By Ronald Kramer and Michael W. Stevens
Seyfarth Synopsis: Claims for benefits at termination may proceed as a breach of contract claim in state court, and avoid ERISA preemption, where the calculations are individualized, straightforward and do not implicate an ongoing administrative scheme.
Under a recent decision from the Central District of California, employers may not be able to invoke ERISA preemption and remove cases to federal courts where the benefits claims at issue are not “complex” and do not implicate administrative discretion.
In Amlani v. Baker’s Burgers, Inc., No. 17-02278, 2018 WL 354617 (C.D. Cal.), Plaintiff brought a breach of contract claim after his employment agreement was terminated by the Defendant. Plaintiff had worked with Defendant for almost 29 years, the first 18 of which were covered by a “handshake” agreement based on a percentage of sales. Id. at *1. In 2006, the parties entered into a written Employee Benefits Agreement, which specified certain benefits to be paid to the Plaintiff. In 2008, they subsequently entered a new Employment Agreement, which in relevant part, allegedly entitled Plaintiff to a longevity payment of “1.68 times [his] base salary and fringe benefits” after the vesting period. Id. at 2.
Defendant terminated Plaintiff, and Plaintiff brought a breach of contract suit in state court claiming he was entitled to certain severance benefits, as well as the longevity payment. Id. Defendant removed to federal court, asserting that Plaintiff’s claims were preempted by ERISA § 502(a)(1)(B). Id.
The Court proceeded to examine whether Plaintiff’s claims fell within the preemption analysis established by Aetna Health Inc. v. Davila, 542 U.S. 200 (2004), which permits preemption where a claim could have been brought under § 502(a)(1)(B), and implicates no other legal duty.
The Court focused on the first half the inquiry: whether Plaintiff’s claims could have been brought under ERISA. To do so, the Court examined whether the agreement constituted a benefit plan covered by ERISA: “does the benefit package implicate an ongoing administrative scheme?” Id. at *3 (citing Delaye v. Agripac, Inc., 39 F.3d 235, 237 (9th Cir. 1994)).
Here, like in Delaye, the Court found no ongoing administrative scheme. The benefits did not apply to a larger group of employees and were relatively straightforward. The longevity severance payment involved a “one-time, individualized calculation,” id., to wit: multiplying the value of Plaintiff’s salary and benefits by 1.68. Nor did the other severance benefits at issue, which required ongoing payments, rise to an ongoing administrative scheme, because there was no “issue of employer discretion, but rather one of contract interpretation.” Id. at *4. The Court thus found no preemption, and remanded to state court.
Amlani reminds employers that where benefits packages are highly individualized, and do not implicate administrative schemes or discretion, claims by employees for breach may remain in state court.