Court Opinion

ID: 156180
Source: CourtListenerOpinion
Date Created: 2010-08-14 04:34:06+00
Date Added: 2024-06-11T16:56:35.526498
License: Public Domain

F I L E D
                                                       United States Court of Appeals
                                                               Tenth Circuit
                                     PUBLISH
                                                               APR 7 1998
                UNITED STATES COURT OF APPEALS
                                                          PATRICK FISHER
                                                                   Clerk
                             TENTH CIRCUIT

CLAY BRONK, MAURINE BURK,
MARK DAMILINI, JACQUELINE
ENRIQUEZ, CHUCK FLETCHER,
NATALIE FRANZ, JOHN GIERKA,
RANDOLPH GILMORE, MARK HAY,
KIM JOHNSON, JOHN KENNEDY,                     Nos. 97-1069
JANE KNUTSON, CAROL MAJOR,                      and 97-1078
SANDRA MARTINSKIS, ALFRED
MULFORD, TERRY REYES, ROY R.
SALINAS, LARRY SANCHEZ, LYNN
SAXE, JOHN SAXE, LING
SIGSTEDT, STEVEN STOLLMAN,
DONNA SLY, LYDIA THOMAS,
ROBERT TOANNON, FRANK VIGIL,
CYNTHIA VOIGT, COLISSION
WELLS, LYNN G. WULF, individually
and as representatives of a Class,

           Plaintiffs - Appellees,
     v.

MOUNTAIN STATES TELEPHONE
AND TELEGRAPH, INC., a Colorado
corporation, dba U.S. West
Communications; U.S. WEST, INC., a
Colorado corporation; U.S. WEST,
INC., EMPLOYEES BENEFITS
COMMITTEE; U.S. WEST DEFINED
CONTRIBUTIONS PLAN
COMMITTEE; U.S. WEST
 COMMUNICATIONS BASE
 BENEFITS COMMITTEE,

                Defendants - Appellants.
 --------------------------------------------

 ERISA INDUSTRY COMMITTEE;
 NATIONAL ASSOCIATION OF
 TEMPORARY AND STAFFING
 SERVICES; CHAMBER OF
 COMMERCE OF THE UNITED
 STATES OF AMERICA,

                Amici Curiae.

         APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE DISTRICT OF COLORADO
                       (D.C. NO. 93-D-1961)

Raymond W. Martin, Parcel, Mauro, Hultin & Spaanstra, P.C., Denver, Colorado
(D. Ward Kallstrom, Lillick & Charles, LLP, San Francisco, California, and
Colleen M. Rea, U.S. West, Inc., Denver, Colorado, with him on the briefs), for
Appellants.

Lee Thomas Judd, Andrew T. Brake, P.C., Englewood, Colorado (Todd J.
McNamara, Todd J. McNamara, P.C., Denver, Colorado, with him on the brief),
for Appellees.

John M. Vine, Covington & Burling, Washington, D.C., filed an amicus curiae
brief for the ERISA Industry Committee.

Kenneth B. Siegel, Sherman & Howard, L.L.C., Denver, Colorado, and C.
Frederick Oliphant III and Alvaro Ignacio Anillo, Miller & Chevalier, Chartered,

                                                -2-
Washington, D.C., filed an amicus curiae brief for National Association of
Temporary and Staffing Services.

Robin S. Conrad, National Chamber Litigation Center, Inc., Washington, D.C.,
and Hollis T. Hurd, The Benefits Department, Pittsburgh, Pennsylvania, filed an
amicus curiae brief for Chamber of Commerce of the United States of America.

Before SEYMOUR, Chief Judge, ANDERSON, and LUCERO, Circuit Judges.

ANDERSON, Circuit Judge.

      This is an interlocutory appeal from an order holding that the minimum

participation, vesting and funding requirements of the Employee Retirement

Income Security Act, 29 U.S.C. §§ 1001-1461 (“ERISA”) mandate the inclusion

in the defendants’ pension plans of “leased” employees who meet the definition of

common-law employees. The district court also held that such employees were

properly excluded from the defendants’ welfare plans. We reverse the district

court’s decision on the pension plans. We do not address the court’s decision on

the welfare plans as the matter is not properly before us.

