Court Opinion

ID: 2969515
Source: CourtListenerOpinion
Date Created: 2015-09-22 15:50:41.390368+00
Date Added: 2024-06-11T11:43:24.875914
License: Public Domain

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
           3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

   (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU
               )LOH 1DPH DS

81,7('67$7(6&28572)$33($/6
             )257+(6,;7+&,5&8,7
               BBBBBBBBBBBBBBBBB

,QUH%,50,1*+$0              ;
1$6+9,//( (;35(66 ,1&         
                    'HEWRU      
                                    1R
BBBBBBBBBBBBBBBBBBBBBBBB         
                                  !
                                 
75$9(/(56 3523(57<               
&$68$/7< &25325$7,21            
                   $SSHOODQW 
                                 
           Y                    
                                 
                                 
%,50,1*+$01$6+9,//(             
(;35(66 ,1&                   
                    $SSHOOHH 
                                 
                                 
                                1
      $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
   IRUWKH0LGGOH'LVWULFWRI7HQQHVVHHDW1DVKYLOOH
 1Rn5REHUW/(FKROV&KLHI'LVWULFWsXGJH
               $UJXHG0DUFK
          'HFLGHGDQG)LOHG$XJXVW

                           
         ,QUH%LUPLQJKDP1DVKYLOOH([SUHVV             1R

    %HIRUH5<$10225(DQG)$55,6
&LUFXLWsXGJHV
                       BBBBBBBBBBBBBBBBB
                             &2816(/
$5*8('  (ULF * :D[PDQ 3+,//,36 1,=(5
%(1s$0,1.5,0	%$//21*DUGHQ&LW\1HZ<RUN
IRU$SSHOODQW%DUEDUD'+ROPHV+$5:(//+2:$5'
+<1(*$%%(57	0$11(51DVKYLOOH7HQQHVVHHIRU
$SSHOOHH  21 %5,()  (ULF * :D[PDQ 3+,//,36
1,=(5%(1s$0,1.5,0	%$//21*DUGHQ&LW\1HZ
<RUN&%HQQHWW+DUULVRQsU&251(/,86	&2//,16
1DVKYLOOH 7HQQHVVHH IRU $SSHOODQW  %DUEDUD ' +ROPHV
&UDLJ 9 *DEEHUW sU +$5:(// +2:$5' +<1(
*$%%(57 	 0$11(5 1DVKYLOOH 7HQQHVVHH IRU
$SSHOOHH
                       BBBBBBBBBBBBBBBBB
                           23,1,21
                       BBBBBBBBBBBBBBBBB
  5<$1 &LUFXLW sXGJH  :H PXVW GHFLGH LQ WKLV DSSHDO
ZKHWKHUDFODLPIRUXQSDLGZRUNHUVjFRPSHQVDWLRQLQVXUDQFH
SUHPLXPV RZHG E\ D EDQNUXSW HVWDWH LV HQWLWOHG WR SULRULW\
XQGHU86&D%RWKWKHEDQNUXSWF\FRXUWDQG
WKH GLVWULFW FRXUW WKRXJKW QRW UHOHJDWLQJ WKH DSSHOODQW
7UDYHOHUV3URSHUW\&DVXDOW\&RUSRUDWLRQ73&&WRWKHVWDWXV
RI RQH DPRQJ PDQ\ JHQHUDO XQVHFXUHG FUHGLWRUV RI WKH
EDQNUXSWHVWDWH%LUPLQJKDP1DVKYLOOH([SUHVV,QF%1(
73&&KDVDSSHDOHGWKHORZHUFRXUWRUGHUVDQGZHKROGLQ
WKLVTXHVWLRQRIILUVWLPSUHVVLRQLQWKLVFRXUWWKDWDFODLPIRU
XQSDLG ZRUNHUVj FRPSHQVDWLRQ LQVXUDQFH SUHPLXPV LV QRW
HQWLWOHG WR VHFWLRQ D SULRULW\ VWDWXV  :H PXVW
WKHUHIRUHDIILUP

      
      7KH +RQRUDEOH sHURPH )DUULV &LUFXLW sXGJH RI WKH 8QLWHG 6WDWHV
&RXUW RI $SSHDOV IRU WKH 1LQWK &LUFXLW VLWWLQJ E\ GHVLJQDWLRQ
1R          ,QUH%LUPLQJKDP1DVKYLOOH([SUHVV          

                                 ,
  8QGHU 7HQQHVVHH ODZ DOO 7HQQHVVHH FRUSRUDWLRQV PXVW
SXUFKDVH LQVXUDQFH WR FRYHU DQ\ OLDELOLW\ IRU ZRUNHUVj
FRPSHQVDWLRQFODLPVRUGHPRQVWUDWHWRWKH&RPPLVVLRQHURI
&RPPHUFHWKHILQDQFLDODELOLW\WRFRYHUDOOFODLPVWKDWPD\
DULVH7HQQ&RGH$QQ%1(DIUHLJKWFDUULHU
LQFRUSRUDWHGLQ7HQQHVVHHIXOILOOHGLWVVWDWXWRU\REOLJDWLRQE\
SXUFKDVLQJZRUNHUVjFRPSHQVDWLRQLQVXUDQFHIURP73&&
  2Q'HFHPEHU%1(ILOHGDFKDSWHUEDQNUXSWF\
SHWLWLRQWRUHRUJDQL]HLWVRSHUDWLRQ,WLVXQGLVSXWHGWKDWIRU
VL[ PRQWKV EHIRUH ILOLQJ LWV SHWLWLRQ %1( IDLOHG WR SD\
LQVXUDQFHSUHPLXPVRZHGWR73&&73&&VXEPLWWHGDSURRI
RI FODLP WR WKH EDQNUXSWF\ FRXUW DVVHUWLQJ WKDW SUHPLXPV
XQSDLG  GD\V SULRU WR WKH ILOLQJ RI %1(jV SHWLWLRQ
FRQVWLWXWHGDQXQVHFXUHGFODLPHQWLWOHGWRSULRULW\XQGHU
86&D%1(UHVSRQGHGWKDW73&&jVFODLPZDV
QRW HQWLWOHG WR VHFWLRQ D SULRULW\ DQG WKLV VXLW
IROORZHG
  6HFWLRQ D WKH GROODU DPRXQWV RI ZKLFK ZHUH
DPHQGHGLQSURYLGHV
  7KHIROORZLQJH[SHQVHVDQGFODLPVKDYHSULRULW\LQWKH
  IROORZLQJRUGHU
  
