Opinion ID: 758774
Heading Depth: 2
Heading Rank: 1

Heading: Standing Under ERISA

Text: 9 We review a denial of ERISA benefits de novo unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan. See Estate of Shockley v. Alyeska Pipeline Service Co., 130 F.3d 403, 405 (9th Cir.1997), (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956, 103 L.Ed.2d 80 (1989)). If the plan gives the administrator or fiduciary discretionary authority, we review the denial of benefits for abuse of discretion. Estate of Shockley, 130 F.3d at 405; Parker v. BankAmerica Corp., 50 F.3d 757, 763 (9th Cir.1995). 10 The PG & E pension and retirement plans in effect in 1989, 1993, and 1994 grant the plan administrator the authority to make such computations, interpretations, and decisions as may be necessary or desirable for the proper administration of the PLAN. CR-38, Ex. N, p. 82; CR-55; Ex. D., p. 19; CR-55, Ex. E. p. 12. This grant of discretionary authority would, under ordinary circumstances, require an abuse of discretion review. However, in this case, the retirement plan incorporated by reference the determination of benefits based upon an interpretation of I.R.C. § 414(n), defining leased employees. The interpretation of § 414(n) is a question of law which we review de novo. See Jeldness v. Pearce, 30 F.3d 1220, 1222 (9th Cir.1994) (Statutory interpretation is a question of law reviewed de novo.); Spink v. Lockheed Corp., 125 F.3d 1257, 1260 (9th Cir.1997) (interpretation of ERISA, a federal statute, is reviewed de novo). 11 In addition, the district court found that plaintiffs lacked standing to challenge the denial of benefits under both the health and severance plans. Thus, the latter ruling presents solely a question of law.
12 In order to have standing to bring a civil action under ERISA, the plaintiff must be a participant in or beneficiary of an ERISA plan. See 29 U.S.C. § 1132(a)(1)(B) (1996); Freeman v. Jacques Orthopaedic and Joint Implant Surgery Medical Group, Inc., 721 F.2d 654, 655 (9th Cir.1983). The applicable statute, 29 U.S.C. § 1002(7), defines participant as any employee or former employee ... who is or may become eligible to receive a benefit of any type from an employee benefit plan.... A former employee may qualify as a participant under ERISA if he has a reasonable expectation of returning to covered employment or ... a colorable claim to vested benefits. Firestone, 489 U.S. at 117, 109 S.Ct. 948 (internal quotations omitted); 2 see Curtis v. Nevada Bonding Corp., 53 F.3d 1023, 1027 (9th Cir.1995). 13 As the district court noted, none of the plaintiffs was an employee of PG & E at the time they filed their suit. 3 It is also clear that the plaintiffs do not have any reasonable expectation at this point of returning to employment with PG & E. Therefore, the plaintiffs must establish that they have a colorable claim to vested benefits under the various PG & E plans in order to have standing. 14
15 The district court concluded the plaintiffs have no colorable claim to vested benefits, and thus lacked standing to sue under the pension and retirement plans because the plaintiffs were expressly excluded from the plans' coverage. In reaching that conclusion, the district court found the plaintiffs satisfied the definition of leased employees set forth in I.R.C. § 414(n), 26 U.S.C. § 414(n) (1996). 16 The PG & E pension and retirement plans offer benefits to PG & E employees, but provides that a 'leased employee,' as defined in Section 414(n)(2) of the Internal Revenue Code, shall not be considered an EMPLOYEE eligible to become a PARTICIPANT in the PLAN. During the time in question, § 414(n) provided: 17 [T]he term leased employee means any person who is not an employee of the recipient and who provides services to the recipient if-- 18 (A) such services are provided pursuant to an agreement between the recipient and any other person (in this subsection referred to as the leasing organization), 19 (B) such person has performed such services for the recipient ... on a substantially full-time basis for a period of at least 1 year, and 20 (C) such services are of a type historically performed, in the business field of the recipient, by employees. 21 26 U.S.C. § 414(n) (1994) (emphasis added). 22 In 1996, Congress amended § 414(n) by replacing the historically performed language of subsection (C) with such services are performed under primary direction or control by the recipient. 26 U.S.C. § 414(n) (1996). Neither version of § 414(n) nor the Internal Revenue Code defines employee, and accordingly the common-law definition of employee should be used in its place. See Rev.Rul. 87-41, 1987-1 C.B. 298 (An individual is an employee ... if the individual has the status of an employee under the usual common law rules applicable in determining the employer-employee relationship.); Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992) ([W]e adopt a common-law test for determining who qualifies as an 'employee' under ERISA....). Therefore, under the plain meaning of § 414(n), a leased employee is any person who: (1) is not a common-law employee of the recipient, and (2) satisfies the three enumerated requirements. In other words, a common-law employee of the recipient cannot qualify as a leased employee under § 414(n). 