                                         -3-
                                  BACKGROUND

      Plaintiffs, twenty-nine individuals who claim to represent a class of

similarly situated individuals (“Workers”), performed services between

approximately January 1984 and June 1991 for defendant Mountain States

Telephone & Telegraph, Inc. (“MSTT”), d/b/a US WEST Communications,

pursuant to leasing contracts between US WEST and various leasing companies. 1

The leasing contracts provided that the leasing company was the “employer” of

the leased workers and that “[a]ll [w]orkers shall be considered solely the

employees or agents of [the leasing company].” Defendants/Appellants’ App.

Vol. I at 208. 2 The Workers were not on US WEST’s payroll nor in its official

service records.

      In December 1990, eleven of the Workers filed ERISA claims requesting

the right to participate in pension and welfare plans maintained by US WEST. 3

The Workers claimed that they performed the “same or similar” functions as US

      1
         Although plaintiffs purport to represent a class of “common law employees” who
have provided services to US WEST through leasing companies, defendants assert that
they have not agreed that class certification is appropriate, nor has a motion for class
certification been filed, nor has a class been certified.
      2
       Other leasing contracts contained similar language.
      3
        The welfare plans sponsored by US WEST include the US WEST Health Care
Plan, the US WEST Group Life Insurance Plan and the US WEST Sickness and Accident
Disability Benefit Plan. The pension plans sponsored by US WEST include the US
WEST Pension Plan, the US WEST Savings & Security Plan/ESOP, and the US WEST
Payroll Stock Ownership Plan.

                                          -4-
WEST employees and were therefor entitled to participate in the pension and

welfare plans. Others filed comparable claims in June and July 1990. Defendant

US WEST Communications Base Benefits Committee (“BBC”) denied them

benefits. They appealed that denial to defendant US WEST, Inc. Employee

Benefit Committee (“EBC”). The EBC denied the appeals, concluding that the

plans only covered “regular employees” and that the Workers were not “regular

employees.”

      The district court reviewed the EBC’s decision. Both sides filed motions

for summary judgment. The district court characterized the issue before it as

“whether the minimum participation standards of ERISA require US West to

cover leased employees in its Plans if they meet the definition of a ‘common law’

employee.” Bronk v. Mountain States Tel. & Tel., Inc., 943 F. Supp. 1317, 1322-

23 (D. Colo. 1996). The court held that leased employees who meet the common

law definition of employees are not entitled to participate in US WEST’s welfare

plans. It accordingly granted defendants’ summary judgment motion and denied

plaintiffs’ summary judgment motion with respect to the welfare plans. With

respect to the pension plans, the court held that, regardless of the language of

such plans, the minimum participation, vesting and funding requirements of

ERISA mandated the inclusion of the Workers, provided they met the common

law definition of employees. Because it could not determine from the record

                                         -5-
whether the Workers met that definition, the court ordered supplemental briefing

and an evidentiary hearing on the issue. The district court then certified its

decision for interlocutory appeal pursuant to 28 U.S.C. § 1292(b). This appeal

followed. 4 Amicus briefs have been filed by the Chamber of Commerce of the

United States of America, the National Association of Temporary and Staffing

Services, and the ERISA Industry Committee, all in support of defendants.

                                     DISCUSSION

       Section 202(a) of ERISA, 29 U.S.C. § 1052(a)(1)(A) and (4), provides as

follows:

              (a)(1)(A) No pension plan may require, as a condition of
       participation in the plan, that an employee complete a period of
       service with the employer or employers maintaining the plan
       extending beyond the later of the following dates

              (i) the date on which the employee attains the age of 21; or

              (ii) the date on which he completes one year of service.

       4
        The Workers have filed a motion seeking to cross-appeal the district court’s
denial of their claim to participation in US WEST’s welfare plans. The motion was
submitted to this panel for decision. Defendants initially did not oppose the Workers’
request to file an interlocutory cross-appeal, but now argue we lack jurisdiction over the
cross-appeal. The Workers purport to file their cross-appeal pursuant to Fed. R. App. P.
4(a)(3), which governs appeals as of right, not interlocutory appeals. This appeal, as an
interlocutory appeal under 28 U.S.C. § 1292(b), is governed by Fed. R. App. P. 5, which
does not contemplate cross-appeals, and we decline to assume jurisdiction over the
Workers’ cross-appeal.

