Amicus Curiae Brief — R. R. Donnelley & Sons Co. v. Prevost

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Supreme Court, U.S.

FILED

No. 90-1249 MAR 11 199]

OFFICE OF THE CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1990

R. R. DONNELLEY & SONS COMPANY,

Petitioner,

Vv.

JUDY PREVOST et al.,

Respondents.

On Petition for Writ of Certiorari

to the United States Court of Appeals

for the Second Circuit

BRIEF OF AMICUS CURIAE

NATIONAL ASSOCIATION OF MANUFACTURERS

IN SUPPORT OF PETITIONER

Jan S. Amundson

General Counsel

*Quentin Riegel

Deputy General Counsel

NATIONAL ASSOCIATION OF

MANUFACTURERS

1331 Pennsylvania Avenue, N.W.

Washington, DC 20004-1703

(202) 637-3058

* Counsel of Record

March 11, 1991

TABLE OF CONTENTS

pp a. a err il

INTEREST OF AMICUS CURIAE ............. 2

SUREMEAS Cl ARUIUMIIINE 2. wc te ees 3

PEE 6 Nae he ka 5 We ee Ae O28 ee 4

I. The Second Circuit Decision Is At Odds

With This Court’s Decision in Shaw. ...... 4

II. The Connecticut Statute Exemplifies Only a

Portion of the Broad Exception Created by

eee tet 5 lak he ee) 6

III. There Will Be Pressure for Other States to

Bupgen ERISA PROMS 2. ww tt tt es 7

IV. Statutes Like Connecticut’s Create Intolerable

Administrative Problems.............. 8

V. The Connecticut Law Subjects Employers

Op TE GS kg ee ek eee es 10

ee eee ee eee eee eee ee ee ears 11

TABLE OF AUTHORITIES

CASES

Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504

908 oe SSS eee ee 9

FMC Corp. v. Holliday, 111 S. Ct. 403 (1990)... 8

Forkas v. International Silver Co., 100 Conn.

es eee 10

Fort Halifax Packing Co. v. Coyne, 482 U.S. |

NE ka es ke oe Re ea 8,9

Greenwood v. Luby, 105 Conn. 398 (1926)... . . 10

Metropolitan Life Ins. Co. v. Massachusetts,

eee ee 7 ee eee 8

Northern Group Services, Inc. v. Auto Owners Ins.

Co., 833 F.2d 85 (6th Cir. 1987), cert.

denied, 486 U.S. 1017 (1988)........... 8

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41

CORE & aye ecko aes ee aes 8

Shaw v. Delta Air Lines, Inc., 463 U.S. 85

CRUE a uae oe ae ee ee eee a 5,6,7,8

R.R. Donnelley & Sons Co. v. Prevost,

915 F.26 767 Ge Ce. TD) . wc es 5

STATUTES

Cal. Unemp. Ins. Code § 2627 (West 1986) ..... 7

Conn. Gen. Stat. Ann. § 31-284b(a)

re Oe ee ae wa 4,6

Conn. Gen. Stat. Ann. § 31-307 (West 1987) ... 10

Conn. Gen. Stat. Ann. § 31-308(a) & (d)

I. SC el 10

Employee Retirement Income Security Act of 1974,

Pub. L. 98-369, § 4(b)(3), codified at 29

Ee pe lk 5,6

Haw. Rev. Stat. § 392-21 (1985)............ 7

N.J. Stat. Ann. §§ 43:21-29 & 43:21-37 (West

a 7

N.Y. Work. Comp. Law § 204 (McKinney 1965 &

TEE a 7

OTHER AUTHORITIES

J. Asselin, The Connecticut Workers’ Compensation

ae ge), Tee 10

No. 90-1249

IN THE

Siuprenwe Court of the United States

OCTOBER TERM, 1990

R. R. DONNELLEY & SONS COMPANY,

Petitioner,

Vv.

JUDY PREVOST et al.,

Respondents.

On Petition for Writ of Certiorari

to the United States Court of Appeals

for the Second Circuit

BRIEF OF AMICUS CURIAE

NATIONAL ASSOCIATION OF MANUFACTURERS

IN SUPPORT OF PETITIONER

The National Association of Manufacturers of the United

States of America ("NAM"), with the consent of the parties, ;

files this brief as amicus curiae in support of the petitioner.’

‘Letters of consent are on file with the Clerk. Counsel for

Respondents indicated receipt of the corrected version of the Petition for

Writ of Certiorari on February 7, 1991. This brief is timely if filed on

or before March 11, 1991, under Rule 15.2.

STATEMENT OF INTEREST

NAM is a non-profit voluntary business association of

approximately 12,500 manufacturing and related business

concerns. Its members employ approximately 85 percent of

all workers in the nation’s manufacturing sector and produce

more than 80 percent of the nation’s manufactured goods.