  >I@RXUWKDOORZHGXQVHFXUHGFODLPVIRUFRQWULEXWLRQVWR
  DQHPSOR\HHEHQHILWSODQn
     $ DULVLQJ IURP VHUYLFHV UHQGHUHG ZLWKLQ  GD\V
     EHIRUHWKHGDWHRIWKHILOLQJRIWKHSHWLWLRQRUGDWHRI
     WKH FHVVDWLRQ RI WKH GHEWRUjV EXVLQHVV ZKLFKHYHU
     RFFXUVILUVWEXWRQO\
     % IRUHDFKVXFKSODQWRWKHH[WHQWRIn
             L WKH QXPEHU RI HPSOR\HHV FRYHUHG E\ HDFK
             VXFKSODQPXOWLSOLHGE\OHVV
      ,QUH%LUPLQJKDP1DVKYLOOH([SUHVV              1R    1R         ,QUH%LUPLQJKDP1DVKYLOOH([SUHVV            

           LL WKHDJJUHJDWHDPRXQWSDLGWRVXFKHPSOR\HHV           UXQZRUNHUVjFRPSHQVDWLRQLQVXUDQFHSURJUDPZHPXVWLQ
           XQGHU SDUDJUDSK  RI WKLV VXEVHFWLRQ SOXV WKH    IDLUQHVVWUHDWSULYDWHLQVXUHUVVLPLODUO\
           DJJUHJDWHDPRXQWSDLGE\WKHHVWDWHRQEHKDOIRI
           VXFK HPSOR\HHV WR DQ\ RWKHU HPSOR\HH EHQHILW           :HGLVDJUHH,WLVTXLWHFRPPRQIRU&RQJUHVVWRSURYLGH
           SODQ                                                      EHWWHU WUHDWPHQW LQ WKH %DQNUXSWF\ &RGH IRU JRYHUQPHQW
                                                                      FUHGLWRUV WKDQ LV SURYLGHG IRU SULYDWH FUHGLWRUV  :H
86&D:HVW	6XSSHPSKDVLV              UHFRJQL]HGWKLVIDFWLQ,QUH6XEXUEDQZKHQZHVWDWHGWKDW
DGGHGIRRWQRWHRPLWWHG                                            mWKH ZRUNLQJV RI *RYHUQPHQW FDQQRW DZDLW EDQNUXSWF\
                                                                      GLVWULEXWLRQ DORQJVLGH XQVHFXUHG FUHGLWRUV ZLWK WKH
  $IWHUUXOLQJLQ73&&jVIDYRURQDSURFHGXUDOREMHFWLRQWR           SRVVLELOLW\HYHQWKHSUREDELOLW\RIUHFHLYLQJSHQQLHVRQWKH
73&&jVFODLPWKHEDQNUXSWF\FRXUWKHOGWKDW73&&jVFODLP             GROODURIZKDWWKHWD[SD\HUGHEWRURZHGl,GDW*LYHQ
ZDVQRWHQWLWOHGSULRULW\7KDWFRXUWDUWLFXODWHGWKUHHEDVHV        WKDW &RQJUHVV RIWHQ WUHDWV SXEOLF FUHGLWRUV GLIIHUHQWO\ WKDQ
IRULWVUXOLQJ,WKHOGILUVWWKDWDmFRQWULEXWLRQlZLWKLQWKH     SULYDWHFUHGLWRUVZHFDQQRWDFFHSW73&&jVSURSRVLWLRQWKDW
PHDQLQJ RI VHFWLRQ D PXVW EH mVRPHWKLQJ JLYHQ          WKLVFRXUWjVSULRUWUHDWPHQWRIWKHmH[FLVHWD[lSULRULW\GLFWDWHV
YROXQWDULO\WRDFRPPRQVRXUFHl%HFDXVH7HQQHVVHHODZ               RXUFRQVWUXFWLRQRI86&D5DWKHUWKHWZR
PDQGDWHGWKHSURYLVLRQRIVRPHW\SHRILQVXUDQFHWRFRYHU             SULRULW\SURYLVLRQVDUHLQWHQGHGWRVHUYHGLIIHUHQWSXUSRVHV
ZRUNHUVjFRPSHQVDWLRQFODLPVWKHFRXUWFRQFOXGHGWKDW%1(            DQG ZH WKHUHIRUH WKLQN LW EHWWHU WR DQDO\]H HDFK
KDGSHUIRUPHGQRmYROXQWDU\DFWHTXDWLQJWRDµFRQWULEXWLRQjl        LQGHSHQGHQWO\
6HFRQGWKHFRXUWKHOGWKDWDSURJUDPVDLGWRFRQVWLWXWHDQ
mHPSOR\HH EHQHILW SODQl XQGHU VHFWLRQ D PXVW                                             9
mGLUHFW>O\@ EHQHILWl HPSOR\HHV  ,Q WKH EDQNUXSWF\ FRXUWjV
RSLQLRQZRUNHUVjFRPSHQVDWLRQLQVXUDQFHGLGQRWPHHWWKLV              73&& DUJXHV ILQDOO\ WKDW WKH EDQNUXSWF\ FRXUW HUUHG LQ
FULWHULRQ7KLUGLQGHFLGLQJWKDW73&&jVFODLPGLGQRWDULVH        KROGLQJ WKDW LWV FODLP ZDV QRW HQWLWOHG SULRULW\ EHFDXVH LWV
IURPmVHUYLFHVUHQGHUHGlWKHFRXUWVWDWHG                           FODLP GLG QRW mDULVH IURP VHUYLFHV UHQGHUHGl  *LYHQ RXU
                                                                      GLVSRVLWLRQRIWKHLVVXHVZHKDYHGLVFXVVHGLWLVQRWQHFHVVDU\
      <HW DQRWKHU UHTXLUHPHQW IRU SULRULW\ WUHDWPHQW IRU        WKDWZHGHFLGHWKLVLVVXHDQGVRZHOHDYHUHVROXWLRQRIWKH
    >73&&jV@FODLPLVWKDWWKHFRQWULEXWLRQVWRWKHHPSOR\HH          PHDQLQJRIWKHWHUPmVHUYLFHVUHQGHUHGlLQVHFWLRQD
    EHQHILWSODQmDULVHIURPVHUYLFHVUHQGHUHGl$FFHSWLQJ           WRDQRWKHUGD\
    >73&&jV@DUJXPHQWZRXOGIRUFHWKLVFRXUWWRFRQFOXGH
    WKDW SD\PHQW RI WKH ZRUNHUVj FRPSHQVDWLRQ SUHPLXP                                           9,
    DURVH IURP VHUYLFHV UHQGHUHG  ,W VHHPV FOHDU WKDW WKH
    XQSDLGSUHPLXPVGLGQRWDULVHIURPmVHUYLFHVUHQGHUHGl             )RUWKHIRUHJRLQJUHDVRQVWKHGLVWULFWFRXUWRUGHUDIILUPLQJ
    EXWLQVWHDGDURVHIURPWKHHPSOR\HUjVIDLOXUHWRPHHWLWV         WKHEDQNUXSWF\FRXUWLV$)),50('
    REOLJDWLRQVWR>73&&@
$FFRUGLQJO\WKHEDQNUXSWF\FRXUWGLVPLVVHG73&&jVFODLP
  3XUVXDQWWR)HGHUDO5XOHRI%DQNUXSWF\3URFHGXUH
73&&DSSHDOHGWRIHGHUDOGLVWULFWFRXUW7KHGLVWULFWFRXUW
DIILUPHGHFKRLQJWKHUDWLRQDOHSURYLGHGE\LWVSUHGHFHVVRU
    ,QUH%LUPLQJKDP1DVKYLOOH([SUHVV              1R       1R         ,QUH%LUPLQJKDP1DVKYLOOH([SUHVV             

