Amicus Curiae Brief — Roberts v. Burlington Industries, Inc.

(’ ~\ | May

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Nos. 85-441 and 85-460 JOSEPH «

Iu the Supreme Court of ihe United States

OCTOBER TERM, 1985 -

LILLIAN ROBERTS, COMMISSIONER OF LABOR

OF THE STATE OF NEW YORK, APPELLANT

v.

BURLINGTON INDUSTRIES, INC.

IRVING GILBERT, ET AL., APPELLANTS

Uv.

BURLINGTON INDUSTRIES, INC.

ON APPEAL FROM THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE

CHARLES FRIED

Solicitor General

CAROLYN B. KUHL

Deputy Solicitor General

CHRISTOPHER J. WRIGHT

Assistant to the Solicitor General

Department of Justice

Washington, D.C. 20530

(202) 633-2217

GEORGE R. SALEM

Deputy Solicitor of Labor

ALLEN H. FELDMAN

Associate Solicitor

BETTE J. BRIGGS

Attorney

Department of Labor

Washington, D.C. 20210

—

QUESTION PRESENTED

Whether an employer’s policy of providing severance

pay to eligible employees is an “employee welfare benefit

plan” under ERISA, thus preempting state statutory and

common law causes of action that relate to the severance

pay policy.

(I)

TABLE OF CONTENTS

ual es oes 1

ae SO al edinsaeuehiennios 7

SE Le LOSS RO Es RE Oe NE ET 22

TABLE OF AUTHORITIES

Cases:

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

Blau v. Del Monte Corp., 748 F.2d 1348, cert. de-

nied, No. 84-2009 (Oct. 7, 1985) _..........-00.222-2..-... 7,9,12

Burger King Corp. Vv. Rudzewicz, No. 83-2097 (May

Ot ASD den UD eee ai Se Od 8

Calhoon v. Bonnabel, 560 F. Supp. 101 ~................... 11

California Hospital Ass’n v. Henning, 770 F.2d

856, petition for cert. pending, No. 85-1648_...___... 17

Carpenters Health & Welfare Fund v. Kenneth R.

po ee a Sy ieee 11

Chevron U.S.A. Inc. v. Natural Resources Defense

I ss SN aes 13

Dependahl v. Falstaff Brewing Corp., 653 F.2d

1208, cert. denied, 454 U.S. 968, aff’g 491 F.2d

LL EEE Ania iS NE el ee eR RiGee iene SO Se 9,12

Donovan Vv. Dillingham, 688 F.2d 1367 .................. 4, 12,18

Federal Power Commission v. Panhandle Eastern

Bree Be Ce, Bt oan neneecacs--s--- 16

Franchise Tax Board V. Construction Laborers Va-

eG ie ee &

Franchise Tax Board v. United States Postal Serv-

a. ep EE Oa im ay ARETE AN oe 8

Goldstein v. Mangano, 99 Misc.2d 523, 417 N.Y.S.2d

(BAe CO te aan ECC NR i OR OER ids 11

Jung Vv. FMC Corp., 755 F.2d 708 ................---..--------- 9, 21

Metropolitan Life Insurance Co. v. Massachusetts,

Me. O4-355 (Jame Ss. 1908) ....................-............--. 10, 19

Motor Coach Employees v. Lockridge, 403 U.S. 274. 18

Murphy v. Heppenstall Co., 635 F.2d 233, cert. de-

“"¢ ii S Faerie: 20

IV

Cases—Continued : Page

Nachman Corp. v. Pension Benefit Guaranty Corp.,

PR i SR IRRr eens cee tran seneme Sem eRe ne chaune er aee nen een 19, 20

Pinto v. Zenith Radio Corp., 618 F.2d 110, aff’g,

GED FTI, TE aire sicicssintrceeecnctsiercerenerncn cneneoenstetee 10

Reiter v. Sonotone Corp., 442 U.S. 330 -................... 16

Scott v. Gulf Oil Corp., 754 F.2d 1499......6, 9, 12, 14, 15, 17

Sforza v. Kenco Constructional Contracting, Inc.,

Fr, Be I ia sts center recs rirnseetictiorwseen 11

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 .............. 10, 19

Silkwood v. Kerr-McGee Corp., 464 U.S. 238 .......... 8,9

Sly v. P.R. Mallory & Co., 712 F.2d 1209 .................. 9

Sutton v. Weirton Steel Division of National Steel

Corp., 724 F.2d 406, cert. denied, 467 U.S. 1205.. 9-10

Trustees of Sheet Metal Workers’ International

Association Production Workers’ Welfare Fund

v. Aberdeen Blower & Sheet Metal Workers, Inc.,

oka vee ie eatieamasrersmmnciis 11

Rae WH, Fs, Be hats enn sacers ccs sececpenrerececs 13

Constitution, statutes, regulations and rule:

U.S. Const. Art. VI, Cl. 2 (Supremacy Clause) ........ 8

Employee Retirement Income Security Act of 1974,

29 U.S.C. (& Supp. II) 1001 et seq. .................... 3

aR Gly RIE 5 alee EO RRR eS 17

re cD oecctecs ni cciendabemansercacab schateal 3, 10, 12, 13

er ME OAD nsec inenpaspntecereioeauen 5, 10

29 U.S.C. 1002 (1) (B) ............ Se RE ala: 4,5, 10

ns ca eieceniaell 14

a dicen 10

. FOS BE) 2 Saar orEEEEReE EER EyTEE meer 12

29 U.S.C. (& Supp. II) 1021-1031 .......0022 22... 4

PE ns en icehianaveteuosdasamenens 13

AR Tt on 8 6 2 Ra aati een nn Dae Rene or none 13

BIR help! oS ) 4 RRR Neale coe eens 13

29 U.S.C. (& Supp. II) 1101-1114 ....................... 4

, git Sake: UL) 2 6) RRO eeMneD een Senne amianeS 13

BP ROT EY 1h 8 6G § pemecmmnemn cree 13

| cs By) - SIRI essipomnenseureeen ss Nemec eure inne 18

Fr SAC rere ce rreeevevwerevesensenccescowes 18, 19, 20-21 i

29 U.S.C. 1132 (2) ..--..cceescecceeceeeseeseeeseeceeeseeeeeeseeeees 21

Be coe cae ian sce aionecdconbeeypens eames 11 |

ee

Vv

Constitution, statutes, regulations

and rule—Continued: Page

Tr a 3, 10

29 U.S.C. (& Supp. IT) 1144(b) -...20 0. 10

29 U.S.C. 1144(b) (4) (§ 514(b) (4) ) ee... 11

enc eR arose cca ieareseloornen 20

National Labor Relations Act, 29 U.S.C. 151 et seq... 19

Taft-Hartley Act of 1947:

mes TD a ceccicssccrctbasdpiioslaobancedasban 4,5, 10, 14, 15

Re IIE MED orice seccrresesniinccsnisericidesivavccodliaunccinons 10

Pub. L. No. 96-364, § 409, 94 Stat. 1807 --..00-2o 14

Be Ws MED ncisss isnstart tui aevcuckontbcpacaaanidedeabe lt 8,9

EE II 20 dicie cers cramsoccteanacsneciraiiaramaticyuataana te 22

N.Y. Lab. Law § 198-c (McKinney 1986) ....3, 6, 8, 9, 10, 11

29 C.F.R.:

Pt. 2509:

Section BGGG. 76-6 (CIGGO) oon. cccevccvevcnesccoecaee 4

Pt. 2510:

I 6

ee AGS 2) en eee ae 15-16

ee ge SE: | a ne ee Re 5, 14, 15

SY EES a OR ie. cc, 6, 15

Section 2510.3-1(b) (1) -00...0.... Riccatisusbaatcsnonthausacnee 16

es Tt ALT > 5 a a eee ee 16

ection 2510.3-1 (ib) (3B)... ---.. nce cccceeeececcceccccecee es 16

ES |) ane yan Ta oe 13

ie ee rice chests tasted 5

Miscellaneous:

120 Cong. Rec. (1974):

ee ae a ar a oe ee 20

I ips eee caae tere are ee a ee ea 20

126 Cong. Rec. 20208 (1980) ....................................-.. 14

Dep’t of Labor Advisory Op.:

Pee: Pee Cea. Sere)... 13

No. 81-55A (June 26, 1981) Be asaanminns & sites 13

PR Bk: ) Rear ene 4

H.R. Conf. Rep. 93-1280, 93 Cong., 2d Sess. (1974).. 20

H.R. Rep. 93-533, 93d Cong., Ist Sess. (1973) ......... 16

S. Rep. 93-127, 93d Cong., Ist Sess. (1973) -.............. 16

Iu the Supreme Court of the United States

OCTOBER TERM, 1985

No. 85-441

LILLIAN ROBERTS, COMMISSIONER OF LABOR

OF THE STATE OF NEW YORK, APPELLANT

Vv.

BURLINGTON INDUSTRIES, INC.

No. 85-460

IRVING GILBERT, ET AL., APPELLANTS

Vv.

BURLINGTON INDUSTRIES, INC.

ON APPEAL FROM THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE

This brief is submitted in response to the Court’s in-

vitation to the Solicitor General to express the views of

the United States.

STATEMENT

1. In 1982 Burlington Industries, a textile manufac-

turer, sold its sock and hosiery divisions as going con-

cerns to Kayser-Roth Hosiery, Inc. Prior to the sale,

Burlington arranged for the individual appellants, 36

former Burlington employees who worked in 16 different

states but reported to Burlington’s merchandising head-

quarters in New York, to continue working With the di-

visions following their acquisition by Kayser-Roth. All

(1)

2

of the individual appellants, except one who retired, con-

tinued to hold the same positions with Kayser-Roth that

they previously held while employed by Burlington. J.S.