As employers, NAM’s members provide a wide range of

employee benefits under benefit plans that are regulated by

the Employee Retirement Income Security Act of 1974

("ERISA"), and each company is directly affected by state

laws that interfere with those plans and the ability of the

company to offer them to employees.

NAM believes that private employee benefit plans with

their inherent flexibility to adapt to the almost infinite variety

of requirements of different employees and employers should

be encouraged to grow and prosper by favorable government

policies and practices. State laws and regulations, if not

properly constrained, can curtail the significant contribution

that such plans make to both individual economic security

and the entire economy, and can substantially interfere with

the competitive position of a company both in selling its

products and in attracting a quality work force.

This case involves whether Connecticut can require

employers that provide benefits under ERISA benefit plans to

make those benefits available to former employees long after

those employees have left the company. Employers without

employee benefit plans are under no similar compulsion.

Thus, if not reversed the ruling of the court below will not

only compound the financial and administrative burdens on

companies that provide ERISA benefit plans, but also will

touch off a flurry of activity in legislatures around the

country to dramatically expand eligibility for ERISA plans

- that are currently in effect.

NAM believes that this brief will offer the Court a

unique perspective that underscores the need for a review of

the decision of the United States Court of Appeals for the

Second Circuit.

SUMMARY OF ARGUMENT

The Connecticut statute being challenged in this case

requires employers who sponsor employee welfare benefit

pians to provide "equivalent" coverage to all employees,

including former employees, who are eligible for or are

receiving workers’ compensation in Connecticut. This

mandate under Connecticut law can continue for the life of

the employee. The statute requires that employee welfare

benefits be provided to a larger eligible group and for a

longer period of time than the employer envisioned when it

established the plans, and gives a free ride to residents of

Connecticut who happen to work for companies that provide

employee welfare benefits through ERISA plans.

This free ride can have a significant effect on the internal

costs faced by a company, thus affecting the competitiveness

of the company, the viability of the employer’s welfare

benefit plans, and the variety and amount of benefits offered

to employees around the country. The Connecticut law

bootstraps a larger population into coverage under an

employer’s ERISA plan, forcing companies to consider

reining in company-wide ERISA benefits to satisfy the

supplementary requirements of Connecticut law. Congress

adopted the broadly-worded ERISA preemption provision to

prevent this kind of back-door mandated benefits tactic.

This issue is Of paramount importance for several

reasons. In itself, this case involves substantial company

liability under Connecticut law. The Second Circuit’s

epinion, if unchecked, could expose all employer-provided

ERISA plans to substantial supplementary eligibility

requirements under state laws around the country. The

opinion misreads the limited exception of this Court’s Shaw

decision, and threatens to allow states to require free rides on

all sorts of benefit plans under the guise of state workers’

compensation, unemployment compensation and disability

insurance law. ERISA benefits of many kinds that are

routinely provided by employers, such as life insurance,

health insurance and pensions will be affected by the

approach taken by Connecticut’s legislature.

ARGUMENT

I. THE SECOND CIRCUIT DECISION IS AT ODDS

WITH THIS COURT’S DECISION IN SHAW

The State of Connecticut adopted the workers’ compen-

sation statute being challenged in this case to ensure that

employees injured on the job continue to receive accident and

health insurance or life insurance benefits they were receiving

while working. The law requires employers that sponsor

employee welfare benefit plans to provide “equivalent”

coverage to all employees who are eligible to receive or are

receiving workers’ compensation benefits in Connecticut.’

The Second Circuit held that such a law relates to

ERISA plans and is preempted unless the law is saved from

*CONN. GEN. STAT. ANN. § 31-284b(a) (West 1987).

preemption by 29 U.S.C. § 1003(b)(3).° That court also

held, purportedly in accordance with this Court’s ruling in

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983), that the

Connecticut law is saved from premption because a Connec-

ticut employer could create a separate injured employee’s

plan as an "extension" of its ERISA plan designed solely for

the purpose of complying with the Connecticut law.*

The Shaw case involved a state requirement that

employers pay specified disability benefits, i.e., $95 per week

or one-half of the employee’s weekly wages, to cligible

employees. This mandated benefit was imposed regardless of

whether the employer had an ERISA plan. This Court ruled

that since the state could mandate this specific benefit to be

provided separately from the employer’s ERISA plan, the

employer could, at its own option, just as well incorporate

the benefit into its ERISA plan.’

However, in the instant case, Connecticut is not mandat-

ing a specified benefit; rather, it demands that benefits under

existing employee benefit plans, if any, be made available to

"employees" as they are defined under Connecticut workers’

compensation law. These benefits could range from complete

health care and life insurance coverage all the way down to

nothing. Thus, Connecticut does not specify an across-the-

board benefit that is independent of benefits available under

the employer’s ERISA plan. The Second Circuit misread

Shaw to allow states to mandate the extension of ERISA

benefits to unemployed workers. In reality, Shaw allows

915 F.2d 787, 791-92, Pet. App. at A9-10.

‘Id. at 793, Pet. App. at A13.

