Engfer v. General Dynamics Advanced Information System, Inc.

SCHELLHAS, Judge

(dissenting).

I respectfully dissent from the majority’s conclusion that the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1144(a) (2012), preempts Minn.Stat. § 268.035, subd. 29(a)(12) (2012).

The apparent purpose of section 268.035, subdivision 29(a)(12), is to allow employers to offer their laid-off employees supplemental unemployment benefits (SUB) payments that are not characterized as wages. For a SUB plan to provide payments that are not considered wages under section 268.035, subdivision 29(a)(12), the plan “must provide supplemental payments solely for the supplementing of weekly state or federal unemployment benefits.” In addressing this exemption in regard to a state disability insurance law, the Supreme Court explained that

while the State may not require an employer to alter its ERISA plan, it may force the employer to choose between providing disability benefits in a separately administered plan and including the state-mandated benefits in its ERISA plan. If the State is not satisfied that the ERISA plan comports with the requirements of its disability insurance law, it may compel the employer to maintain a separate plan that does comply-

Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 108, 103 S.Ct. 2890, 2906, 77 L.Ed.2d 490 (1983). The Minnesota legislature has chosen to exclude SUB payments from *242wages only if the SUB plan comports with section 268.085, subdivision 29(a)(12).

In this case, the unemployment-law judge (ULJ) noted that the plan

pays the participant’s full weekly wage during a state imposed nonpayable week, it continues to pay benefits in the full amount of the participant’s weekly wage if the participant exhausts his unemployment compensation eligibility, and it also pays benefits to the participant if he does not have sufficient earnings to qualify for unemployment.

(Emphasis added.) The ULJ decided that Engfer was ineligible to receive unemployment benefits and is responsible for an overpayment because the SUB payments he received under the Employee Transition Benefit (ETB) plan were wages because they did not meet the requirements of section 268.035, subdivision 29(a)(12)— they exceeded the amount of Engfer’s weekly unemployment benefits. I agree.

Engfer’s argument that ERISA preempts Minn.Stat. § 268.085, subd. 29(a)(12), is unpersuasive. ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title.” 29 U.S.C. § 1144(a) (2012). The analysis of whether ERISA preempts Minn.Stat. § 268.035, subd. 29(a)(12), must begin “with the starting presumption that Congress does not intend to supplant state law.” N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 654, 115 S.Ct. 1671, 1676, 131 L.Ed.2d 695 (1995). The preemption provision is not of infinite scope and the objectives of ERISA must be a guide to the scope of the state law that can survive preemption. Id. at 656, 115 S.Ct. at 1677. The question of preemption turns on whether Minn.Stat. § 268.035, subd. 29(a)(12), relates to the ERISA plan by connecting with or referring to ERISA. See Cal. Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 324, 117 S.Ct. 832, 837, 136 L.Ed.2d 791 (1997).

Section 268.035, subdivision 29(a)(12), does not explicitly refer to ERISA, nor is the existence of ERISA plans essential to its operation, and therefore the state law cannot be preempted on these grounds. See id. at 325, 117 S.Ct. at 838. But even a state law that does not refer to ERISA plans may be preempted if it has a “connection with” ERISA plans. Id. A state law that produces “such acute, albeit indirect economic effects, by intent or otherwise, as to force an ERISA plan to adopt a certain scheme of substantive coverage” might be subject to preemption under 29 U.S.C. § 1144(a). Travelers Ins. Co., 514 U.S. at 668, 115 S.Ct. at 1683.

ERISA exempts an employee benefit plan from its provisions if the plan “is maintained solely for the purpose of complying with applicable [workers’] compensation laws or unemployment compensation or disability insurance laws.” 29 U.S.C. § 1003(b)(3) (2012); see 29 U.S.C. § 1144(a) (providing that ERISA suspends state law related to employee benefit plans if not exempt under section 1003(b)). An ETB plan offering SUB payments that satisfy section 1003(b)(3) would be exempt from ERISA. But no record evidence indicates whether the subject ETB plan is, as section 1003(b)(3) requires, maintained “solely for the purpose of complying with applicable [workers’] compensation laws or unemployment compensation or disability insurance laws.” (Emphasis added.)

