (1) shall be construed to 
preclude the exclusion from participation in a pension plan 
of individuals who in fact do not meet a minimum service 
period or minimum age which is required under the terms 
of the plan and which is otherwise in conformity with the 
requirements of this section.’’.
SEC. 4. OBJECTIVE ELIGIBILITY CRITERIA IN PLAN IN-
STRUMENTS. 
Section 402 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1102) is amended by adding 
at the end the following new subsection: 
‘‘(d)(1) The written instrument pursuant to which an 
employee benefit plan is maintained shall set forth eligi-
bility criteria which—
‘‘(A) include and exclude employees on a uni-
form basis; 
‘‘(B) are based on reasonable job classifications 
other than the mere labeling of a job position as 
something other than an employee; and 
‘‘(C) are based on objective criteria stated in 
the instrument itself for the inclusion or exclusion 
(other than the mere listing of an employee as in-
cluded or excluded). 
‘‘(2) No employee benefit plan may permit an em-
ployer or plan sponsor to exclude any person from partici-
pation irrespective of the placement of such employee in 
any category of workers (such as temporary employees, 
leased employees, agency employees, staffing firm employ-
ees, contractors, or any similar category), if the em-
ployee—
‘‘(A) is an employee of the employer under the 
common law;
‘‘(B) performs the same work (or substantially 
the same work) for the employer as other employees 
who generally are not excluded from participation in 
the plan; and 
‘‘(C) meets a minimum service period or min-
imum age which is required under the terms of the 
plan. 
‘‘(3) In any case in which the employer of an indi-
vidual who is a participant in an employee benefit plan, 
the plan sponsor of such plan, or a fiduciary of such plan 
requires such individual to convert to the status of a tem-
porary employee, leased employee, agency employee, staff-
ing firm employee, contractor, or any similar category as 
a condition of continuing in the service of the employer, 
such individual shall not cease to be treated under such 
plan or this title as a participant in such plan by reason 
of such conversion.’’. 
SEC. 5. ENFORCEMENT. 
Section 502 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1132) is amended—
(1) in paragraphs (3)(B) and (5)(B) of sub-
section (a), by striking ‘‘other appropriate equitable 
relief’’ and inserting ‘‘other appropriate relief, in-
cluding such additional relief as a court of equity 
might have awarded in a case involving the enforce-
ment or administration of a trust, other equitable 
relief, compensatory relief, or remedial relief’’; 
(2) in subsection (a)(3)(B), by striking ‘‘or’’ at 
the end of clause (i) and inserting a comma, by 
striking the semicolon at the end of clause (ii) and 
inserting ‘‘, or’’, and by adding at the end the fol-
lowing: ‘‘(iii) to provide restitution and other appro-
priate relief to employees who have been excluded 
from participation or have been misclassified or re-
classified in violation of section 202 or 402’’; 
(3) by striking ‘‘or’’ at the end of subsection 
(a)(8), by striking the period at the end of sub-
section (a)(9) and inserting ‘‘; or’’, and by adding at 
the end the following new paragraph: 
‘‘(10) by a participant or beneficiary to obtain 
a judicial declaration concerning whether a waiver of 
rights arising under this title or a plan, including a 
waiver of participation in a plan, was knowing and 
voluntary under the totality of the circumstances.’’; 
(4) in subsection (g)(1), by inserting ‘‘, reason-
able expert fees,’’ before ‘‘and costs’’ and by insert-
ing before the period at the end the following: ‘‘, ex-
cept that the court shall award such fees and costs 
to a prevailing party in the case of an action 
brought to enforce section 510, unless the court de-
termines that it would be unjust to do so under the 
circumstances’’; and 
(5) by adding at the end of section 502 the fol-
lowing new subsection: 
‘‘(n) In an action under this section, if the court finds 
that any participant or beneficiary has been discharged, 
fined, suspended, expelled, disciplined, or discriminated 
against in violation of section 510, relief under this section 
may include enjoining such unlawful conduct and ordering 
such affirmative action as may be appropriate. Such ac-
tion may include, but is not limited to, reinstatement or 
hiring and an award of back pay and lost benefits.’’. 