App. A5.'

Burlington maintained a severance pay policy which

was summarily described in an employee handbook and

fully set forth in a company policy manual. The sever-

ance pay policy provided that “regular full-time salaried

employees” experiencing either “job elimination” or cer-

tain other “involuntary terminations” were eligible for

severance payments.* The grant or denial of severance

pay occurred immediately upon termination of employ-

ment and benefits were payable from the company’s gen-

eral assets rather than from a separate fund. Burlington

determined that appellants were not eligible for severance

benefits under its policy because their jobs were not

terminated. J.S. App. A5-A7.*

2. Burlington’s former employees sought to obtain sev-

erance pay from the company on the theory that they be-

came entitled to benefits when they ceased working for

1The district court stated that appellants were employed by

Kayser-Roth “at the salaries or rates of pay received previously

from Burlington” (J.S. App. A22). The court of appeals, in

contrast, noted that appellants contend that Kayser-Roth employed

them at a lower rate of compensation (id. at A5).

2 The policy states that “job elimination” includes “terminations

due to circumstances such as elimination or modification of opera-

tions or other job elimination due to bona fide organizational

changes” and that “other involuntary terminations” include “termi-

nations due to unsatisfactory job performance which is not willful.”

J.S. App. A23. The amount of the severance payment is determined

from tables contained in the policy and depznds on factors such as

age, salary, and years of service (ibid.).

*’ Burlington agreed to provide severance pay to any employee

terminated by Kayser-Roth within six months after the sale (85-929

Pet. App. All). Appellants contend that about one-third of them

have been terminated by Kayser-Roth—presumably after the six-

month period—and that Kayser-Roth has no severance pay policy,

so that the terminated employees received little or no severance pay

(85-460 J.S. 4 n.3).

3

Burlington and began working for Kayser-Roth. In state

administrative proceedings, the New York State Commis-

sioner of Labor ordered Burlington to cgmply with claims

that ten of the individual appellants in this action had

filed with the State Department of Labor pursuant to Sec-

tion 198-c of the State Labor Law.‘ Burlington appealed

the Commissioner’s order to the New York State Indus-

trial Board of Appeals. Appellants then brought this

action in the United States District Court for the South-

ern District of New York, alleging four claims under

the Employee Retirement Income Security Act of 1974

(ERISA), 29 U.S.C. (& Supp. II) 1001 et seg., and, in

the alternative, seven state law causes of action. The

Commission intervened as a plaintiff, and the Board

stayed enforcement of the Commissioners order and

held the administrative appeal in abeyance pending de-

termination of the present action (J.S. App. A295)

Burlington sought dismiss! of appellants’ claims,

tending that their state law claims are preempted by <9

U.S.C. 1144(a), which provides that ERISA “sup:

sede[s] any and all State laws insofar as they * * * re

late to any employee benefit plan.” The district court «

missed the state law claims. It first held that Burling-

ton’s severance pay policy is an “employee welfare ben-

efit plan” within the coverage of ERISA (J.S. App. A26).

The court noted that Burlington did not contend that its

severance pay policy was a pension plan but that it was

a welfare plan as defined in 29 U.S.C. 1002(1).* Respond-

4 That statute makes it a misdemeanor for an employer to fail or

refuse to pay or provide “benefits or wage supplements,” which are

defined by the statute to include “reimbursement for expenses;

health, welfare and retirement benefits; and vacation, separation or

holiday pay.” N.Y. Lab. Law § 198-c (McKinney 1986).

5 Section 1002(1) defines “employee welfare benefit plan” (or

“welfare plan”) to mean “any plan, fund, or program * * * estab-

lished or maintained * * * for the purpose of providing for its

participants or their beneficiaries, through the purchase of insur-

ance or otherwise, (4) 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

4

ing to appellants’ argument that Burlington’s severance

pay policy is not a welfare plan ‘“‘because there is no plan

as such, but simply a naked promise to pay severance

benefits” (J.S. App. A27 (emphasis in original) ), the

court, following Donovan v. Dillingham, 688 F.2d 1367,

1372 (lith Cir. 1982) (en banc), concluded that Burling-

ton’s severance pay policy “is a plan, established by an

employer, for the purpose of providing * * * [a covered]

benefit to its participants, the Burlington employees,

thruogh the use of general corporate assets” (J.S. App.

A28). The district court also rejected appellants’ argu-

ments that welfare plans must be separately funded in

order to be covered by ERISA (id. at A28, A30).° And

the court concluded, contrary to appellants’ contentions,

that while the statute’s fiduciary and reporting provisions

establish responsibilities of plan fiduciaries and admin-

istrators, they do not set forth prerequisites for ERISA

coverage (id. at A29).7 The court added that an inter-

pretive bulletin issued by the Department of Labor stated

that welfare plans do not have to have a funding proce-

dure and that a statement accompanying proposed amend-

ments to ERISA regulations stated that “severance pay

plans would in virtually all cases be welfare plans” (id.

at A30, citing 29 C.F.R. 2509.75-5 (1980) and 44 Fed.

