Opinion ID: 391158
Heading Depth: 2
Heading Rank: 3

Heading: The DBL and ERISA

Text: 53 We turn finally to the question whether the DBL is preempted by ERISA. We do not consider this issue to be foreclosed in the Board's favor by our holding above concerning the validity of the HRL under ERISA. Unlike the HRL and the state statutes upheld against ERISA preemption in Minnesota and Mountain States, supra, the DBL does not merely forbid employers to discriminate against workers disabled through pregnancy, but instead affirmatively requires employers to provide minimum pregnancy benefits. Because the DBL thus differs from the pure antidiscrimination laws upheld in Minnesota and Mountain States, those decisions are not controlling with respect to it, and we must make an independent review of its validity. Cf. Mandel v. Bradley, supra, 432 U.S. at 176, 97 S.Ct. at 2240. 54 Nor is the issue of ERISA preemption foreclosed by our analysis of the validity of the HRL and DBL under the RLA. It is true that ERISA does not address problems of sex discrimination any more than does the RLA, so that the analysis of state and federal interests presented with respect to the RLA would apply with equal force to ERISA, absent any other indications of congressional intent. Unlike any provision of the RLA, however, ERISA § 514(a) explicitly addresses the preemption question. Thus, in considering that question, we cannot rely solely upon the general policy considerations which lead us to uphold the HRL and DBL under the RLA. Instead, we must seek to divine the intent of Congress as expressed in § 514(a). 55 The airlines' principal contention is that insofar as the DBL requires employers to provide minimum benefits for pregnancy-related disabilities, it relate(s) to employee benefit plans within the meaning of § 514(a) of ERISA and is therefore invalid. 21 The Board's principal response is that the DBL does not relate to such plans in the manner Congress contemplated, so that § 514(a) is inapplicable to it. The district court did not rule on this question; it held instead that ERISA § 4(b)(3) exempted the disputed portions of the airlines' plans from regulation under ERISA, so that ERISA § 514(a) had no bearing on the case. Our own views, however, compel us to begin with the proper construction of § 514(a). We agree with the plaintiffs that the section is broad enough to encompass the DBL. 56 Section 514(a) explicitly preempts any and all State laws insofar as they may now or hereafter relate to any employee benefit plan. 22 Despite the apparent allinclusiveness of this language, the Board argues that only laws governing ERISA's own subject matter funding, vesting, disclosure, and the like actually relate to benefit plans in the manner Congress intended. Because the DBL addresses only the level of benefits provided, a matter ungoverned by ERISA, the Board contends that § 514(a) is inapplicable to it. 57 Our review of the legislative history leads us to conclude that the statute is as sweeping as it seems. As other courts have noted, the legislative history of ERISA supports a broad reading of the phrase relate(s) to in § 514(a). The preemption provisions of the bills that preceded ERISA applied only to state laws that regulated ERISA's specific subject matters. See H.R. 2, § 514(a), (c), 93d Cong., 1st Sess. (1973), reprinted in 120 Cong.Rec. 4742 (1974) (House version); H.R. 2, § 699(a), 93d Cong., 1st Sess. (1973), reprinted in 120 Cong.Rec. 5002 (1974) (Senate version). The present language of § 514(a) was adopted by the Conference Committee, whose report indicated that the provision was as broad as its language. H.R.Conf.Rep. No. 93-1280, 93d Cong., 2d Sess. 383, reprinted in (1974) U.S.Code Cong. & Ad.News, 5038, 5162. Statements in both Houses of Congress emphasized the breadth of federal preemption. See 120 Cong.Rec. 29197 (1974) (remarks of Rep. Dent) (§ 514(a) reserv(es) to Federal authority the sole power to regulate the field of employee benefit plans; conferees applied preemption principle in its broadest sense); id. at 29933 (remarks of Sen. Williams) (§ 514(a) intended to preempt the field for Federal regulations); id. at 29942 (remarks of Sen. Javits) (conference version adopted to avoid litigation concerning scope of narrower provisions of predecessor bills). Thus, most courts of appeals that have considered the issue have held that the phrase relates to in § 514(a) does not limit the provision to those state laws that are directed toward ERISA's subject matter. See Buczynski v. General Motors Corp., 616 F.2d 1238, 1250 (3d Cir.), cert. granted, --- U.S. ----, 101 S.Ct. 352, 66 L.Ed.2d 213 (1980); Wadsworth v. Whaland, 562 F.2d 70, 76-77 (1st Cir. 1977), cert. denied, 435 U.S. 980, 981, 98 S.Ct. 1630, 56 L.Ed.2d 72 (1978); Hewlett-Packard Co. v. Barnes, 425 F.Supp. 1294, 1298-1300 (N.D.Cal.1977), aff'd per curiam, 571 F.2d 502 (9th Cir.), cert. denied, 439 U.S. 831, 99 S.Ct. 108, 58 L.Ed.2d 125 (1978). Cf. Marshall v. Chase Manhattan Bank, 558 F.2d 680, 683 (2d Cir. 1977). See also Hutchinson & Ifshin, Federal Preemption of State Law Under the Employee Retirement Income Security Act of 1974, 46 U.Chi.L.Rev. 23, 38-43 (1978). 