5HVWDXUDQW86DW7REHFOHDUKRZHYHUZHGRQRW                7KH&RXUWDJUHHVWKDW m>D@µFRQWULEXWLRQjLV
KROGWKDWWRTXDOLI\IRUSULRULW\XQGHUVHFWLRQDWKH             VRPHWKLQJ JLYHQ YROXQWDULO\ WR D FRPPRQ VRXUFH   
ZDJH VXEVWLWXWH PXVW DFWXDOO\ EH WKH SURGXFW RI FROOHFWLYH        7KHZRUGµFRQWULEXWLRQjJHQHUDOO\FRQQRWHVDQRSWLRQDO
EDUJDLQLQJ:HDUHLQDJUHHPHQWZLWKWKH)LUVW&LUFXLWWKDW              FKRLFHVXFKDVDQHPSOR\HUjVGHFLVLRQWRSURYLGHIULQJH
UHDGLQJ D FROOHFWLYH EDUJDLQLQJ UHVWULFWLRQ LQWR VHFWLRQ            EHQHILWVOLNHKHDOWKOLIHRUGLVDELOLW\LQVXUDQFHl,Q
DZRXOGmFUHDWHDGLVWLQFWLRQZLWKRXWDGLIIHUHQFHl              WKLVFDVHWKH'HEWRUZDVVWDWXWRULO\REOLJDWHGWRSURYLGH
6HH6DFR)GDW                                              DZRUNHUVjFRPSHQVDWLRQLQVXUDQFHSURJUDPm>6@LQFH
                                                                          ZRUNHUVj FRPSHQVDWLRQ EHQHILWV DUH D VWDWXWRU\
   :RUNHUVjFRPSHQVDWLRQLVQRWDZDJHVXEVWLWXWHUDWKHULW             UHTXLUHPHQW DQG QRW REWDLQHG WKURXJK D FROOHFWLYH
LVDQDZDUGDULVLQJRXWRIDZRUNUHODWHGLQMXU\RZHGE\DQ               EDUJDLQLQJWKH\FDQQRWEHFRQVLGHUHGDµFRQWULEXWLRQjWR
HPSOR\HU&RQVHTXHQWO\ZHKROGWKDW73&&jVDVVHUWLRQRI                 DQHPSOR\HHµEHQHILWSODQjl
SULRULW\ DJDLQ PXVW IDLO EHFDXVH ZRUNHUVj FRPSHQVDWLRQ
LQVXUDQFHLVQRWDQmHPSOR\HHEHQHILWSODQl                          7KHGLVWULFWFRXUWDOVRDJUHHGZLWKWKHEDQNUXSWF\FRXUWWKDW
                                                                        mZRUNHUVj FRPSHQVDWLRQ LQVXUDQFH GRHV QRW TXDOLI\ DV DQ
  :HDOVRKROGDVWKH(LJKWKDQG7HQWK&LUFXLWVKDYHGRQH              HPSOR\HHEHQHILWSODQIRUSXUSRVHVRIVHFWLRQDl
EHIRUH WKDW LQFRUSRUDWLRQ RI (5,6$ GHILQLWLRQV LQWR WKH
%DQNUXSWF\ &RGH LV LOODGYLVHG  7KRVH WZR SLHFHV RI               ,QWKLVDSSHDO73&&DUJXHVWKDWWKHUHDUHQXPHURXVIODZV
OHJLVODWLRQVHUYHGLIIHUHQWDQGQRQRYHUODSSLQJSXUSRVHV6HH          LQERWKORZHUFRXUWRSLQLRQV73&&FRQWHQGVWKDWWKHORZHU
,QUH6RXWKHUQ6WDU)RRGV)GDW:HWKHUHIRUH             FRXUWV HUUHG LQ UHVWULFWLQJ WKH WHUP mFRQWULEXWLRQl WR IXQGV
GHFOLQH 73&&jV LQYLWDWLRQ DQG OHDYH VXFK DFWLRQ LI LW LV      SURYLGHG mYROXQWDULO\l EHFDXVH VXFK D UHVWULFWLRQ LV QRW
DSSURSULDWHWR&RQJUHVV                                             HQWLUHO\FRQVLVWHQWZLWKHLWKHUWKHRUGLQDU\XVHRIWKDWWHUPRU
                                                                        WKH SROLFLHV XQGHUO\LQJ VHFWLRQ D  73&& QH[W
                                ,9                                     PDLQWDLQV WKDW FRQWUDU\ WR WKH EDQNUXSWF\ FRXUWjV RSLQLRQ
                                                                        ZRUNHUVj FRPSHQVDWLRQ LQVXUDQFH GRHV SURYLGH mGLUHFW
   73&&DOVRDGYDQFHGWKHVHSDUDWHDUJXPHQWQRWWLHGWRDQ\             EHQHILW>V@lWRHPSOR\HHV%H\RQGFKDOOHQJLQJWKDWDVSHFWRI
RI WKH VSHFLILF WHUPV RI VHFWLRQ D WKDW WKLV FRXUWjV   WKHEDQNUXSWF\FRXUWjVRSLQLRQ73&&XUJHVWKLVFRXUWWRUHDG
GHFLVLRQLQ,QUH6XEXUEDQ0RWRU)UHLJKW,QF)G           WKHGHILQLWLRQRImHPSOR\HHEHQHILWSODQlSURYLGHGLQ(5,6$
WK&LUOHDGVE\DQDORJ\WRDGHFLVLRQLQLWVIDYRU        ZKLFKLQFOXGHVZRUNHUVjFRPSHQVDWLRQLQVXUDQFHLQWRVHFWLRQ
KHUH,Q,QUH6XEXUEDQWKLVFRXUWGHFLGHGWKDWDQXQVHFXUHG          DRIWKH%DQNUXSWF\&RGH73&&DOVRFRQWHQGVWKDW
FODLPE\WKH6WDWHRI2KLRIRUIHHVXQSDLGE\WKHEDQNUXSW              WKH EDQNUXSWF\ FRXUWjV FRQVWUXFWLRQ RI WKH WHUP mVHUYLFHV
HVWDWH WR WKH 2KLR %XUHDX RI :RUNHUVj &RPSHQVDWLRQ               UHQGHUHGlLVLOORJLFDODQGZLOOOLNHO\FDXVHPLVFKLHILQIXWXUH
TXDOLILHGIRUSULRULW\XQGHUWKHQVHFWLRQD(RIWKH           FDVHV
%DQNUXSWF\ &RGH ZKLFK SURYLGHG SULRULW\ WR FODLPV E\ D
mJRYHUQPHQWDOXQLWlIRUmDQH[FLVHWD[RQD>SUHSHWLWLRQ@           %1( UHVSRQGV WKDW WKH ORZHU FRXUWV ZHUH FRUUHFW WKDW D
WUDQVDFWLRQl86&D(DPHQGHGLQE\             mFRQWULEXWLRQlZLWKLQWKHPHDQLQJRIVHFWLRQDPXVW
D(:HVW6XSS,QUH6XEXUEDQ)GDW              KDYHEHHQSURYLGHGmYROXQWDULO\lE\WKHFRQWULEXWRU%1(
:HFRQFOXGHGWKDWWKHIHHVZHUHmWD[HVlEHFDXVH2KLRjV            DOVRFDXWLRQVWKDWLQFRUSRUDWLRQRI(5,6$GHILQLWLRQVIRUOLNH
ZRUNHUVj FRPSHQVDWLRQ SURJUDP ZDV FHQWUDOL]HG DQG                  WHUPVLQWRWKH%DQNUXSWF\&RGHLVXQZLVHDVWKRVHWZRERGLHV
XQLYHUVDODQGDOOmVLPLODUO\VLWXDWHGILUPVlSDLGWKHIHHV       RIOHJLVODWLRQVHUYHGLIIHUHQWSXUSRVHV)LQDOO\%1(DUJXHV
,Q UH 6XEXUEDQ  )G DW   73&& FRQWHQGV WKDW       WKDW HYHQ LI WKH EDQNUXSWF\ FRXUW PLVFRQVWUXHG WKH WHUP
EHFDXVHWKLVFLUFXLWSURYLGHGSULRULW\WRDFODLPE\RQHVWDWH
        ,QUH%LUPLQJKDP1DVKYLOOH([SUHVV              1R    1R         ,QUH%LUPLQJKDP1DVKYLOOH([SUHVV            