Reg. 11763 (1979) ).

Having determined that Burlington’s severance pav

policy is covered by ERISA, the court held that ERISA

services, or (B) any benefit described in section 186(c) of this

me? * e

®In that connection, the court explained (J.S. App. A29) that

although 29 U.S.C. 1002(1)(B) refers to benefits “described in”

29 U.S.C. 186(c), and that Section mentions “pooled * * * severance

or similar benefits,” that reference did not. mean that severance

pay benefits had to be pooled in order to be covered by Section

1002(1) (B). Appellants have abandoned this argument ‘see 85-460

J.S. 7-8 n.7).

7 ERISA imposes certain uniform standards on the design, admin-

istration, and operation of all employee benefit plans, including rules

concerning reporting, disclosure, and fiduciary responsibility. 29

U.S.C. (& Supp. II) 1021-1031, 1101-1114.

5

preempts appeliants’ state law claims because they “re-

late to” an employee benefit plan (J.S. App. A30-A31).°

The court therefore dismissed the state law claims and

permanently enjoined the state administrative proceed-

ings; it did not dismiss appellants’ ERISA claims. Pur-

suant to Fed. R. Civ. P. 54(b), the district court certi-

fied its decision for immediate review by the court of

appeals. J.S. App. A84-A35.

3. The Second Circuit affirmed (J.S. App. A1-A20).

The court agreed with the district court’s conclusion “that

Burlington’s severance pay policy was an ERISA plan”

(id. at A7). The court rejected appellants’ argument

that “a promise or agreement to pay severance benefits,

without more,” is not a welfare plan (id. at A9). The

court instead found that the severance pay policy is a

welfare plan under Section 1002(1) (A), which includes

plans providing unemployment benefits in the definition

of welfare plans, since severance pay is a type of unem-

ployment benefit (J.S. App. A10). The court also con-

cluded that the severance pay policy is a welfare plan

under Section 1002(1)(B) which refers to severance pay

by means of its reference to Section 186(c¢c), which spe-

cifically mentions severance pay (J.S. App. Al0). The

court noted that a Department of Labor regulation states

that welfare plans include plans that pay severance ben-

efits (id. at All, citing 29 C.F.R. 2510.3-1(a) (3) ), con-

cluding that that regulation is reasonable (J.S. App. A12).

The court also rejected .appellants’ argument that

ERISA covers only separately funded severance pay

plans (J.S. App. Al1-A12). And it rejected their argu-

ment that Burlington’s unfunded severance pay policy

should be considered to be a “payroll practice” which is

excluded from ERISA coverage under the Department of

Labor’s regulations (id. at A1l3).° As did the Ninth Cir-

8 Appellants have abandoned their argument that “heir state law

claims do not “relate to” an ERISA plan. See 85-441 J.S. 7 n.**;

85-460 J.S. 7-8 n.7.

® To clarify the definition of ‘welfare plan,” the regulation identi-

fies as outside the scope of the definition certain “payroll practices”

including arrangements whereby an employee continues to receive

6

cuit in Scott v. Gulf Oil Corp., 754 F.2d 1499, 1503

(1985), the court noted that the payroll practices enu-

merated in 29 C.F.R. 2510.3-1 cover payments made

“during the course of employment, while severance pay

occurs only after termination” (J.S. App. A13).

The court accordingly held that ERISA preempts ap-

pellants’ state common law claims and their claims based

on N.Y. Lab. Law § 198-c (McKinney 1986). It stated

that “[t]o hold otherwise would undermine the uniform-

ity in plan administration that [ERISA] was designed

to promote” (J.S. App. A17).?°

Finally, the court of appeals considered whether Bur-

ington should be estopped from raising the preemption

defense because, as appellants contend without contradic-

tion, Burlington failed to comply with ERISA’s reporting

compensation from an employer’s general assets during periods of

absence. 29 C.F.R. 2510.3-1(b). Severance pay is not included

among the “payroll practices” enumerated in the regulation.

10 Two hundred other Burlington employees affected by the sale

filed a similar action in the United States District Court for the

Middle District of North Carolina, alleging claims based on ERISA

and state law claims as well. As in this case, the employees first

obtained a favorable administrative ruling from state officials.

When federal court proceedings commenced, the Commissioner of

Labor for the State of North Carolina intervened in that action.

The district court held in that case that ERISA preempted the

plaintiffs’ state law claims. It also held that Burlington’s decision

to deny severance pay was not arbitrary or capricious and dismissed

their ERISA-based claims. It based its conclusion that the employ-

ees could not recover under ERISA on its finding that “Burlington

established its severance policy for the purpose of providing financial

support to employees whose jobs are lost through no willful fault of

their own and who might therefore be in need of financial resources

during a period of unemployment” (85-929 Pet. App. A61). The

Fourth Circuit affirmed (id. at Al-A43). It stated that because

“unemployment compensation was undoubtedly a major purpose of

the plan,” Burlington’s decision not to award severance pay, “though

not compelled by the plan’s language, is certainly a reasonable one”

(id. at A38-A39). The individual plaintiffs in this related case have

filed a petition for a writ of certiorari (No. 85-929) and the North

Carolina Commissioner has filed a jurisdictional statement (No. 85-

944), both of which are pending before the Court.