58 We agree with this interpretation. A state law relate(s) to employee benefit plans, and is thus subject to preemption, whenever it has a direct bearing on such plans, not merely when it parallels the federal scheme for regulating them. 23 By prescribing minimum plan benefits, the DBL plainly relate(s) to employee benefit plans in the manner contemplated under § 514(a). Therefore, it may be preempted under that section. 59 That the DBL provisions are within the purview of § 514(a), however, does not necessarily mean that they are preempted, for § 514(a) excepts from preemption state laws that relate to benefit plans that are themselves exempted from coverage under ERISA by ERISA § 4(b). 24 Section 4(b)(3) exempts from ERISA coverage any plan that is maintained solely for the purpose of complying with applicable ... disability insurance laws. The Board contends that the DBL is exempted from preemption by this provision. 60 The Board's argument begins with the premises, not challenged here, that the pregnancy provisions of the DBL are disability insurance laws within the meaning of § 4(b)(3), and that the airlines would not provide pregnancy benefits for their employees if they were not compelled to do so by the DBL. Thus, the Board contends, any portions of the airlines' benefits plans devoted to pregnancy benefits would be maintained solely for purposes of complying with the DBL. If this is so, the argument continues, then these portions of the plans are exempt from regulation under ERISA by virtue of § 4(b)(3). If they are exempt under § 4(b), then the DBL continues to govern them, notwithstanding § 514(a). 61 This argument assumes that the word plan as used in § 4(b)(3) can be read to mean either a whole plan or a portion of a plan, such as the specific pregnancy provisions the Board seeks to impose upon the airlines. In ruling for the Board on this issue, the district court accepted this assumption. Reasoning that ERISA contemplates independent and concurrent obligations under federal and state law, the court held that those provisions of an employee plan which are maintained to comply with (state disability insurance) laws are excluded from ERISA. 485 F.Supp. at 307. In attacking the district court's ruling, the airlines argue that plan must mean a benefits plan in its entirety, and that their plan(s) were adopted largely for competitive reasons, not solely to comply with the DBL. In the airlines' view, § 4(b) (3) was intended to exempt small, intrastate employers whose plan(s) are designed only to meet the minimum requirements of state law. 62 We think the district court took an unduly expansive view of the role that ERISA assigns to state law in governing employee benefit plans. As discussed above, ERISA contemplates a federal occupation of the regulatory field that is very nearly total. Section 514(a) was meant to clear away all state laws bearing on benefits plans, and the various exceptions to the general rule of federal preemption were meant to be narrow. 120 Cong.Rec. 29933 (1974) (remarks of Sen. Williams); id. at 29197 (remarks of Rep. Dent). We recognize that many aspects of benefits plans generally, and of welfare benefits plans in particular, will go unregulated under this regime of broad preemption, and that § 514(a) may therefore permit abuses that Congress might otherwise have wished to avert. See generally Brummond, Federal Preemption of State Insurance Regulation Under ERISA, 62 Iowa L.Rev. 57 (1976). 25 Nonetheless, it is clear that Congress sought to stay the states' hands, at least for a certain period, with the thought that appropriate modifications could be made if later shown to be needed. See 120 Cong.Rec. 29942 (1974) (remarks of Sen. Javits). See also 29 U.S.C. § 1222(a)(4); H.R.Conf.Rep.No.93-1280, supra, at 361, reprinted in (1974) U.S.Code Cong. & Ad.News at 5140 (Joint Pension Task Force to study effects and desirability of ERISA preemption policy). Thus, ERISA ordinarily does not permit independent and concurrent obligations under federal and state law. Under ERISA, federal law will govern, even in those instances where federal governance effectively means no governance, save where Congress has clearly declared otherwise. 63 With these principles in mind, we conclude that the word plan as used in § 4(b)(3) refers to a plan as an integral unit, not to isolated and subsidiary provisions of a plan. The plain terms of the statute refer to plan(s), not to portions or provisions of a plan. Moreover, permitting the fragmentation of the term plan would disrupt the uniformity that Congress sought to achieve through § 514(a), allowing a state to remove specific disability provisions of a complex benefits scheme from coverage under ERISA merely by legislating on a particular subject. For a nationwide employer, those provisions might be subject to New York's DBL, yet also subject to ERISA requirements in states without applicable ... disability insurance laws, and subject to further, and probably conflicting, requirements imposed by other states that do have such laws. Congress could scarcely have intended to permit such successive layers of regulation to be imposed on certain portions of a plan otherwise subject in its entirety to ERISA alone. Thus we conclude that plan refers to an integral unit or program, not to selected provisions. 