mVHUYLFHV UHQGHUHGl VXFK HUURU GRHV QRW DOWHU WKH XOWLPDWH     mHPSOR\HH EHQHILW SODQl VKRXOG RQO\ HQFRPSDVV mZDJH
UHVXOWLQWKLVFDVH                                                  VXEVWLWXWHVl,GDW,QVWHDGWKH1LQWK&LUFXLWFRQFOXGHG
                                                                        WKDW&RQJUHVVjVSULPDU\FRQFHUQLQHQDFWLQJVHFWLRQD
                                    ,,                                 ZDVHQVXULQJWKDWHPSOR\HHVRIWKHEDQNUXSWHVWDWHUHFHLYH
                                                                        mµWKH SROLF\ EHQHILWV WR ZKLFK WKH\ DUH HQWLWOHGjl DQG
  7KHVROHLVVXHLQWKLVFDVHLVWKHPHDQLQJDQGHIIHFWRI           DFFRUGLQJO\DGRSWHGDQH[SDQVLYHFRQVWUXFWLRQRImHPSOR\HH
86&DDSXUHTXHVWLRQRIODZQHFHVVLWDWLQJGH             EHQHILW SODQl ZKLFK LQFOXGHG ZRUNHUVj FRPSHQVDWLRQ
QRYRUHYLHZE\WKLVFRXUW7RUHSHDWWKDWVWDWXWHSURYLGHV         LQVXUDQFH,GFLWDWLRQRPLWWHG7KDWFRXUWH[SUHVVO\OHIW
                                                                        DVLGH WKH TXHVWLRQ ZKHWKHU WKH (5,6$ GHILQLWLRQ RI
    7KHIROORZLQJH[SHQVHVDQGFODLPVKDYHSULRULW\LQWKH              mHPSOR\HHEHQHILWSODQlVKRXOGEHLQFRUSRUDWHGLQWRVHFWLRQ
    IROORZLQJRUGHU                                                    D,G
                                                                    8QGHU VHFWLRQV  DQG E RI (5,6$
                                                                        ZRUNHUVj FRPSHQVDWLRQ LQVXUDQFH LV LQGHHG OLVWHG DV DQ
    >I@RXUWKDOORZHGXQVHFXUHGFODLPVIRUFRQWULEXWLRQVWR             mHPSOR\HH EHQHILW SODQl   86&   	
    DQHPSOR\HHEHQHILWSODQn                                           E$IHZEDQNUXSWF\FRXUWVKDYHH[SUHVVHGWKHYLHZ
       $ DULVLQJ IURP VHUYLFHV UHQGHUHG ZLWKLQ  GD\V         WKDWWKH(5,6$GHILQLWLRQRImHPSOR\HHEHQHILWSODQlLVRI
       EHIRUHWKHGDWHRIWKHILOLQJRIWKHSHWLWLRQRUGDWHRI         VRPH XVH LQ FRQVWUXLQJ VHFWLRQ D  6HH HJ ,Q UH
       WKH FHVVDWLRQ RI WKH GHEWRUjV EXVLQHVV ZKLFKHYHU          *HUDOG7)HQWRQ,QF%5%DQNU''&
       RFFXUVILUVWEXWRQO\                                             0RVW IHGHUDO FRXUWV KRZHYHU KDYH UHMHFWHG WKLV
                                                                        UHDVRQLQJ6HH+/0&RUS)GDW:HEHOLHYHWKH
       % IRUHDFKVXFKSODQWRWKHH[WHQWRIn                        ODWWHUJURXSKDVWKHEHWWHURIWKHDUJXPHQW

