Opinion ID: 172853
Heading Depth: 2
Heading Rank: 2

Heading: The Plan Administrator's Interpretation of the Plan

Text: When reviewing a plan administrator's decision to deny benefits, we consider only the rationale asserted by the plan administrator in the administrative record and determine whether the decision, based on the asserted rationale, was arbitrary and capricious. Id. (internal quotation marks, alterations omitted) (quoting Flinders, 491 F.3d at 1190). We make that determination based on the language of the plan. Id. Where the plan administrator's decision relies on an interpretation of the language in the plan, as it does here, we begin by considering whether the provision is ambiguous; if the plan documents, examined as a whole, are unambiguous, we construe them as a matter of law. Id. (internal quotations omitted). `Ambiguity exists where a plan provision is reasonably susceptible to more than one meaning, or where there is uncertainty as to the meaning of the term.' Miller v. Monumental Life Ins. Co., 502 F.3d 1245, 1250 (10th Cir.2007) (quoting Admin. Comm. of Wal-Mart Assocs. Health & Welfare Plan v. Willard, 393 F.3d 1119, 1123 (10th Cir. 2004)). In order to determine whether the plan is ambiguous, we `consider the common and ordinary meaning as a reasonable person in the position of the plan participant... would have understood the words to mean.' Weber, 541 F.3d at 1011 (quoting Miller, F.3d at 1250) (further quotation, emphasis omitted). If a plan provision is ambiguous, under the arbitrary and capricious standard, then we take a hard look and determine whether the plan administrator's interpretation of the ambiguous language was arbitrary in light of [the administrator's] conflict of interest. Id. (internal quotation omitted). However, if the plan provision is unambiguous, and the plan administrator's interpretation differs from the unambiguous meaning, then the plan administrator's interpretation is unreasonable, and the decision to deny benefits based on that interpretation is arbitrary and capricious. Flinders, 491 F.3d at 1193.
The ExxonMobil Pension Plan [6] provides that generally a person acquires a matured right to a Pension Benefit at the time of termination if the person was a covered employee  and the person has completed sufficient years of service. [7] (Aplt.App.84.). The Common Provisions [8] applicable to the Pension Plan define a covered employee, in general, as a qualifying employee ... of a participating employer. ( Id. at 302 (emphasis omitted.)) The definitions of qualifying employee and participating employer incorporate further definitions: a qualifying employee is defined, in general, as any employee of a participating employer who ... is both a regular employee and a domestic-type employee [9] ( Id. at 312-13); and a participating employer is, in general, ExxonMobil and any service-oriented employer that has elected to participate in one or more of the benefit plans. [10] (2 Aplt.App. 311.) Therefore, ultimately, a covered employee is, generally, a full-time employee of ExxonMobil who is compensated in U.S. Dollars and is regularly stationed in the United States or Canada. Despite all of these definitions, the pivotal term employee is never specifically defined, and neither was the term defined in any previous version of the Plans. (The Plan asserts that only a person who was on ExxonMobil's payroll meets the definition of an employee under the benefit plans) (Aple. Br. at 44); to the contrary, Scruggs argues that the term employee has a broader scope that reaches common-law employees, as defined under Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992), and possibly extends still more widely. [11] To be sure, each of the interpretations proposed by the parties is plausible, and the benefit plans neither specifically include nor exclude common-law employees. Furthermore, a holistic reading of the plan documents is equivocal. On the one hand, the plan documents' specific exclusion of certain individuals who would not be on ExxonMobil's payroll, such as leased employees and some special-agreement person[s], could imply that absent the exclusion they might fall under the definition of a qualifying employee even though they were not on ExxonMobil's payroll. On the other hand, the plan documents at least suggest that a person who is not paid through the established wage or salary system, i.e., the payroll system, could not accrue any benefits. [12] (Aplt.App.307.) It would make little sense to characterize as a covered employee a person who is not eligible to receive benefits because he or she was not on the payroll. Because the term employee is ambiguous and the plan documents as a whole do not establish a definitive interpretation, it is appropriate to proceed to consider the reasonableness of the administrator's exercise of his interpretive discretion.