“Id.

ERISA plans to incorporate otherwise legitimate state-

mandated benefits into them, thus easing the administration

of mandated benefits by employers. The Second Circuit’s

interpretation of Shaw is clearly at odds with that opinion and

should be reviewed.

Il. THE CONNECTICUT STATUTE EXEMPLIFIES

ONLY A PORTION OF THE BROAD EXCEPTION

CREATED BY THE SECOND CIRCUIT

ERISA benefits that are routinely provided by employ-

ers and that are expressly drawn into the state’s workers’

compensation requirement include accident, health and life

insurance.° Connecticut, or any other state, might also

mandate that other ERISA benefits, such as pension benefits,

be continued for all persons eligible for workers’ compensa-

tion. Thus, even though Connecticut is concerned only with

health, accident and life insurance, a state law could attach

itself to all kinds of ERISA benefits.

In addition, although the Connecticut statute under

review only involves benefits under a workers’ compensation

law, the language of Section 4(b)(3) of ERISA exempting

certain benefit plans encompasses plans maintained solely to

comply with unemployment compensation or disability

insurance laws as well. Thus, the Second Circuit’s ruling

could allow a state to require companies to provide similar

benefits to unemployed workers without running afoul of

ERISA. Similarly, in those states where disability insurance

“CONN. GEN. STAT. ANN. § 31-284b(a) (West 1987).

laws provide benefits,’ employers could face similar obliga-

tions to provide ERISA benefits to eligible residents.

Whether Congress intended for states to be able to free-ride

on ERISA plans for these purposes is a fundamental issue in

benefits law, and this case presents a proper vehicle for

further resolution of how such laws should be interpreted.

lil, THERE WILL BE PRESSURE FOR OTHER

STATES TO BURDEN ERISA PLANS

The Second Circuit’s ruling may encourage expansive

legislative activity in other states. It can certainly be

expected that other states will feel considerable pressure to

keep the burden of dramatically increasing health-care costs

on employer-funded plans. They will also feel an obligation

from constituents to provide benefits comparable to those of

other states. Thus, because Connecticut’s statute has been

validated by a United States court of appeals, other states are

likely to move ahead in this area. Legal challenges to these

new statutes can be expected to take the time and resources

of all affected, and this Court’s intervention at this point

would be quite positive in defining the limits on this activity.

The Shaw case itself involved benefits for disabilities arising from

nonoccupational injuries and illnesses, rather than workers’ compensation

benefits. See 463 U.S. 85, 89 (1983). Several states currently have

similar disability benefits laws that might be amended to provide benefits

based on ERISA plans. See, e.g., CAL. UNEMP. INS. CODE § 2627

(West 1986); Haw. REv. STAT. § 392-21 (1985); N.J. STAT. ANN.

§§ 43:21-29 & 43:21-37 (West 1962 & Supp. 1990); N.Y. Work.

Comp. LAW § 204 (McKinney 1965 & Supp. 1991).

IV. STATUTES LIKE CONNECTICUT’S CREATE

INTOLERABLE ADMINISTRATIVE PROBLEMS

As this Court recognized in Shaw, "[o]bligating the

employer to satisfy the varied and perhaps conflicting re-

quirements of particular state fair employment laws . . .

would make administration of a nationwide plan more dif-

ficult."" This in turn would produce "considerable ineffi-

ciencies in benefit program operation, which might lead those

employers with existing plans to reduce benefits, and those

without such plans to refrain from adopting them.’

Congress adopted the ERISA preemption provision to

prevent this kind of back-door attempt to regulate core

ERISA concerns.” Because congressional intent is

fundamental in any analysis of preemption,’ the Second

Circuit should have considered the clear purpose of the

conspicuously broad preemption provision as reflected in fhe

legislative history.'° This Court has regularly repeated Con-

gress’s intent to establish a uniform administrative scheme for

employee benefit plans, and it looks askance at any law that

"463 U.S. at 105 n.25.

*Fort Halifax Packing Co. v Coyne, 482 U.S. 1, 11 (1987).

See Northern Group Services, Inc. v. Auto Owners Ins. Co., 833

F.2d 85, 91-95 (6th Cir. 1987), cert. denied, 486 U.S. 1017 (1988). Cf.

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45-46 (1987) ("the express

preemption provisions of ERISA are deliberately expansive, and designed

to ‘establish pension plan regulation as exclusively a federal concern.’”)

'' Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 747

(1985).