23 The plain meaning of § 414(n) is supported by the legislative history of the 1996 amendment: 24 As under present law, the determination of whether someone is a leased employee is made after determining whether the individual is a common-law employee of the recipient. Thus, an individual who is not a common-law employee of the service recipient could nevertheless be a leased employee of the service recipient. Similarly, the fact that a person is or is not found to perform services under primary direction or control of the recipient for purposes of the employee leasing rules is not determinative of whether the person is or is not a common-law employee of the recipient. 4 25 S.Rep. No. 104-281, at 93, reprinted in 1996 U.S.C.C.A.N. 1567 (emphasis added). 26 The district court erroneously concluded that the plaintiffs were leased employees under § 414(n) even assuming they qualified as common-law employees. In so doing, the district court did not believe the term employee in § 414(n) was intended to include common-law employees. We think the plain wording of the statute contradicts this finding. Furthermore, the legislative history for the 1996 amendment to § 414(n) belies this conclusion. Congress expressly stated that the determination of whether an individual employee is a common-law employee must be made before the determination of whether the individual is a leased employee. Id. Additionally, the Supreme Court has held that to determine who is an employee under ERISA, courts should use the common-law test as set forth in Community for Creative Non-Violence v. Reid, 490 U.S. 730, 751-52, 109 S.Ct. 2166, 104 L.Ed.2d 811 (1989). See Darden, 503 U.S. at 323-24, 112 S.Ct. 1344. 5 27 The district court also concluded that to read employee to include common-law employee would create a resulting anomaly that Congress could not have intended. The district court stated: [I]f the plaintiffs' interpretation of § 414(n)(2) is to be accepted, the leased employee category is reduced to the virtual null set of those employees who work under the supervision and direction of an employer and yet are not common law employees of the employer. Burrey v. Pacific Gas & Electric Co., No. C-95-4638, slip op. at 11 (N.D.Cal. May 2, 1997). This, the district court found, could not have been Congress' intended result. 28 We believe the district court's reasoning is flawed in two ways. First, the primary direction or control requirement under § 414(n) was added in 1996; the plaintiffs' claims are for benefits allegedly owed to them between 1988 and 1994. Therefore, the wording of the prior § 414(n) is controlling in this analysis. Second, the district court mistakenly equates the common-law test of employee status with the primary direction and control element added by the 1996 amendment. 6 Whether an employer has primary direction and control over the individual is only one of the twenty factors used to determine common-law employment status. See Reid, 490 U.S. at 751, 109 S.Ct. 2166. Additionally, the district court's interpretation effectively renders superfluous the phrase who is not an employee in § 414(n). In interpreting a statutory provision, we must avoid any construction that renders some of its language superfluous. See Hearn v. Western Conference of Teamsters Pension Trust Fund, 68 F.3d 301, 304 (9th Cir.1995); see also Security Pacific Nat. Bank v. Resolution Trust Corp., 63 F.3d 900, 905 (9th Cir.1995). 29 We also reject the district court's interpretation of and reliance upon Abraham v. Exxon Corp., 85 F.3d 1126 (5th Cir.1996) to support its holding. The district court read Abraham to implicitly hold that common-law employees can be properly excluded from a benefit plan as leased employees. At issue in Abraham was whether employers are forbidden from discriminating against leased employees when designing an ERISA plan. The Fifth Circuit merely assumed that the individuals were leased employees, and concluded that an employer may bar leased employees from participating in its ERISA plan. Id. at 1130. In this case, the question is not whether PG & E can bar a leased employee from participating in its ERISA plans. Rather, the question is whether the plaintiffs qualify as common-law employees under § 414(n). 7 30 We hold that employee as used in § 414(n) means common-law employee and an individual's employment status under § 414(n) should be determined using the twenty-factor test adopted in Darden. We do not address here whether the plaintiffs could qualify as common-law employees. Instead, we merely conclude that the district court erred by not considering whether the plaintiffs qualified as common-law employees as a threshold determination of whether the plaintiffs were leased employees under § 414(n). We therefore reverse the district court's order and remand this issue in order that the district court may make a determination of the plaintiffs' employment status under § 414(n).