              L WKH QXPEHU RI HPSOR\HHV FRYHUHG E\ HDFK            ,WLVLQGLVSXWDEOHWKDW&RQJUHVVHQDFWHGVHFWLRQDWR
              VXFKSODQPXOWLSOLHGE\OHVV                      DEURJDWHWKH6XSUHPH&RXUWjVFRQVWUXFWLRQRIWKHSUHYLRXV
                                                                        ZDJH SULRULW\ SURYLVLRQ  86&  D UHSHDOHG
              LL WKHDJJUHJDWHDPRXQWSDLGWRVXFKHPSOR\HHV           GHWDLOHG LQ sRLQW ,QGXVWU\ DQG (PEDVV\ 5HVWDXUDQW
              XQGHU SDUDJUDSK  RI WKLV VXEVHFWLRQ SOXV WKH   6HHHJ6DFR)GDW,WLVFOHDUWKDWXQGHUVHFWLRQ
              DJJUHJDWHDPRXQWSDLGE\WKHHVWDWHRQEHKDOIRI          DHPSOR\HHFODLPVWREHQHILWVSURYLGHGE\SURJUDPV
              VXFK HPSOR\HHV WR DQ\ RWKHU HPSOR\HH EHQHILW        VXFK DV ZHOIDUH DQG DQQXLW\ IXQGV DUH HQWLWOHG WR SULRULW\
              SODQ                                                     7KDW LV VHFWLRQ D HQVXUHV WKDW HPSOR\HHV RI WKH
                                                                        EDQNUXSWHVWDWHUHFHLYHSULRULW\RQWKHLUFODLPVQRWRQO\IRU
86&D:HVW	6XSSHPSKDVLV                ZDJHV EXW DOVR IRU ZDJH VXEVWLWXWHV SURYLGHG WKURXJK
DGGHG IRRWQRWH RPLWWHG  4XHVWLRQV DV WR WKH VFRSH RI       mHPSOR\HHEHQHILWSODQVl%H\RQGWKDWLWLVQRWDWDOOFOHDU
VHFWLRQ D KDYH SURYHG WURXEOHVRPH WR WKH IHGHUDO         ZKDW WKH WHUP mHPSOR\HH EHQHILW SODQl PHDQV  :LWKRXW D
FRXUWVSULPDULO\EHFDXVH&RQJUHVVKDVQRWGHILQHGWKHWHUPV             FOHDUHUVWDWHPHQWIURP&RQJUHVVWKLVFRXUWPXVWDGKHUHWRWKH
mFRQWULEXWLRQl mHPSOR\HH EHQHILW SODQl RU mVHUYLFHV              SULQFLSOHWKDWSULRULWLHVDUHWREHFRQVWUXHGQDUURZO\DQGWKDW
UHQGHUHGlDQGDVRIWKLVZULWLQJWKH6XSUHPH&RXUWKDVQRW            VWDWXWRU\ODQJXDJHFUHDWLQJDQDVVHUWHGSULRULW\PXVWEHFOHDU
LQWHUSUHWHGWKLVODQJXDJHHLWKHU                                     DQGH[SOLFLW$FFRUGLQJO\ZHKROGWKDWWKHWHUPmHPSOR\HH
                                                                        EHQHILW SODQl LV OLPLWHG WR ZDJH VXEVWLWXWHV  6HH (PEDVV\
    ,QUH%LUPLQJKDP1DVKYLOOH([SUHVV             1R       1R         ,QUH%LUPLQJKDP1DVKYLOOH([SUHVV            