7

and disclosure requirements with respect to its severance

pay policy until after suit was filed in this case. The

court concluded that it would be undesirable to hold Bur-

lington estopped and therefore subject to inconsistent

treatment of claims under state law (J.S. App. A19).

The court did not consider appellants’ claims based on

ERISA, leaving that question for determination by the

district court on remand (zbid.)."

ARGUMENT

The court of appeals correctly determined that Bur-

lington’s severance pay policy is a welfare plan covered

by ER!ISA. Therefore, the court was also correct in hold-

ing that appellants must seek relief under federal, not

state, law. The decision below is consistent with the lan-

guage and legislative history of ERISA and the con-

temporaneous construction of the statute by the United

States Department of Labor, the agency charged with

responsibility for enforcing the reporting, disclosure, and

fiduciary obligations that ERISA imposes oii private em-

ployee benefit plans. Moreover, the court of appeals’ de-

cision is in accord with the decisions of all other courts

11 Following the approach adopted in Blau v. Del Monte Corp.,

748 F.2d 1348, 1354 (9th Cir. 1984), cert. denied, No. 84-2009 (Oct.

7, 1985), the court concluded that it would be appropriate to scruti-

nize Burlington’s decision not to award severance pay while at the

same time indicating that the arbitrary and capricious standard of

review should be applied in reviewing Burlington’s construction of

its severance pay policy. J.S. App. Al8-A19. Such an approach, the

court stated, “eliminates any incentive on the part of employers not

to comply with the Act’s reporting, disclosure and fiduciary require-

ments” (id. at Al9). In following Blau, the court contrested its

approach with the approach taken by the district court in the case

brought by Burlington employees in North Carolina (J.S. App. A18)

since that court applied the arbitrary and capricious standard with-

out considering Burlington’s failure to comply with ERISA’s report-

ing and disclosure provisions. The Fourth Circuit, in turn, which

issued its decision after the Second Circuit, stated that it applied

the arbitrary and capricious standard to all claim eligibility disputes

and saw “no reason to vary the standard based on procedural viola-

tions indicating bad faith, for such situations can be adequately

resolved under the traditional standard” (85-929 Pet. App. A37).

8

of appeals that have considered the issue, and does not

conflict with any decision of this Court. Therefore, al-

though in our view this case is properly brought as an

appeal, it does not warrant plenary review.

1. This case is prcperly brought as an appeal pursu-

ant to 28 U.S.C. 1254(2), which provides for review

“Tbly appeal by a party relying on a State statute held

by a court of appeals to be invalid as repugnant to the

Constitution, treaties or laws of the United States,” be-

cause the court of appeals has held Section 198-c of New

York’s Labor Law unconstitutional under the Supremacy

Clause. Franchise Tax Board vy. United States Postal

Service, 467 U.S. 512, 515 n.7 (1984); Franchise Tax

Board v. Construction Laborers Vacation Trust, 463 U.S.

1, 7 & n.6 (1983). Burlington argues that there is no

basis for appeal because this case is similar to Silkwood

v. Kerr-McGee Corp., 464 U.S. 238 (1984), in which the

Court held that appeai was not proper where a court of

appeals invalidated a punitive damages award because

federal law prohibited such an award. The Court ex-

plained its decision in Silkwood by stating that the court

of appeals “did not purport to rule on the constitution-

ality of the Oklahoma punitive damages statute. The

court did not mention the statute, and the parties did not

contest or defend the constitutionality of the statute in

their appellate briefs. While the award itself was struck

down, the statute authorizing such awards was left un-

touched.” Jd. at 247.

“Jurisdiction under 28 U.S.C. § 1254(2) is properly

invoked only where a court of appeals squarely has ‘held’

that a state statute is unconstitutional on its face or as

applied” (Burger King Corp. v. Rudzewicz, No. 83-2097

(May 20, 1985), slip op. 8 n.12 (emphasis in original) ).

This case falls in the Court’s appellate jurisdiction under

28 U.S.C. 1254(2). Section 198-c of New York’s Labor

Law provides that it is a misdemeanor for an employer

to refuse to pay benefits, including “separation * * *

pay,” and appellants seek to enforce that provision. Un-

like Silkwood, the court of appeals expressly recognized

that this case presents the issue whether Section 198-c is

9

preempted by ERISA (J.S. App. A8) and held that it is

preempted (id. at A1l6). Thus, Section 198-c is not left

“untouched,” like the Oklahoma punitive damage awards

statute in Silkwood. Rather the court of appeals has held

that the statute may not be used to enforce promises by

private employers to provide severance pay even though

it applies by its terms in such cases. Since the court of

appeals clearly held the statute unconstitutional as ap-

plied, this case is reviewable under Section 1254(2).”