31 In order to have standing to sue under PG & E's health plan, the plaintiffs must establish that they have a colorable claim of right to vested benefits under that plan. See Firestone, 489 U.S. at 117, 109 S.Ct. 948. The district court found that the plaintiffs lacked standing because (1) health benefits are not vested benefits under ERISA, and (2) the plaintiffs had not participated in the health plan. 32 Health care benefits are included within the term welfare benefits, which are not subject to the same minimum vesting requirements under ERISA as pension benefits. See West v. Greyhound Corp., 813 F.2d 951, 954 (9th Cir.1987). However, this does not mean that the plaintiffs cannot have a colorable claim to accrued or vested benefits under the plan. The plaintiffs are not asserting that they are entitled to health plan benefits for medical expenses incurred after their period of employment. Instead, the plaintiffs contend that as common-law employees of PG & E, they had been automatically enrolled in the medical plan and therefore entitled to reimbursement for medical expenses the plaintiffs incurred during their employment at the Center, the same as the regular PG & E employees received. In a more general sense, then, the plaintiffs are claiming a right to a benefit, i.e. reimbursement for medical expenses incurred as employees enrolled under the plan, to which any PG & E employee enrolled in the plan would be entitled. 33 Under the terms of the Basic Health Plan, if the plaintiffs qualify as common-law employees, then they were automatically enrolled in the plan upon commencement of their employment, and thus participants in the health plan. 8 The PG & E Basic Health Plan provides: 3. PARTICIPATION 34 a. Except as specified in Section 3.b below, to become a PARTICIPANT, an EMPLOYEE must submit a completed ENROLLMENT FORM to the COMPANY within 31 days of becoming an EMPLOYEE.... 35 b. An EMPLOYEE shall automatically be enrolled in the PLAN without DEPENDENT coverage on the first day of employment with the COMPANY or an EMPLOYER. EMPLOYEE coverage shall continue until the date coverage commences under another COMPANY-offered medical plan following the EMPLOYEE'S election. 36 c. An EMPLOYEE who does not enroll in the PLAN when initially eligible, or who fails to submit a completed ENROLLMENT FORM during an open enrollment period designated by the COMPANY once each year, shall automatically be enrolled in the PLAN without DEPENDENT coverage. EMPLOYEE must wait until the next open enrollment period, as designated by the COMPANY once each year, before he may change plans and/or enroll his eligible DEPENDENTS. Such benefits shall become effective the following January 1. 37 The plan requires that in order to become eligible for more extensive health coverage, including dependent coverage, a PG & E employee must complete and return to the company an enrollment form. However, even in the absence of the enrollment form, each PG & E employee is automatically enrolled in a more basic health coverage plan that does not include dependent coverage. Therefore, if the district court determines that the plaintiffs qualify as common-law employees of PG & E under the Darden test, then the plaintiffs have a colorable claim to benefits, and thus have standing to sue for benefits under the health plan.
38 Unlike the health plan, PG & E's employees were not automatically enrolled in the severance plan. PG & E's 1993 and 1994 severance plans provide: INVOLUNTARY SEVERANCE PROGRAM 39 This option will be made available to all management and non-bargaining unit employees who are not offered a regular position by the end of the second 45-day redeployment period. Payment is dependent on the signing of the Severance Agreement and Release prior to the end of the second 45-day period, and the expiration of the seven-day revocation period. 40 CR-55, Ex. A, p. 14; Ex. B, p. 12. 41 These severance plans conditioned entitlement to severance benefits upon the timely completion of the Severance and Agreement Release. In other words, a PG & E employee could not participate in the severance plan without first completing and returning this agreement. The plaintiffs do not contend they satisfied this requirement of the severance plans. In the absence of such participation, the plaintiffs, even if PG & E common-law employees, are not entitled to benefits under the severance plan, and thus do not have a colorable claim to benefits under the plan. Therefore, we agree with the district court that plaintiffs lack standing to sue for benefits under the severance plan.