|
|
|
October 15, 2000
|
2000-14A
ERISA Sec. 3(1)
|
|
Roderick A. DeArment
Covington & Burling
1201 Pennsylvania Avenue, NW
P.O. Box 7566
Washington, DC 20044-7566
|
|
Dear Mr. DeArment:
|
|
This is in response to your request on behalf of the
United Transportation Union (UTU), regarding the applicability of Title I
of the Employee Retirement Income Security Act of 1974 (ERISA) to the UTU’s
Job Benefit Fund/Income Security Program (JBF/ISP or Program).
Specifically, you request an opinion that the JBF/ISP is not an
"employee welfare benefit plan" within the meaning of section
3(1) of Title I of ERISA. In support of this request you maintain that the
JBF/ISP is akin to "strike funds," that are specifically
excluded from Title I coverage under the Department’s regulation at 29
C.F.R.§ 2510.3-1(h).
|
|
According to your submissions, the UTU represents
railway trainmen, conductors, brakemen, switchmen, and some engineers, as
well as operators for a number of bus companies and transit systems. The
JBF/ISP, as maintained by the UTU from 1980 to 1998, is a program that
provided a daily cash benefit to its members who ". . . suffer[ ] a
loss of wages by reason of being out of employment occasioned by discharge
or suspension as a penalty or method of discipline."(1)
|
|
Under the JBF/ISP, discharge or suspension means a member
has been ". . . entirely relieved, either permanently or temporarily,
by his or her employer from the performance of all service . . . "
Under the Program, members are not eligible for benefits or compensation for
lost wages due to discharge or suspension where such claim is based and/or
occasioned in whole or in part upon admitted or alleged:
|
-
Refusal to perform any duty or
service as directed or when directed by a representative of the
employer. Insubordination.
-
Sleeping and/or assuming the
position or appearance of sleeping while employed and on duty.
-
Engaging in a fight and/or
altercation (defensive or offensive).
-
Missing a call. Reporting late for
duty. Not being available for duty.
-
War. Unlawful acts (criminal or
civil).
-
Strikes, lockout, furlough,
calculated deliberate slowdown, work stoppage (legal or illegal).
-
Misuse of company funds.
Misappropriation of company funds. Failure to properly remit company
funds.
-
Removal of employer's property or
employer customer's property from premises without proper authority.
Malicious and/or willful destruction of company property.
-
Assignment of wages and/or
garnishment.
-
Failure to pass or failure to take
any required examination or test, including, but not limited to,
physical or mental tests.
-
Failure to obtain watch comparison.
Failure to possess, while employed and on duty, a standard watch
and/or watch card.
-
Use of intoxicating beverages while
on duty or subject to duty. Possession of intoxicating beverages
while on duty. Being under the influence of intoxicants while on duty.
-
Use of and/or possession of
controlled drugs or narcotics while on duty -- being under the
influence of controlled drugs and/or narcotics while on duty. Use of
controlled drugs or narcotics while subject to duty.
-
Personal injury, disability and/or
sickness.
|
|
According to the 1980 UTU Board Minutes, participation
in the Program is voluntary for UTU members, and is funded by UTU member
contributions. The member would apply to be eligible for benefits of $10
to $60 a day, and would be assessed monthly, $.40 for each $1.00 of daily
benefit selected. Daily benefits applied for could not exceed, together
with other similar benefits carried by the member,(2)
the average daily wages received from the job occupied at the time
of applying for membership in the JBF/ISP. The duration of the payment
period is based on years of service, with benefits payable for up to 240
days, or, if sooner, until the member’s death, retirement, or
commencement of employment for any other railway or bus employer. Benefits
may be discontinued after 60 days ". . . if the grievance involving
the discipline is not being actively handled by the committee having
jurisdiction."
|
|
According to your submissions, the Program is designed
to provide income replacement due to periods of unemployment unique to the
railway industry. You posit that there is a historical pattern of
suspension or discharge of individual UTU members, allegedly for
disciplinary reasons, but actually to interfere with the member’s
collectively bargained or statutory rights. Specifically, you relate that
UTU members have a special statutory right under the Federal Employers’
Liability Act (FELA), 45 U.S.C.§ 51 et seq., to sue their employer
for general damages for work-related injuries. You suggest that, because
FELA adopts a comparative negligence standard, railway employers have a
strong incentive to suspend or terminate an injured employee, allegedly
for cause, both to establish the employee’s negligence and thereby
reduce or avoid a large FELA damage award, and to increase the economic
pressure on an injured employee to settle his FELA claim quickly. You
indicate that although the employee has the right to grieve and arbitrate
the suspension or termination, the grievance and arbitration procedures
may be lengthy and costly. You suggest that the benefits provided by the
JBF/ISP protect the collective bargaining process by sustaining the UTU
member during the pendency of a FELA suit and the grievance and
arbitration proceedings concerning the suspension or termination.
|
|
You also relate that the railway industry, over the last
twenty years, has undergone a significant reduction in the workforce, often
involving the payment by employers of substantial severance amounts,
negotiated by the UTU, to employees whose positions have been eliminated.