The preemption analysis will continue with an examination of whether the indirect economic effects of section 268.035, subdivision 29(a)(12), impermissibly force the ETB ERISA plan to adopt a scheme of substantive coverage. See Travelers Ins. *243Co., 514 U.S. at 668, 115 S.Ct. at 1683. The indirect economic effects are that SUB payments made by an employer pursuant to a plan that does not meet these statutory requirements, such as the ETB plan, are considered wages, and when they equal or exceed the applicant’s weekly unemployment benefits, the applicant is ineligible for weekly unemployment benefits. Minn.Stat. § 268.085, subd. 3(a)(2).

An instructive preemption issue arose in Hewlett-Packard, Co. v. Diringer, in which a state workers’ compensation law required that employer-provided benefits, including benefits from an ERISA plan, must be included in the calculation of an employee’s average weekly wage. 42 F.Supp.2d 1038, 1044-46 (D.Colo.1999). The federal court held that even though ERISA may sometimes preempt a state law that indirectly affects an ERISA-gov-erned plan, the requirement that the value of benefits provided from ERISA-gov-erned plans be included in the calculation of workers’ compensation benefits did not implicate the congressional concerns behind the ERISA law as to “the administrative and financial burden of complying with conflicting directives among States or between States and the Federal Government” and therefore was not preempted by the law. Id. (quotation omitted).

Likewise, the Minnesota Supreme Court considered the somewhat similar issue of whether ERISA preempted the application of Minn.Stat. § 548.36 (1996), the collateral-source statute, under which a jury verdict in an uninsured motorist action was reduced, in relevant part, by payments from the insured’s ERISA employee benefit plan. Gilhousen v. III. Farmers Ins. Co., 582 N.W.2d 571, 572-73, 575 (Minn.1998) (citing 42 U.S.C. § 1144(a) (1994)). The supreme court noted that “[i]n holding that ERISA did not preempt the statute’s operation as to employee welfare benefits, the [Supreme] Court observed that ERISA preempts state statutes that affect plans, not the plan benefits that are owing a debtor-participant.” Id. at 575 (citing Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 836-38, 108 S.Ct. 2182, 2188-90, 100 L.Ed.2d 836 (1988)). The supreme court held that ERISA did not preempt the collateral-source statute because it did “not impose any administrative or operational requirements upon ERISA plans.” Id. The aim of the collateral-source statute was “merely to prevent plaintiffs from ‘double-dipping,’ by collecting damages from defendants for which they already have been compensated.” Id. The court emphasized that “the impact of Minnesota’s collateral source statute may affect benefits, not plans, and bears most directly upon the employee-plaintiff, not the employer-provider of benefits.” Id.

As in Hewlett-Packard Co. and Gilhousen, section 268.035, subdivision 29(a)(12), does not impose any administrative or operation requirements on the ETB plan. Nor does it force the ERISA plan to adopt a certain scheme of substantive coverage. See Travelers Ins. Co., 514 U.S. at 668, 115 S.Ct. at 1683. Instead, as in Hewlett-Packard Co. and Gilhousen, it at most indirectly affects the ETB plan payments because receipt of payments from the ETB plan rendered Engfer ineligible for unemployment benefits.4

*244Although subdivision 29(a)(12) indirectly affects the ETB benefits received by Eng-fer, in that the receipt of payments under the ETB plan rendered Engfer ineligible for unemployment benefits, it does not affect the ETB plan itself. Instead, it bears most directly on Engfer, rather than the employer who provided the benefits through the ETB plan. See Gilhousen, 582 N.W.2d at 575. And, although the determination that the ETB payments are wages would result in an overpayment to Engfer, as the ULJ determined, no equitable or common-law denial or allowance of unemployment benefits exists under the law. Minn.Stat. § 268.069, subd. 3 (2012).

For all of the reasons discussed above, I would hold that section 268.035, subdivision 29(a)(12), is not preempted by ERISA.

. The record contains a document titled “General Dynamics Employee Transition Benefit Plan Frequently Asked Questions” that Engfer provided to the ULJ. It advised beneficiaries that if they encounter a problem in collecting state unemployment benefits, they should immediately contact General Dynamics’s ETB plan administrator by calling a phone number listed on the document, stating that the administrator “can assist you in having your claim approved.”