                                            -6-
              ....

            (4) A plan shall be treated as not meeting the requirements of
      paragraph (1) unless it provides that any employee who has satisfied
      the minimum age and service requirements specified in such
      paragraph, and who is otherwise entitled to participate in the plan,
      commences participation in the plan no later than the earlier of—

           (A) the first day of the first plan year beginning after the date
      on which such employee satisfied such requirements, or

            (B) the date 6 months after the date on which he satisfied such
      requirements.

29 U.S.C. § 1052(a)(1)(A) & (4) (emphasis added). The district court clearly held

that those minimum participation standards required the inclusion in US WEST’s

pension plans of all leased employees who met the test for common law

employees, regardless of whether or not the actual language of the plans would

include such employees. We disagree with that interpretation of those ERISA

provisions.

      It is well established that ERISA does not prohibit an employer from

distinguishing between groups or categories of employees, providing benefits for

some but not for others. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 91

(1983) (“ERISA does not mandate that employers provide any particular benefits,

and does not itself proscribe discrimination in the provision of employee

benefits.”); Abraham v. Exxon Corp., 85 F.3d 1126, 1130-31 (5th Cir. 1996);

Averhart v. US WEST Management Pension Plan, 46 F.3d 1480, 1488 (10th Cir.

                                         -7-
1994). It simply may not make such distinctions based upon age or length of

service. Accordingly, an employer need not include in its pension plans all

employees who meet the test of common law employees. See Hockett v. Sun Co.,

109 F.3d 1515, 1525 (10th Cir. 1997) (“We are doubtful that the [plan] defines

‘employee’ in a manner identical to the common law . . . .”). While not decisive,

the language of ERISA § 202(a) supports this conclusion. Section 202(a)(4)

imposes a deadline by which a plan must admit an employee satisfying the

minimum age and service requirements of § 202(a)(1)(A) and “who is otherwise

entitled to participate in the plan.” As US WEST and amici argue, the “otherwise

entitled to participate” language would be superfluous unless Congress intended

that plans could impose other participation requirements besides age or length of

service.

      In reaching its conclusion—that ERISA § 202(a) requires the inclusion of

leased employees who are common law employees and satisfy § 202(a)’s

minimum age and length of service requirements—the district court relied upon

Renda v. Adam Meldrum & Anderson Co., 806 F. Supp. 1071 (W.D.N.Y. 1992)

and Crouch v. Mo-Kan Iron Workers Welfare Fund, 740 F.2d 805 (10th Cir.

1984), and it rejected the reasoning of Abraham v. Exxon Corp., 85 F.3d 1126

(5th Cir. 1996). We find the reasoning of Abraham to be more persuasive than

that of Renda, and we do not read Crouch as inconsistent with that reasoning.

                                        -8-
      The Renda court, and in turn the district court below, held that certain

provisions of the Internal Revenue Code and Treasury Department regulations

were effectively incorporated into ERISA’s substantive requirements and

compelled the result they reached. They relied on Crouch in so concluding: “[i]t

is apparent from cases like Crouch that the[] [Treasury] regulations are not to be

implemented only for the narrow purpose of determining tax qualification. They

are useful for extracting subtler shades of meaning necessary to paint a more

detailed portrait of an individual’s substantive rights under ERISA.” Renda, 806

F. Supp. at 1083. That overlooks the critical fact that the plans at issue in Crouch

stated that they must comply with ERISA, the Internal Revenue Code and

Treasury Department regulations governing tax-qualification. 5 Thus, construction

of the plans in that case to comply with the Code and Treasury regulations, as

well as ERISA, was compelled by the particular plans; it was not compelled by

application of a broader principle that the Code and all Treasury regulations must

inform and amplify the substantive requirements of ERISA. The court in

Abraham made that precise point:

      5
       At oral argument, the Workers’ counsel argued that US WEST’s pension plans
contained similar language requiring the plans to comply with all Internal Revenue Code
and Treasury regulations, as well as ERISA. US WEST’s counsel vigorously denied that.
The document in the record to which the Workers’ counsel refers us as supporting his
argument does not demonstrate that the plans here included any obligation, explicit or
otherwise, to maintain tax-qualified status.