You suggest that employers may suspend or discharge employees, allegedly for
rules infractions, but actually to avoid paying severance benefits and
thereby reduce the cost of downsizing. You suggest that the provision of
benefits by the JBF/ISP in this context also protect the collective
bargaining process by supporting UTU members during the grievance and
arbitration procedures available for these suspensions and terminations.
|
|
To be an ERISA-covered employee welfare benefit plan,
the Program must, among other criteria, be established or maintained by an
employer or an employee organization, within the meaning of ERISA section
3(1). For the purposes of this opinion, we assume that UTU is an employee
organization within the meaning of ERISA section 3(4), and that the
Program is established and maintained by UTU. Therefore, if the Program
provides benefits described in ERISA section 3(1), the Program is an
employee welfare benefit plan covered by Title I of ERISA.(3)
|
|
Section 3(1) of Title I of ERISA defines the term
"employee welfare benefit plan" to include " . . . any
plan, fund, or program which was heretofore or is hereafter established or
maintained by an employer or by an employee organization, or by both, to
the extent that such plan, fund, or program was established or is
maintained for the purpose of providing for its participants or their
beneficiaries, through the purchase of insurance or otherwise, (A)
medical, surgical, or hospital care or benefits, or benefits in the event
of sickness, accident, disability, death or unemployment, or vacation
benefits, apprenticeship or other training programs, or day care centers,
scholarship funds, or prepaid legal services, or (B) any benefit described
in section 302(c) of the Labor Management Relations Act, 1947 (other than
pensions on retirement or death, and insurance to provide such
pensions)."
|
|
The statute does not define the term "benefits in
the event of . . . unemployment" for purposes of defining welfare
plans under ERISA section 3(1). The Department has had the occasion to
analyze a number of income replacement programs to determine whether a
particular program provides such benefits. According to Advisory Opinion
84-42A:
|
. . . The Department generally would analyze each plan
based on its place on a continuum which considers the relationship between
the benefits provided and the actual status of unemployment. Thus, at one
end of the continuum would be plans which would not be viewed as providing
benefits in the event of unemployment if they assist an individual who
receives his regular wage for full-time employment in his customary job
under a collective bargaining agreement. . . . At the other end of the
continuum would be plans which provide benefits during a period that an
individual is not employed. Plans which fall toward this end of the
continuum would be considered to be providing unemployment benefits. See,
e.g., the discussion of the guaranteed annual income benefit in ERISA
Opinion 79-55A.
|
|
After careful consideration of your representations
concerning the nature of the JBF/ISP benefits and your arguments as to why
the JBF/ISP benefits should not be treated as "unemployment"
benefits, it is the view of the Department that the JBF/ISP falls toward
that end of the continuum that would be considered to be providing
unemployment benefits within the meaning of ERISA section 3(1).(4)
In this regard, it is noted that, by its own unambiguous terms, the
JBF/ISP is intended to provide a daily cash benefit for members who . . .
"suffer[ ] a loss of wages by reason of being out of employment . . .
."
|
|
Moreover, we are unable to conclude that the JBF/ISP is a
"strike fund," within the meaning of 29 C.F.R.§ 2510.3-1(h),
excluded from coverage under Title I of ERISA. That section provides, in
relevant part, that:
|
. . . the terms "employee welfare benefit
plan" and "welfare plan" shall not include a fund
maintained by an employee organization to provide payments to its members
during strikes and for related purposes.
|
|
You assert that the JBF/ISP program is designed to
provide benefits for a purpose related to strikes — to maintain the
relative bargaining position of the UTU in disputes with management, by
paying benefits which support UTU members while they exercise their
collectively bargained rights. You posit that the JBF/ISP benefits are like
strike benefits, not unemployment benefits, and the Program is therefore not
a welfare benefit program covered by Title I of ERISA.
