Opinion ID: 759514
Heading Depth: 2
Heading Rank: 2

Heading: The Department of Labor Regulations

Text: 25 Watson also claims that the Department of Labor's regulations are ultra vires and inconsistent with ERISA. A federal regulation in conflict with a federal statute is invalid as a matter of law. See Chemical Mfrs. Ass'n v. Natural Resources Defense Council, Inc., 470 U.S. 116, 126, 105 S.Ct. 1102, 1108, 84 L.Ed.2d 90 (1985). In order to determine whether these regulations conflict with ERISA, we must first examine the plain meaning of the pertinent language of ERISA. See id. In interpreting the plain meaning of a statute, even one in which Congress has delegated its legislative authority to a particular agency, it must be determined whether Congress has spoken directly to the issue. See Matinchek v. John Alden Life Ins. Co., 93 F.3d 96, 100 (3rd Cir.1996); accord Chevron U.S.A. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). 26 The plain language of ERISA is ambiguous with respect to the classification of a dual status employer/employee. ERISA, which states only that an employee is any individual employed by an employer, 29 U.S.C. § 1002(6), provides scarcely a hint as to whether an insurance plan covering only a business owner and his or her immediate family members can qualify as an employee welfare benefit plan. Matinchek, 93 F.3d at 100. 27 In anticipation of the need to fill such gaps, Congress authorized the Secretary of Labor to prescribe regulations as he finds necessary or appropriate to carry out the provisions of this [ERISA] subchapter. 29 U.S.C. § 1135 (1988). Pursuant to this authority, the Secretary issued the regulation in question, 29 C.F.R. § 2510, which clearly does not conflict with the plain meaning of the statute. 28 Moreover, these regulations are reasonable. On judicial review, we can only ask whether the rule representing the agency's construction was reasonable or reasonably defensible. Sure-Tan, Inc. v. NLRB, 467 U.S. 883, 891, 104 S.Ct. 2803, 2808, 81 L.Ed.2d 732 (1984) (referencing definition of employee constructed by National Labor Relations Board); accord Chevron, 467 U.S. at 844, 104 S.Ct. at 2782, 81 L.Ed.2d 694. These regulations are clearly reasonable. They properly serve the congressional purpose to the extent ascertainable from the text and legislative history. 29 ERISA Title I was adopted by Congress in 1974, in part, to remedy abuses by employers who manage pension plan assets held in trust for workers in traditional employer-employee relationships. 7 Schwartz v. Gordon, 761 F.2d 864, 868 (2nd Cir.1985) (citing S.Rep. No. 127 at 3-5 (1994), reprinted in 1974 U.S.C.C.A.N. 4639, 4838, 4839-42). Congress recognized that workers, i.e., traditional employees, are vulnerable to abuse by employers because employers typically maintain exclusive control over the pension funds of their employees. In contrast, a self-employed individual such as Watson, has complete control over the amount, investment and form of the fund because he voluntarily creates and manages it for his own retirement. Congress had no reason to extend ERISA coverage to self-employed owners such as Watson. 8 Self interest provides adequate protection. Therefore, it was reasonable for the Department of Labor to exclude self-employed sole shareholders from its definition of employees for purposes of ERISA. 30 The case law supports this conclusion. As the Third Circuit recently noted, [i]t strikes us that the Department of Labor's regulations are eminently reasonable. The regulations are consistent with the goals of ERISA and with a common sense understanding of the terms 'employer' and 'employee.'  Matinchek, 93 F.3d at 100; accord Kwatcher v. Massachusetts Serv. Employees Pension Fund, 879 F.2d 957 (1st Cir.1989); Schwartz, 761 F.2d 864. 31 The regulations, to repeat, are reasonable and deserve our deference.