'2See FMC Corp. v. Holliday, 111 $. Ct. 403, 407 (1990).

requires a plan to keep certain records in some states but not

in others, to make certain benefits available in some states

but not in others, or to process claims in a certain way in

some states but not in others."

This Court rejected a state law that prohibited offsetting

worker compensation payments against pension benefits

because the law would require the employer to devise and

operate a system for processing claims and paying benefits

with different formulae in different states." The case at bar

involves a state requirement for maintaining benefits and

processing claims with the same resulting interstate inconsis-

_tencies.

Many employers offer a variety of health benefit

options, such as a selection of health maintenance organiza-

tions (HMOs) or other group insurance plans, each with

different costs, benefits and requirements. In order for a

company to comply with Connecticut’s law by establishing "a

separately administered plan,” it would have to look not to

specific benefits mandated by Connecticut law, but rather to

the terms of its own plan or plans. Any change in an

existing ERISA plan would trigger an obligation to amend a

separate plan to provide “equivalent” benefits. For example,

if an employer lowered the deductible amount in an ERISA

plan one year, the change could lead to liability if the

employer does not provide equivalent coverage in its separate

plan. In another year, if the employer changed the per-

centage of the premium paid by the employees, a similar

change must be made in its separate plan. If the company

"Fort Halifax Packing Co. v. Coyne, 482 U.S. i, 9 (1987).

'4Id. at 10 (discussing Alessi v. Raybestos-Manhattan, Inc., 451 U.S.

504 (1981)).

should then alter a plan’s requirement relating to second

medical opinions for surgery, it must then make sure that

every separately administered plan established under state law

requirements provide equivalent benefits.

Litigation over whether changes in benefits were provid-

ed, whether changes were made, and whether they were in

fact "equivalent" will mean that a separate plan is not in fact

practical. This problem is compounded by the possibility that

fifty states could adopt comparable statutes, and "equivalent"

plans set up in each state would all have to be modified

whenever there is a change in an employer's ERISA plan.

This is exactly the result Congress intended to prevent.

V. THE CONNECTICUT LAW SUBJECTS EMPLOY-

ERS TO SUBSTANTIAL COSTS

If this decision is a proper reading of the exception to

the general rule that state laws relating to ERISA plans are

preempted, it will have a substantial impact both in Connec-

ticut and around the country. In Connecticut, workers are

eligible to receive certain workers’ compensation benefits for

life.’ Thus, an employer has to provide its regular ERISA

plan benefits to workers that may have long since left the

workforce. This requirement will clearly have a significant

impact on all companies, both large and small.

'S Conn. GEN. STAT. ANN. §§ 31-308(a), (d) & 31-307 (West 1987)

(eligibility for partial incapacity for up to 780 weeks; eligibility for total

incapacity limited only to the period of incapacity); J. Asselin, The

Connecticut Workers’ Compensation Practice Manual 126 (1985). See

Forkas y. International Silver Co., 100 Conn. 417 (1924); Greenwood

v. Luby, 105 Conn. 398, 400 (1926).

This statute can have a significant effect on the internal

costs faced by a company, thus affecting the competitiveness

of the company, the viability of the employer’s welfare

benefit plans, and the company’s willingness to bear the

added risk arising out of the presence of a workforce in

Connecticut. The Connecticut law bootstraps a larger popula-

tion into coverage under an employer’s ERISA plan for a

longer period of time, forcing companies to consider reining

in company-wide ERISA benefits to satisfy the supplementary

requirements of Connecticut law. Moreover, because costs

per worker are increased, companies may be forced to reduce

these costs by laying workers off, or not hiring new workers,

or by reducing other benefits. Therefore, these benefits will

not necessarily raise the welfare of workers as a whole, but

may even have the opposite effect.

The statute also gives a free ride to residents of Con-

necticut who happen to work for companies that provide

employee welfare benefits through ERISA plans. This free

ride occurs when state residents benefit from eligibility

criteria, mandated by the state government, that take ad-

vantage of contributions made to the plan either by employees

outside the state or by the company as a whole.

In short, the Second Circuit’s ruling will legitimize the

power of a state to require that ERISA plan benefits be made

available to an extent far exceeding the expectations of plan

sponsors, trustees or beneficiaries.

CONCLUSION

The Supreme Court should take this opportunity to

provide states, employers and employees with a decision that

clearly limits the extent to which ERISA plan benefits may be

expanded by state law. If states are allowed to freely roam

among ERISA-governed employee benefits programs under

the guise of workers’ compensation law, an important

national policy promoting the development of wide-ranging

benefits packages will be seriously distorted and undermined.

This could cause a retrenchment in the breadth and level of

employee benefits at a time when international and domestic

competition, recessionary pressures and the impact of health

care costs are so strong.

We urge that the petition for a writ of certiorari be

granted.

Respectfully submitted,