|
|
In Advisory Opinion 92-01A, the Department considered
whether a fund which paid benefits for "authorized work stoppages"
was a welfare plan under ERISA or was excepted from coverage by the
regulation as a "strike fund." In its consideration, the
Department stated that the term "strike" within the meaning of
regulation section 2510.3-1(h) was not to be equated with unemployment and
took the position that the regulation would not be applicable if the term
"authorized work stoppage" referred to mere unemployment rather
than to a strike. See also DOL Notice of Proposed Rulemaking
(Preamble), 40 Fed. Reg. 24642 (June 9, 1975) (A strike fund is not a
welfare plan under section 3(1) of the Act. Although unemployment benefits
are among the benefits listed in section 3(1), a strike is not to be equated
with unemployment).
|
|
Thus, it is the Department's position that an income
replacement program will be excluded from Title I of ERISA pursuant to this
regulation if the benefit payments are provided to members whose loss of
work and consequent loss of income occurs during a strike. The unemployment
benefits paid under the JBF/ISP are not paid during a strike. Rather, the
JBF/ISP benefits are paid during periods of unemployment for individual UTU
members who have been suspended or discharged by their employer as a penalty
or method of discipline. Indeed, prior to 1998, the JBF/ISP specifically
prohibited the payment of benefits if the unemployment is occasioned by
"[s]trikes, lockout, furlough, calculated deliberate slowdown, [or]
work stoppage (legal or illegal)." Therefore, the express terms of the
Program excluded it from the definition of a "strike fund."(5)
|
|
Nor, in the Department’s view, could the JBF/ISP
benefits be considered to be for a "related purpose" within the
meaning of the regulation, and hence excluded from ERISA coverage. The
Department has not had the occasion to articulate what a "related
purpose" would be. However, the definition would not, in the Department’s
view, include benefits for unemployment as described in ERISA section 3(1)
other than benefits provided in a situation involving a strike. Even though
the JBF/ISP benefits may be intended to equalize an employee’s bargaining
power, that purpose relates to individual circumstances of suspension or
discharge for disciplinary reasons.
|
|
On the basis of the facts, representations and documents
provided, we conclude that the JBF/ISP Program is an employee welfare
benefit plan providing unemployment benefits within the meaning of ERISA
section 3(1). The exclusion of "strike funds" does not, in our
view, provide a basis for considering the benefits provided under the
Program as outside the scope of ERISA section 3(1).
|
|
This letter constitutes an advisory opinion under ERISA
Procedure 76-1. Accordingly, it is issued subject to the provisions of the
procedure, including section 10 thereof relating to the effect of advisory
opinions.
|
|
Sincerely,
John J. Canary
Chief, Division of Coverage, Reporting and Disclosure
Office of Regulations and Interpretations
|
|
|
|
|
-
The JBF/ISP, although it continues
in existence, was amended in 1998. This opinion only addresses the
terms of the Program provided in the Minutes of the Meeting, UTU Board
of Directors, July 14, 1980 (1980 UTU Board Minutes) (Exhibit 5 of
Memorandum Attachment to letter of June 3, 1999).
-
You confirmed that UTU members
receiving JBF/ISP benefits while pursuing a grievance challenging
their suspension or termination are also eligible for unemployment
benefits under the Railroad Unemployment Insurance Act, 45 U.S.C.§
351 et seq. (RUIA).
-
Your submission indicates that the
UTU originally sponsored the JBF alone. In addition to benefits
similar to those later offered by the JBF/ISP, the JBF provided a
"retirement dividend," which returned to members a portion
of their contributions into the Fund upon retirement. In 1980,
membership in the JBF was frozen, and the JBF/ISP was established by
UTU to provide a greater daily benefit to participating members. The
new program eliminated the retirement dividend, except for then
current members of the JBF who waived participation in the JBF/ISP.
Although your submission does not contain sufficient facts to be
definitive, nothing in the materials you submitted suggest that the
JBF/ISP benefits paid at employment termination would be considered
pension benefits under ERISA section 3(2). See 29 C.F.R.§
2510.3-2(b). However, you do not indicate whether there are UTU
members who may have elected to remain members under the JBF, and
therefore may still be eligible, upon retirement, for a retirement
dividend. You have not sought an opinion as to the status of the JBF
as an employee welfare or pension plan under Title I of ERISA, and
therefore this letter does not address any issues with respect to that
Fund, or its assets which may remain held by UTU.
-
The Department does not believe that
treatment of the JBF/ISP benefits as "unemployment" benefits
is inconsistent with the concept of unemployment under other
Department of Labor programs or other federal laws.
-
The JBF/ISP was amended in 1998 to
delete this exclusion. You have not sought an opinion as to whether
this change in the Program would have any effect on the extent to
which the Program is covered under Title I of ERISA after the
effective date of the change.
|
| |
|