2. Every court of appeals that has considered the ques-

tion has concluded that an employer’s unfunded severance

pay policy is an employee welfare benefit plan covered by

ERISA. In addition to the court below, the Fourth Cir-

cuit so held in the related case brought by other Burling-

ton employees (see note 10, supra), and the Ninth Cir-

cuit has repeatedly held that unfunded severance pay

policies are welfare plans. Jung v. FMC Corp., 755 F.2d

708, 710 & n.2 (9th Cir. 1985); Scott v. Gulf Oil Corp.,

754 F.2d 1499, 1502-1503 (9th Cir. 1985); Blau v. Del

Monte Corp., 748 F.2d 1348, 13852 (9th Cir. 1984), cert.

denied, No. 84-2009 (Oct. 7, 1985).'* Appellants have

12 Burlington’s other arguments in support of its contention that

this case does not present an appeal are insubstantial. Its argument

(Mot. to Dis. or Aff. 8-9) that Section 198-c does -9t provide a pri-

vate right of action appears to be wrong (see Appellants Jt. Br. in

Opp. to Mot. to Dis. or Aff. 1-2) and is in any event irrelevant since

the appellant in No. 85-441, the New York Commissioner of Labor,

plainly has standing to enforce the law. Nor does it matter that

appellants have abandoned the argument that their claims do not

“relate to” ERISA. Although the issue presented is whether

Burlington’s severance pay policy is a welfare plan under ERISA,

the parties agree that that question is significant because its answer

determines whether Section 198-c is preempted.

18 The Seventh and Eighth circuits, in ruling on ERISA claims

involving severance pay provisions set forth in employer policy

manuals, have implicitly held that informal, unfunded severance

pay policies are covered by the statute. Sly v. P.R. Mallory & Co.,

712 F.2d 1209, 1210 & n.l (7th Cir. 1983); Dependahi v. Falstaff

Brewing Corp., 653 F.2d 1208 (8th Cir.), cert. denied, 454 U.S. 968

(1981), aff’g, 491 F. Supp. 1188, 1190, 1196 (E.D. Mo. 1980); see

also Sutton v. Weirton Steel Division of National Steel Corp., 724

10

cited no case that conflicts with the decision below, and

we are not aware of any. Because severance pay policies,

whether funded or unfunded, are welfare plans, appel-

lants’ state law claims are preempted by ERISA.

a. ERISA defines two categories of “employee benefit

plans”: employee welfare benefit plans and employee pen-

sion benefit plans. 29 U.S.C. 1002(3). Employee welfare

benefit plan, the category relevant to this case, is defined

as “any plan, fund, or program * * * established or

maintained by an employer” for the purpose of providing

specified benefits, including medical, disability, death, un-

employment, and vacation benefits (29 U.S.C. 1002

(1) and (A)), and “any benefit described in section

186(c) of [Title 29]” (29 U.S.C. 1002(1) (B)). Section

186(c), enacted as part of the Taft-Hartley Act of 1947,

enumerates the types of contributions an employer may

legally make to a union trust fund, and includes contri-

butions “paid by any employer to a trust fund established

by such representative for the purpose of pooled vacation,

holiday, severance or similar benefits” (29 U.S.C. 186

(c) (6) (emphasis added) ).

As this Court has several times observed, Congress in-

tended ERISA to occupy the field of benefit plan regula-

tion to the exclusion of the states in order to foster the

development of such plans by relieving employers of po-

tentially conflicting state requirements. See Metropolitan

Life Insurance Co. V. Massachusetts, No. 84-325 (June 3,

1985), slip op. 138; Shaw v. Delta Air Lines, Inc., 463 U.S.

85, 105 & n.25 (1983); Alessi v. Raybestos-Manhattan,

Inc., 451 U.S. 504, 522-523, (1981). ERISA therefore

preempts (with certain exceptions not applicable here,

see 29 U.S.C. (& Supp. II) 1144(b)) “any and all State

laws” that “relate to any employee benefit plan” as de-

fined in the Act. 29 U.S.C. 1144(a).™ If the Burlington

F.2d 406, 409 (4th Cir. 1983), cert. denied, 467 U.S. 1205 (1984) ;

Pinto v. Zenith Radio Corp., 618 F.2d 110 (7th Cir. 1980) (Table),

aff’g 480 F. Supp. 361 (N.D. Ill. 1979).

14 Appellants did not raise, and the courts below did not consider

the issue whether N.Y. Lab. Law § 198-c (McKinney 1986) is saved

11

severance pay policy is an “employee benefit plan” with-

in the meaning of ERISA, the New York state law must

be held to be preempted, because that law’ requires pay-

ment of separation benefits and thus clearly “relate[s]

to” the company’s policy."