                                          -9-
             We read the function of Treasury regulations more narrowly.
      The regulations purport to do no more than determine whether a plan
      is a qualified tax plan. Failure to meet the requirements of those
      regulations results in the loss of a beneficial tax status; it does not
      permit a court to rewrite the plan to include additional employees.
      The Treasury regulations do not create substantive rights under
      ERISA that would permit the relief [plaintiff] requests. It is true that
      ERISA does incorporate portions of the Internal Revenue Code and
      Treasury regulations, in some instances, but on those occasions it
      does so explicitly.

Abraham, 85 F.3d at 1131; see also Burditt v. Kerr-McGee Chem. Corp., 982 F.

Supp. 404, 408 (N.D. Miss. 1997).

      Accordingly, neither 26 U.S.C. § 410 nor § 414, nor the Treasury

regulations promulgated under § 410(b), compel the interpretation of ERISA

adopted by the district court. Indeed, they highlight the error in that

interpretation. Section 410(b) requires a tax-qualified retirement plan to benefit a

certain percentage of an employer’s non-highly-compensated employees in

relation to the percentage of highly-compensated employees who participate in the

plan. For that purpose, employees who do not meet a plan’s prescribed minimum

age and service requirements are disregarded as employees under the section. 26

U.S.C. § 410(b)(4). That section would be pointless if, as the district court held

in this case, all employees who satisfy ERISA’s minimum participation

                                         -10-
requirements and meet the definition of common law employees must be included

within a plan. 6 No employees could ever be excluded under that section.

       Moreover, given our conclusion that the substantive participation

requirements of ERISA § 202(a) are not implicitly modified by the Internal

Revenue Code and Treasury regulations upon which the district court relied, 7 it is

irrelevant that, for certain purposes, the Code treats leased employees as

employees of the entity to whom the leased employee provides services. See 26

U.S.C. § 414(n); 26 C.F.R. § 1.410(b)-9. Even those Code provisions do not

require ERISA plans to include leased employees; they merely require employers

to take leased employees into account in showing that their plans meet the

nondiscriminatory coverage requirements of the Code. The IRS has said as much

in a notice. Q & A-14 of Notice 84-11 states:

       6
        We also disagree with the district court’s, and the Renda court’s, assertion that
Internal Revenue Service Code § 410(b), 26 U.S.C. § 410(b), is parallel to or an analog to
ERISA § 202(a)(1)(A). Section 202(a)(1)(A) of ERISA states the minimum age and
service requirements for plan participation. Its parallel under the Code is section 410(a),
26 U.S.C. § 410(a). Code § 410(b), concerning minimum coverage requirements under
the Code, has no parallel provision in ERISA. ERISA says nothing about discriminating
in favor of highly-compensated employees. Thus, the district court erred in deriving
support for its view of the coverage requirements of ERISA from the coverage
requirements of Code § 410(b).
       7
        We recognize, as did the Fifth Circuit in Abraham, that ERISA does explicitly
incorporate certain provisions of the Internal Revenue Code and Treasury regulations.
See 29 U.S.C. § 1202(c) (explicitly incorporating Treasury regulations promulgated under
26 U.S.C. §§ 410(a), 411 & 412). We simply decline to consider multiple other
regulations as implicitly incorporated as well.

                                           -11-
            Q-14. Must a leased employee participate in the plan
      maintained by the recipient [of leased employee services]?
            A-14. No. Section 414(n)(1)(A) requires only that a leased
      employee be treated as an employee; it does not require that a leased
      employee be a participant in the recipient’s qualified plan.

I.R.S. Notice 84-11, available in Westlaw, FTX-RELS.

      Finally, ERISA makes no mention of “leased workers.” Had Congress

intended particular treatment for leased workers under ERISA, as it has done

under the Code, it would have expressly so provided.

      In sum, we agree with the Fifth Circuit in Abraham that, absent explicit

indication by Congress, the tax-qualification provisions of the Code do not

rewrite pension plans under ERISA § 202(a) to mandate inclusion of employees,

leased or otherwise, whom the plans have permissibly excluded. We therefore

REVERSE the judgment of the district court granting summary judgment to the

Workers on their claims involving the pension plans, and we REMAND for

further proceedings consistent herewith.

                                       -12-