The plan administrator concluded that the word employee was never intended as a legal term of art, but simply as a reference to persons that ordinary businessmen consider to be employees  that is, those on the payroll  as distinct from persons that ordinary businessmen would consider to be contractors, because that is how they are designated and treated in [ExxonMobil's] systems. ( Id. at 457.) The administrator supported his decision with reference to several factors. First, the design of [ExxonMobil's] benefits administration processes as they have existed for many years supported the fact that the pension plan was only intended to cover employees on ExxonMobil's payroll. ( Id. ) The administrator explained that [c]ontractors, including individual contractors, are paid through accounts payable on the basis of invoices submitted, not through the payroll system. However, only the payroll system has the interfaces and recordkeeping capabilities to track employee information essential to the administration of benefits. ( Id. ) For instance, only the payroll system can track elections and collect medical premiums, and savings plan contributions. Also, the payroll system tracks hours of service and hours of leave, which applies to the vesting rules and the amount of benefits accrued under the Pension Plan. Accordingly, it is completely impractical to provide benefits to persons who receive payments through accounts payable, rather than through the payroll system. ( Id. at 458.) And this inability to track pay to determine the amount of the benefit would be even more complicated when a person claiming eligibility for benefits was in fact paid by an outside vendor. Additionally, the administrator explained that [f]urther evidence of the fact that only persons on the payroll are intended to be covered by the Plans is the fact that benefits communications, such as periodic benefit statements and enrollment materials, are provided only to persons who are (or were) on the payroll. ( Id. ) Finally, the plan administrator explained that during his thirty-year career in human resources at ExxonMobil he was not aware of a case in which a person hired as an independent contractor or an employee of a third party providing services to [ExxonMobil] was provided benefits under [ExxonMobil's] plans. ( Id. ) Therefore, the plan administrator concluded that because [Scruggs] was not an employee within the meaning of that term as used in the Plans she was not eligible for benefits under the Plans. ( Id. )
The plan administrator interpreted the term employee as limited to individuals on ExxonMobil's payroll, a category that does not include all persons who might be considered employees under ERISA. Thus, the administrator considered it irrelevant whether Scruggs had in fact been a common-law employee of ExxonMobil. [13] ERISA does not prohibit an employer from distinguishing between groups or categories of employees in this way by providing benefits for some but not others. Bronk v. Mountain States Tel. & Tel., Inc., 140 F.3d 1335, 1338 (10th Cir.1998). Here, we conclude that the administrator's interpretation of the plan documents, distinguishing between persons who are or are not on ExxonMobil's payroll, was not arbitrary and capricious. As we previously noted, the plan documents do not define the word employee. Consequently, in reaching his decision, the plan administrator engaged in an analysis of the structure of the benefits administration system, the inability to track or determine benefits if a potential claimant was paid through accounts payable as an independent contractor or through an outside third-party contractor; he then determined that ExxonMobil never intended to cover such individuals. As the plan administrator noted, ExxonMobil never engaged in benefits communications with persons paid outside ExxonMobil's payroll system and never provided benefits to independent contractors or persons who provided services pursuant to a third-party agreement. All of this evidence supports the finding that the administrator's interpretation was not an abuse of discretion. [14] Cf. MacLachlan v. ExxonMobil Corp., 350 F.3d 472, 481-82 (5th Cir.2003) (holding that, under a similar benefits plan to the plan at issue, an administrator's interpretation of the term employee as only including workers that were on the employer's payroll irrespective of whether they may be a common law employee was not an abuse of discretion), aff'd, Glenn, ___ U.S. ___, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008). Scruggs's contention that Vizcaino v. Microsoft Corp., 97 F.3d 1187 (9th Cir. 1996) ( Microsoft I ), vacated by Vizcaino v. Microsoft Corp., 120 F.3d 1006 (9th Cir.1997) (en banc) ( Microsoft II ), undermines the reasonableness of the administrator's decision is unpersuasive. In that case, plaintiffs, individuals who had been determined to be common-law employees by the IRS, claimed benefits under Microsoft's savings and stock purchase plans even though they were paid through Microsoft's accounts payable rather than payroll department. The ERISA plan restricted participating employees to any common-law employee ... who is on the... payroll of the employer. Microsoft I, 97 F.3d at 1192 (emphasis omitted). In Microsoft I, a panel of the Ninth Circuit, reviewing the plan's denial de novo and employing the rule of contra proferentem, rejected Microsoft's interpretation that the term employee excluded persons who Microsoft thought were freelancers or independent contractors, and who were paid through accounts payable, but who were later determined by IRS to be common-law employees who should have been paid through the regular payroll system. The case at bar is readily distinguishable from Microsoft I. Here, we are employing a deferential standard of review and therefore the rule of contra proferentem is inapplicable. [15] See Kimber v. Thiokol Corp., 196 F.3d 1092, 1100 (10th Cir.1999). Further, the Plan definitions are different.