Appellants’ primary contention is that Burlington’s sev-

erance pay policy cannot be considered a “plan, fund, or

program” within the meaning of ERISA’s definition of

“employee benefit plan.” 85-460 J.S. 8-11; 85-441 J.S.

from preemption by the exception in Section 514(b) (4) of ERISA

for “any generally applicable criminal law of a State.” 29 U.S.C.

1144(b) (4). The government agrees with other courts that have

considered the question, however, that by limiting this exception to

laws of “general” applicability, Congress expressed an intent to pre-

empt state laws, such as Section 198-c, which are directed specifically

at employee benefit plans. Trustees of Sheet Metal Workers’ Inter-

national Association Production Workers’ Welfare Fund v. Aberdeen

Blower & Sheet Metal Workers, Inc., 559 F. Supp. 561, 563 (E.D.

N.Y. 1983) (N.Y. Lab. Law §198-c (McKinney 1986), is not a

criminal law of general applicability); see also Sforza v. Kenco

Constructional Contracting, Inc., 629 F. Supp. 489, 491-492 (D.

Conn. 1986) (and cases cited). Moreover, as one court has held,

even if N.Y Lab. Law § 198-c (McKinney 1986) were considered a

generally applicable criminal law, ERISA’s criminal law exception

cannot be construed to save civil actions implied from state criminal

statutes. See Calhoon v. Bonnabel, 560 F. Supp. 101, 109 (S.D.N.Y.

1982). But see, e.g., Goldstein v. Mangano, 99 Misc.2d 523, 417

N.Y.S.2d 368 (Civ. Ct. 1978) (since Section 198-c is a generally

applicable criminal law as defined by New York law, it is saved from

ERISA preemption).

15 While appellants do not argue that their state law claims do

not relate to ERISA, state amici argue (Br. 16-17) that there is a

conflict in the circuits on the issue of whether ERISA preempts

related state law claims, citing Carpenters Health & Welfare Fund

v. Kenneth R. Ambrose, Inc., 727 F.2d 279 (3d Cir. 1983). The court

in that case decided a pendent state law claim in an action to collect

delinquent pension contributions under the terms of a collective

bargaining agreement. Jd. at 281. The Third Circuit rejected with-

out discussion the employer’s argument that ERISA preempted the

state law claim. Jd. at 282 n.5. In the absence of any indication

from the Third Circuit as to the basis of its holding, the decision in

that case cannot be read as creating a conflict with cases holding,

as Section 1144 plainly commands, that state law claims related to

ERISA are preempted.

12

10-13. They argue that the court of appeals simply did

not consider the threshold issue of the existence of a plan,

and indeed that “[t]here is not a single case, nor a sin-

gle court, that has truly addressed [this] issue” (85-460

J.S. 11). These contentions are simply incorrect. In

Donovan V. Dillingham, 688 F.2d 1367 (1982) (en banc),

the leading case construing the term “plan” for purposes

of applying ERISA’s definitions and coverage provisions,

the Eleventh Circuit squarely addressed the question of

what constitutes the establishment of a plan under

ERISA. The court concluded that “a ‘plan, fund, or pro-

gram’ under ERISA is established if from the surround-

ing circumstances a reasonable person can ascertain the

intended benefits, a class of beneficiaries, the source of

financing, and procedures for receiving benefits” (id. at

1373). The Dillingham formulation gives a common

sense meaning to the statutory language which connotes

an identifiable benefit policy without specifying what

form that policy must take. The district court in this

case expressly followed Dillingham (J.S. App. A27-A28)

and the court of appeals affirmed, noting its approval of

the district court’s “well-considered opinion * * * that

Burlington’s severance pay policy was an ERISA plan”

(id. at A7). The standards articulated in Dillingham

also have been followed uniformly by all the courts of

appeals that have considered the question of whether an

employer’s benefit policy constitutes an ERISA plan.

Scott, 754 F.2d at 1503-1504; Blau, 748 F.2d at 1352;

see also Dependahl, 491 F. Supp. at 1195.

Contrary to the contentions of appellants and state

amici (85-460 J.S. 17; States Amici Br. 13) nothing in

the language or structure of ERISA suggests that in

order to meet the definition of ‘‘employee welfare benefit

plan” a severance pay policy must be funded. The stat-

ute’s definitional and coverage provisions contain no fund-

ing requirements or limitations. See 29 U.S.C. 1002(1)

and 1003(a). Had Congress intended to limit coverage

of the Act to separately funded plans it could have so

stated. Instead, Congress defined “welfare plan” broadly

to include not just any “fund,” but any “plan, fund or

13

program” that provides covered benefits. 29 U.S.C.

1002(1). Moreover, in defining the statute’s pattern of

regulation, Congress repeatedly distinguished between

funded and unfunded plans. For example, the statute’s

requirement that plan fiduciaries be bonded expressly

does not apply “where such plan is one under which the

only assets from which benefits are paid are the general

assets of a union or of an employer.” 29 U.S.C.