64 This does not necessarily mean that the airlines are entitled to relief against enforcement of the pregnancy provisions of the DBL. While we reject the argument that those provisions alone enable the Board to compel plaintiffs to provide minimum pregnancy benefits, the Board may be empowered to do so by the DBL as a whole. If a plaintiff's disability plan as a whole is maintained solely to comply with the requirements of the DBL as a whole, then that plan in its entirety would be exempted from ERISA under § 4(b)(3). With respect to such a plan, the Board would be free to enforce all provisions of the DBL, including those that govern pregnancy, § 514(a) notwithstanding. Because it is entirely possible that some or all of the plaintiffs do maintain disability plan(s) adopted solely to comply with the DBL, we must give content to those statutory terms. 65 Nothing in the legislative history of ERISA explicitly addresses the purpose of the § 4(b)(3) exemption. 26 Nonetheless, Congress's thought seems fairly clearly to have been that plan(s) adopted solely to comply with state social insurance laws were adequately regulated by state authorities and that state regulation of such plans would not unduly disrupt the ERISA scheme. In determining the meaning of the troublesome terms plan and solely, it will be helpful to examine the characteristics of the social insurance programs potentially affected by § 4(b)(3). 27 66 Unemployment insurance systems function in substantially the same manner in every state. Each state requires employers to contribute to a central unemployment fund. The fund is a state agency that superintends collections from employers and pays stated benefits to idled workers. 28 Some states permit employers to provide supplemental unemployment benefits through private arrangements, but such supplemental plans are wholly independent of the state fund. They provide benefits in addition to those available from the state fund and their establishment does not relieve the employer of his obligation to contribute to the state fund. See generally 1B Unempl.Ins.Rep. (CCH) # 2300. 67 Workmen's compensation systems are more diverse. Some follow the pattern established by unemployment insurance legislation and permit an employer to satisfy his obligations under state law only by participation in a state-administered insurance fund. Others permit employers to choose between participation in the state fund and the establishment of equivalent coverage through private means, as by purchasing insurance, establishing a trust or other fund, or maintaining a plan of self-insurance. Many states have no state fund and merely require employers to make satisfactory private arrangements. Where private arrangements are permitted, they are generally subject to review and approval by state authorities. See generally 4 A. Larson, The Law of Workmen's Compensation § 92.10 (1980). 68 The comparatively few states that have disability insurance laws have varying requirements. One, Rhode Island, establishes participation in a state fund as the exclusive means of compliance. Most give employers the option to participate in a state-administered fund or to provide alternate private arrangements, subject to approval by state authorities. See generally 4 A. Larson, supra, §§ 96.40, 97.42. New York falls into the latter mold. Employers may discharge their obligation to provide disability benefits by participating in a state fund that is financed by employer and employee contributions. N.Y.Work.Comp.Law §§ 209, 210, 211(1), 214. Alternatively, employers may provide the required benefits through private insurance, a plan of self-insurance, or other plan or agreement, subject to the Board's approval. N.Y.Work.Comp.Law § 211(2), (3), (4), (5) (McKinney 1965 & Supp.1980-1981). The Board will approve a private disability benefits program if it provides benefits at least as favorable to employees as those provided by the state fund. Id. § 211(5); 12 N.Y.C.R.R. §§ 375.1, 358-3.1 (regulations governing approval of alternate plans). 69 It is relatively easy to see how Congress would classify the programs at the extreme ends of this spectrum of social insurance schemes. At one end of the spectrum are employers whom the state compels to participate in state-administered funds as the exclusive means of providing protection for their employees. In this situation, state regulation is quite comprehensive and presumably suffices to protect workers' interests. In addition, the centralization of the state's regime sharply diminishes its potential for disrupting the federal scheme under ERISA. Thus, when the state compels participation in a state-administered fund, the policies of the § 4(b)(3) exemption are fully satisfied. In the language of § 4(b)(3), the employer's program for complying with such a state law will constitute his plan, and that plan will have been adopted solely to comply with the state law. 70 At the opposite end of the spectrum are employers who provide a type of benefit commonly associated with social insurance schemes, but who do so voluntarily, with no compulsion by the state. Because such programs are not closely supervised by the state, they are far more susceptible to abuse than are compulsory, state-administered programs. Moreover, because such voluntary programs are typically part of a complex benefits scheme established through collective bargaining, state efforts to regulate them pose a significant risk of conflict with ERISA requirements. The policies of § 4(b)(3) do not apply to such programs, and § 514(a) would ordinarily preempt state laws purporting to regulate them. Particularly because state law does not compel employers to establish programs of this sort, it would be sensible to say, in the language of § 4(b)(3), that such programs are not maintained solely to comply with state laws, even if they do constitute separate plan(s). 