SEC. 6. WAIVERS. 
Section 502 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1132) (as amended by sec-
tion 5) is amended further by adding at the end the fol-
lowing new subsection: 
‘‘(o)(1) The rights under this title (including the 
right to maintain a civil action) may not be waived, de-
ferred, or lost pursuant to any agreement not authorized 
under this title with specific reference to this paragraph. 
‘‘(2)(A) Subject to subparagraph (B), paragraph (1) 
shall not apply to an agreement providing for arbitration 
or participation in any other non-judicial procedure to re-
solve a dispute if the agreement is entered into knowingly
and voluntarily by the parties involved after the dispute 
has arisen or is pursuant to the terms of a collective bar-
gaining agreement. 
‘‘(B)(i) No waiver under subparagraph (A) of partici-
pation in an employee benefit plan may be considered 
knowing and voluntary if related, in whole or in part, to 
the misclassification or reclassification of an individual in 
one or more categories ineligible for participation in the 
plan. 
‘‘(ii) The party asserting the validity of a waiver 
under subparagraph (A) shall have the burden of proving 
that the waiver was knowing and voluntary. 
‘‘(iii) A waiver under subparagraph (A) shall not im-
pose any limitation, including any condition precedent or 
penalty, adversely affecting the right of an individual to 
challenge the waiver by bringing a civil action in a court 
of competent jurisdiction. Any provision requiring an indi-
vidual to tender back consideration received and any provi-
sion allowing employers, plan sponsors, and fiduciaries (in-
cluding administrators, officers, trustees, and custodians) 
to recover attorney’s fees or damages because of the filing 
of a civil action shall be treated as limitations referred 
to in the preceding sentence. Nothing in this clause shall 
be construed as precluding recovery of a reasonable attor-
ney’s fee or costs of action that may be authorized under 
subsection (g)(1). 
‘‘(iv) No individual who brings a civil action shall be 
required to tender back any consideration given in ex-
change for a waiver under subparagraph (A) before bring-
ing such civil action. The retention of any consideration 
received in exchange for any waiver shall not constitute 
ratification of a waiver under subparagraph (A) or fore-
close a challenge thereto. 
‘‘(v) No waiver otherwise permitted under subpara-
graph (A) may affect the Secretary’s rights and respon-
sibilities to enforce this title. No waiver may be used to 
justify interfering with the protected right of any person 
to participate in an investigation or proceeding conducted 
by the Secretary.’’. 
SEC. 7. GENERAL PROVISIONS. 
(a) IN GENERAL.—Except as otherwise provided in 
this Act, the amendments made by this Act shall apply 
with respect to plan years beginning on or after January 
1, 2004. 
(b) SPECIAL RULE FOR COLLECTIVELY BARGAINED 
PLANS.—In the case of a plan maintained pursuant to one 
or more collective bargaining agreements between em-
ployee representatives and one or more employers ratified 
on or before the date of the enactment of this Act, sub-
section (a) shall be applied to benefits pursuant to, and 
individuals covered by, any such agreement by substituting 
for ‘‘January 1, 2004’’ the date of the commencement of 
the first plan year beginning on or after the earlier of—
(1) the later of—
(A) January 1, 2005; or 
(B) the date on which the last of such col-
lective bargaining agreements terminates (de-
termined without regard to any extension there-
of after the date of the enactment of this Act); 
or 
(2) January 1, 2006. 
(c) PLAN AMENDMENTS.—If any amendment made 
by this Act requires an amendment to any plan, such plan 
amendment shall not be required to be made before the 
first plan year beginning on or after January 1, 2005, if—
(1) during the period after such amendment 
made by this Act takes effect and before such first 
plan year, the plan is operated in good faith compli-
ance with the requirements of such amendment 
made by this Act; and 
(2) such plan amendment applies retroactively 
to the period after such amendment made by this 
Act takes effect and before such first plan year.
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