                               ,,,                                     6HFWLRQDLV&RQJUHVVjVUHVSRQVHWR8QLWHG
                                                                       6WDWHVY(PEDVV\5HVWDXUDQW,QF86DQG
  %RWKWKHEDQNUXSWF\FRXUWDQGWKHGLVWULFWFRXUWKHOGWKDW           sRLQW,QGXVWU\%RDUGY8QLWHG6WDWHV86
ZRUNHUVj FRPSHQVDWLRQ LQVXUDQFH FRYHUDJH LV QRW DQ               7KRVHFDVHVHVWDEOLVKHGWKDW86&DUHSHDOHG
mHPSOR\HH EHQHILW SODQl ZLWKLQ WKH PHDQLQJ RI VHFWLRQ            WKH SUHGHFHVVRU RI VHFWLRQ D GLG QRW JUDQW
D73&&DUJXHVWKDWWKLVYLHZLVPLVWDNHQDQGWKDW            SULRULW\WRFODLPVIRUXQSDLGHPSOR\HUFRQWULEXWLRQVWRXQLRQ
WKH WHUP mHPSOR\HH EHQHILW SODQl LQ VHFWLRQ D           RSHUDWHGZHOIDUHDQGDQQXLW\IXQGV6HHsRLQW,QGXV
LQFOXGHVZRUNHUVjFRPSHQVDWLRQFRYHUDJHMXVWDVLVSURYLGHG            86DW(PEDVV\5HVWDXUDQW86DW1R
LQ (5,6$   86&   	 E  )RU WKH     RQH GLVSXWHV WKDW VXEVHTXHQWO\ HQDFWHG VHFWLRQ D
UHDVRQZHVKDOOQRZH[SODLQZHGLVDJUHH                            SURYLGHVWKDWWKHFODLPVRIWKHW\SHWUHDWHGE\WKH6XSUHPH
                                                                       &RXUWLQWKRVHFDVHVDUHQRZHQWLWOHGWRSULRULW\7KXVLWLV
   7KH IHGHUDO FRXUWV KDYH QRW DJUHHG RQ ZKHWKHU ZRUNHUVj      FOHDUWKDWDQXQVHFXUHGFODLPIRUXQSDLGFRQWULEXWLRQVWRD
FRPSHQVDWLRQLQVXUDQFHLVDQmHPSOR\HHEHQHILWSODQlZLWKLQ            XQLRQRSHUDWHG HPSOR\HH EHQHILW SODQ LV HQWLWOHG SULRULW\
WKHPHDQLQJRIVHFWLRQD%RWKWKH(LJKWKDQG7HQWK           XQGHU VHFWLRQ D  %H\RQG WKDW KRZHYHU VHFWLRQ
&LUFXLWVKDYHFRQFOXGHGWKDWZRUNHUVjFRPSHQVDWLRQFRYHUDJH            DOHDYHVPDQ\TXHVWLRQVXQDQVZHUHGLQFOXGLQJWKH
LVQRWDQmHPSOR\HHEHQHILWSODQlXQGHUVHFWLRQD,Q         RQHEHIRUHXVWRGD\
,QUH+/0&RUS)GWK&LUWKH(LJKWK
&LUFXLWFRQFOXGHGWKDWEDVHGXSRQWKHOHJLVODWLYHKLVWRU\RI             :HQRWHDWWKHWKUHVKROGWKDWWKHIXQGDPHQWDOSULQFLSOH
VHFWLRQDWKHWHUPmHPSOR\HHEHQHILWSODQlVKRXOGEH          UXQQLQJWKURXJKDOORIWKH%DQNUXSWF\&RGHLVWKDWFUHGLWRUV
OLPLWHGWRmµEDUJDLQHGIRUVXEVWLWXWHVIRUZDJHVjl,GDW       VKRXOGJHQHUDOO\EHWUHDWHGHTXDOO\6HH(PEDVV\5HVWDXUDQW
 FLWDWLRQ RPLWWHG  7KH FRXUW WKHQ KHOG WKDW ZRUNHUVj     86DW$QREYLRXVFRUROODU\RIWKLVSULQFLSOHLVWKDW
FRPSHQVDWLRQ LQVXUDQFH LV QRW D ZDJH VXEVWLWXWH DQG            LIWKHFODLPVRIDFODVVRIFUHGLWRUVDUHWRUHFHLYHSUHIHUHQWLDO
DFFRUGLQJO\UHMHFWHGWKHLQVXUHUjVFODLPWRSULRULW\,G7KDW      WUHDWPHQWIURPWKHFRXUWVWKHULJKWWRVXFKWUHDWPHQWPXVW
FRXUWDOVRUHMHFWHGWKHDUJXPHQWWKDWWKH(5,6$GHILQLWLRQRI          KDYHEHHQDXWKRUL]HGE\&RQJUHVVLQFOHDUDQGSUHFLVHWHUPV
mHPSOR\HHEHQHILWSODQlVKRXOGEHLQFRUSRUDWHGLQWRVHFWLRQ            6HHLG:KHWKHUZHPLJKWWKLQNJUDQWLQJSULRULW\WRWKHW\SH
D,G                                                      RIFODLPDVVHUWHGE\73&&ZRXOGEHVRXQGSROLF\LVUHDOO\RI
                                                                       QRPRPHQWWKHLVVXHLVZKHWKHU&RQJUHVVKDVSURYLGHGIRULW
  7KH7HQWK&LUFXLWUHOLHGKHDYLO\RQ+/0&RUSZKHQ LW               6HH ,Q UH :KLWH 0RWRU &RUS  )G   WK &LU
FRQIURQWHGWKLVLVVXHDQGLQODUJHSDUWDGRSWHGWKHUHDVRQLQJ          
RIWKDWRSLQLRQ,QUH6RXWKHUQ6WDU)RRGV,QF)G
WK &LUFHUW GHQLHG  86    7KDW FRXUW     7RDQVZHUWKDWTXHVWLRQZHLQTXLUHILUVWZKHWKHUXQSDLG
DJUHHG ZLWK WKH (LJKWK &LUFXLW WKDW WKH (5,6$ GHILQLWLRQ       SUHPLXPV IRU ZRUNHUVj FRPSHQVDWLRQ LQVXUDQFH DUH
VKRXOGQRWEHXVHGKHUHDVDQLQWHUSUHWLYHDLGEHFDXVHm>W@KH          mFRQWULEXWLRQVlZLWKLQWKHPHDQLQJRIVHFWLRQD7KH
(5,6$ GHILQLWLRQ DQG DVVRFLDWHG FRXUW JXLGHOLQHV ZHUH            ZRUGmFRQWULEXWHlJHQHUDOO\GHVFULEHVWKHJLYLQJRIVRPHWKLQJ
GHVLJQHG WR HIIHFWXDWH WKH SXUSRVH RI (5,6$ QRW WKH           mDORQJ ZLWK RWKHUV WR D FRPPRQ VXSSO\ IXQG HWFl  7+(
%DQNUXSWF\&RGHl6HHLGDWLQWHUQDOTXRWDWLRQPDUNV            5$1'20+286(',&7,21$5<2) 7+( (1*/,6+/$1*8$*(
DQGFLWDWLRQVRPLWWHG                                              HPSKDVLVDGGHG$V73&&DUJXHVIRUFHIXOO\D
                                                                       mFRQWULEXWLRQl FDQ DOVR PHDQ mDQ LPSRVW RU OHY\l  ,G  $
  7KH 1LQWK &LUFXLW KDV UHDVRQHG RWKHUZLVH LQ (PSOR\HUV         FKDUDFWHULVWLFFRPPRQWRERWKXVHVLVWKDWWKHmFRQWULEXWLRQVl
,QVXUDQFHRI:DXVDXY3ODLG3DQWULHV,QF)GWK          FOHDUO\ FRPH IURP PRUH WKDQ RQH VRXUFH  7KH SULPDU\
&LU7KDWFRXUWUHMHFWHGWKHDUJXPHQWWKDWWKHWHUP
     ,QUH%LUPLQJKDP1DVKYLOOH([SUHVV                1R       1R         ,QUH%LUPLQJKDP1DVKYLOOH([SUHVV               