71 The troublesome cases, falling in the middle of the spectrum, arise when state laws compel an employer to maintain some program, but permit him to satisfy this obligation through private arrangements that may vary from, and exceed, the state-mandated norms. In such cases, the nature and scope of the program sought to be regulated by state authorities will largely determine whether state regulation comports with ERISA policies. If the employer's program for providing the particular benefit comprises a separate administrative unit, as where an employer insures his employees against disability through a single group policy or establishes a separate disability trust, then state authorities can adequately police that unit without affecting federal authority to regulate programs for other types of benefits. If, however, the employer's program encompasses types of benefits besides those reserved to state authority under § 4(b)(3), and if the various benefits are administered through a single vehicle, then state regulation may quickly run afoul of federal policies. The unit selected by the employer for administering the complex benefits scheme would be subject to state requirements insofar as it provided benefits enumerated in § 4(b)(3), but subject to federal requirements insofar as it provided other types of benefits. As we noted above, ERISA does not permit such regulatory disharmony. 72 Thus, we think that the word plan as used in § 4(b)(3) must refer to a benefits program as an integral administrative unit. If an employer, using a single administrative unit, provides disability benefits as part of a larger welfare scheme, comprising, for example, health insurance as well as disability benefits, then that scheme as a whole constitutes the employer's plan. Because such a plan provides types of benefits that the states cannot permissibly require under § 514(a), the plan could not be said to be maintained solely to comply with state disability insurance laws. On the other hand, if an employer's disability program constitutes a separate unit, concerned predominantly with disability benefits and organized so that it is substantially independent of other benefits programs, then that program itself constitutes a plan. Such a plan is potentially subject to state regulation under a law like the DBL. 73 Most disability programs that constitute separate plan(s) will have been adopted solely to comply with state disability insurance laws applicable to the employer. The airlines' argument that the employer's intentions are dispositive in determining this issue proves too much. Any employer, even the small intrastate employer at whom the airlines contend § 4(b)(3) was aimed, could credibly claim that it had adopted a disability plan in order to attract and keep good employees, smooth labor relations, and the like. Congress did not intend § 4(b)(3) to empower employers to evade state regulation by engaging in a swearing contest concerning their motives. Structural considerations, not subjective intentions, must govern the analysis under § 4(b)(3). Thus, if an employer maintains a separate disability plan that generally meets the requirements of applicable state disability insurance laws, the court should find that the plan was adopted solely to comply with those laws, unless compelling circumstances, not applicable to employers generally, dictate otherwise. See Standard Oil Co. v. Agsalud, 442 F.Supp. 695, 704 (N.D.Cal.1977), aff'd, 633 F.2d 760 (9th Cir. 1980). 74 Turning to the case before us, we note that the airlines' amended complaint did not clearly describe their benefits plans. It stated in general terms that (p)laintiffs maintain various employee benefit plans, including sickness and accident disability plans, sick leave plans, and medical benefit plans, and that these plans are funded and administered in several different ways. It is possible that some or all of the plaintiffs maintain disability benefits programs that are plan(s) maintained solely to comply with state law under the analysis presented above. Such plans would be exempt from regulation under ERISA and would be subject to the DBL in its entirety, including its provisions governing minimum pregnancy benefits. Such plaintiffs would not be entitled to relief against the Board. Other plaintiffs, however, may maintain more complex benefits systems that do not employ a separate plan for disability. The DBL is preempted in its entirety with respect to such plaintiffs, and is wholly unenforceable against them. 29 Each plaintiff must have an opportunity to show the nature of its disability program under the analysis set forth above.