GHILQLWLRQ RI WKH WHUP mFRQWULEXWHl H[SUHVVO\ QRWHV JLYLQJ            73&&DUJXHVWKDWDVLQ6DFR%1(UHGXFHGWKHZDJHVRILWV
mDORQJZLWKRWKHUVl,G2UGLQDULO\DQmLPSRVWRUOHY\lLV             HPSOR\HHV WR RIIVHW WKH FRVW RI ZRUNHUVj FRPSHQVDWLRQ
SDLGE\VRPHRUDOORIWKHJHQHUDOSXEOLFLQH[FKDQJHIRUVRPH            LQVXUDQFHDQGWKHUHIRUHWKHHPSOR\HHVGLGmFRQWULEXWHlWR
JRYHUQPHQW VHUYLFH  7KXV RXU DQDO\VLV LV WKDW WKH WHUP         WKH SXUFKDVH RI WKDW LQVXUDQFH  2XU UHVSRQVH LV WZRIROG
mFRQWULEXWLRQlGRHVQRWGHVFULEHDXQLODWHUDOSXUFKDVHRIVRPH            )LUVW WKHUH LV QR HYLGHQFH WR VXSSRUW 73&&jV DVVHUWLRQ
SURGXFWRUVHUYLFH                                                     6HFRQGLWZRXOGKDYHEHHQDEVXUGDQGDUJXDEO\XQODZIXOIRU
                                                                          %1( WR UHTXLUH LWV HPSOR\HHV WR SD\ IRU ZRUNHUVj
   ,WLVRIFRXUVHXVHIXOWRNQRZKRZRXUVLVWHUFLUFXLWVKDYH          FRPSHQVDWLRQLQVXUDQFH:RUNHUVjFRPSHQVDWLRQSURJUDPV
LQWHUSUHWHG mFRQWULEXWLRQVl LQ FRQQHFWLRQ ZLWK VHFWLRQ               DUHDOHJLVODWLYHFKRLFHWRUHPRYHIURPWKHFRXUWVHPSOR\HH
D7KH)LUVW&LUFXLWDGGUHVVHGWKLVTXHVWLRQLQWKH              WRUW VXLWV DOOHJLQJ ZRUNUHODWHG LQMXULHV DQG WR DVVLJQ VXFK
FRQWH[WRIDSULRULW\FODLPIRUXQSDLGSUHPLXPVDVVHUWHGE\D             FODLPV IRU FRPSHQVDWLRQ WR DQ DGPLQLVWUDWLYH IRUXP  $
SURYLGHURIOLIHKHDOWKDQGGLVDELOLW\LQVXUDQFH,QUH6DFR           ZRUNHUVj FRPSHQVDWLRQ DZDUG ZKLFK 73&&jV LQVXUDQFH
/RFDO'HY&RUS)GVW&LU,QWKDWFDVH            FRYHUVLVLQWHQGHGWRUHPHG\DQHPSOR\HHjVLQMXU\:HGR
WKH WUXVWHH DUJXHG WKDW DQ LQVXUHUjV FODLP LV QRW HQWLWOHG WR   QRWDFFHSWWKHQRWLRQWKDWDQHPSOR\HUVXFKDV%1(FRXOGDVN
SULRULW\VWDWXVXQGHUVHFWLRQDLIWKHEDQNUXSWHVWDWH            LWVHPSOR\HHVWRSD\HYHQLQSDUWIRUZKDWDPRXQWVWRWKH
KDGEHHQSD\LQJIRUWKHLQVXUDQFHZLWKRXWFRQWULEXWLRQVIURP              HPSOR\HUjVmOLDELOLW\lIRULQMXULHVVXIIHUHGLQWKHZRUNSODFH
LWVHPSOR\HHV6HHLGDW7KH)LUVW&LUFXLWUHMHFWHGWKLV          &RQVHTXHQWO\ZHILQG73&&jVDUJXPHQWWREHZLWKRXWPHULW
DUJXPHQWFRQFOXGLQJWKDWmWKHUHFRUGFRQWDLQVWHVWLPRQ\WKDW
WKHSODQUHVXOWHGLQDGHIDFWRµEDUJDLQjLQZKLFKHPSOR\HHV                )RUZKDWLWLVZRUWKZHDJUHHZLWK73&&WKDWERWKORZHU
DFFHSWHGORZHUZDJHVWKDQRWKHUILUPVSDLGLQUHWXUQIRUD                FRXUWVHUUHGLQUXOLQJWKDWDmFRQWULEXWLRQlZLWKLQWKHPHDQLQJ
QRQFRQWULEXWRU\SODQl,G7KXVWKH)LUVW&LUFXLWKHOGWKDW           RIVHFWLRQDPXVWEHmVRPHWKLQJJLYHQYROXQWDULO\l
HYHQZKHUHHPSOR\HHVGRQRWGHYRWHDSRUWLRQRIWKHLUJURVV               7KLVSDUWLFXODUJORVVXSRQVHFWLRQDKDVDSSHDUHGLQ
ZDJH LQ SDUWLDO SD\PHQW IRU VRPH W\SH RI EHQHILW WKHVH          WKH RSLQLRQV RI D QXPEHU RI ORZHU FRXUWV  6HH HJ ,Q UH
HPSOR\HHV VWLOO PD\ KDYH mFRQWULEXWHGl WR DQ mHPSOR\HH             $OOHQWRZQ0RYLQJ	6WRUDJH,QF%5%DQNU('
EHQHILWSODQlLIWKHFUHGLWRUFDQGHPRQVWUDWHWKDWHPSOR\HH               3DDIIjG%5('3D$IWHUDQDO\]LQJ
ZDJHVKDGEHHQUHGXFHGWRSURYLGHIXQGLQJIRUDEHQHILWSODQ             YDULRXV GHILQLWLRQV RI WKH ZRUG mFRQWULEXWLRQl ZH DUH QRW
                                                                          FRQYLQFHG WKDW YROXQWDULQHVV LV DW DOO WLPHV D QHFHVVDU\
  :HDUHQRWHQWLUHO\SHUVXDGHGWKDWWKHWHUPmFRQWULEXWLRQl              FRPSRQHQWRIDmFRQWULEXWLRQl7KLVOLPLWDWLRQLVQRWHQWLUHO\
LQ VHFWLRQ D VKRXOG EH FRQVWUXHG WR LQFOXGH                FRQVLVWHQWZLWKWKHRUGLQDU\XVHRIWKHZRUGmFRQWULEXWLRQl
FRQVWUXFWLYH FRQWULEXWLRQV E\ HPSOR\HHV SDUWLFXODUO\ VLQFH          $QHPSOR\HUjVVWDWXWRULO\PDQGDWHGSD\PHQWWRDQHPSOR\HH
SULRULWLHV DUH WR EH LQWHUSUHWHG QDUURZO\  6HH (PEDVV\           EHQHILWIXQGIRUH[DPSOHLVQROHVVRIDmFRQWULEXWLRQlWR
5HVWDXUDQW86DW+RZHYHUZHQHHGQRWGHFLGH               VXFKDIXQGVLPSO\EHFDXVHLWLVPDQGDWHGE\VWDWXWHDJHQF\
ZKHWKHU WR DGRSW WKH )LUVW &LUFXLWjV GH IDFWR FRQWULEXWLRQ        UHJXODWLRQVDQHPSOR\HHFRQWUDFWRUDFROOHFWLYHEDUJDLQLQJ
VWDQGDUG EHFDXVH HYHQ LI ZH ZHUH WR DGRSW WKDW DQDO\WLFDO       DJUHHPHQW:HWKHUHIRUHKROGWKDWLWLVQRWQHFHVVDU\IRUD
PHWKRG73&&jVDVVHUWLRQRISULRULW\IRULWVFODLPWRXQSDLG              FRXUW WR GHWHUPLQH ZKHWKHU DQ HPSOR\HUjV DFWLRQV ZHUH
ZRUNHUVj FRPSHQVDWLRQ SUHPLXPV ZRXOG IDLO VLQFH WKH                 mYROXQWDU\lEHIRUHJUDQWLQJSULRULW\WRDFODLPXQGHUVHFWLRQ
ZRUNHUVjFRPSHQVDWLRQLQVXUDQFHLWVROGZDVSDLGIRUVROHO\               D
E\%1(DVUHTXLUHGE\7HQQHVVHHODZDQGWKHUHIRUH%1(jV
HPSOR\HHVPDGHQRmFRQWULEXWLRQl