1112(a) (1). Obviously such an exemption would be su-

perfluous if Congress had defined employee welfare bene-

fit plans to include only benefit plans that have a sepa-

rate source of funding. Welfare plans also are exempted

altogether from ERISA’s specific funding requirements.

29 U.S.C. 1081(a)(1).1° These provisions amply demon-

strate that Congress intended ERISA to regulate welfare

plans irrespective of their method of financing.

The Department of Labor has consistently interpreted

the definition of “welfare plan” to include unfunded

severance pay plans. The Department published regula-

tions less than a year after the Act’s passage construing

ERISA’s coverage provisions. 29 C.F.R. Pt. 2510. The

regulations clarify that severance pay plans generally

are categorized as “welfare plans” rather than “pension

plans” and thus are not subject to the funding and other

requirements that ERISA imposes on pension plans. 29

C.F.R. 2510.3-2(b). And, in advisory opinions interpret-

ing the Act, the Department has consistently found that

unfunded severance plans are governed by ERISA. See,

e.g., Advisory Op. 81-55A (June 26, 1981); Advisory

Op. 76-66 (June 2, 1976). This longstanding interpre-

tation of the Act by the agency charged with its admin-

istration is entitled to deference. Chevron U.S.A. Inc. V.

Natural Resources Defense Council, Inc., 467 U.S. 837,

842-845 (1984); see also Udall v. Tallman, 380 U.S. 1,

16 (1965).

16 See also, e.g., 29 U.S.C. 1051(2), 1081(a) (3), 1101(a) (1)

(excepting unfunded deferred compensation plans from the Act’s

participation and vesting, funding, and fiduciary responsibility

provisions).

14

In 1980 Congress ratified the Department’s interpreta-

tion by amending 29 U.S.C. 1002(2) expressly to au-

thorize the Department to treat severance pay arrange-

ments as welfare plans. The amendment provided that

“Tt]he Secretary may by regulation prescribe rules con-

sistent with the standards and purposes of this Act

providing one or more exempt categories under which—

(1) severance pay arrangements * * * shall, for purposes

of this title, be treated as welfare plans rather than

pension plans” (Pub. L. No. 96-364, § 409, 94 Stat.

1307). See also, 126 Cong. Rec. 20208 (1980) (joint ex-

planation of amendments). Thus Congress, by adopting

this amendment after the Department had promulgated

its regulations, effectively approved the Department’s in-

terpretation of the Act to cover unfunded severance pay

plans, as the Fourth Circuit recognized in the related

case arising from Burlington’s sale of its sock and hosiery

divisions to Kayser-Roth (85-929 Pet. App. A21-A22).

That court and the Ninth Circuit have expressly rejected

arguments, similar to those raised by appellants here,

that a severance pay plan must be funded in order to be

covered by the Act. Scott, 754 F.2d at 1503.

The Department’s regulations also clarify that although

the definition of “welfare plan” refers to “any ben-

efit described in [29 U.S.C.] 186(c)” which in turn

lists “pooled severance [and other] benefits” (emphasis

added), this language does not indicate that severance

benefits must be funded separate from the general assets

of the employer in order to be covered by ERISA. 29

C.F.R. 2510.3-1(a) (3). As analyzed by the regulations,

“the effect of [the cross-reference] is to include within

the definition of ‘welfare plan’ those plans which provide

* * * severance benefits, and benefits which are similar”

(ibid.). This conclusion is quite clearly correct. The

word “pooled” is used in Section 186(c) in the context of

“money * * * paid by any employer to a trust fund

established by such representative,” meaning money paid

to a fund set up by a union or other employee repre-

sentative. Thus if the reference to Section 186(c) were

taken to encompass not just the type of benefit but also

15

the arrangement for payment of benefits described in

Section 186(c), ERISA’s coverage would be limited not

just to funded severance benefit plans but to “pooled”

severance benefit plans set up by a union or some other

entity separate from the employer. Thus the argument

that the reference to Section 186(c) requires severance

plans to be funded or “pooled” in order to be covered by

ERISA proves too much. Indeed appellants have aban-

doned this argument."”

b. Appellants argue (85-441 J.S. 16-18) that Burling-

ton’s severance pay policy is a “payroll practice” that is

excluded from ERISA’s definition of “employee welfare

benefit plan” by the Department of Labor’s regulations.

This argument is incorrect. The court of appeals here

(J.S. App. A13) and the other courts of appeals that have

considered the issue uniformly and correctly have held

that the payment of severance benefits from general as-

sets does not constitute a “payroll practice’ under 29

C.F.R. 2510.3-1(b). 85-929 Pet. App. A22-A24; Scott,

754 F.2d at 1502-1503. As we have shown, the Depart-

ment of Labor has consistently interpreted ERISA to

cover unfunded severance pay plans. The same regula-

tions that specifically interpret the definition of “welfare

plan” to include severance pay plans, 29 C.F.R. 2510.3-

1(a) (3), make no mention of severance pay in the im-

mediately following provision identifying payroll prac-

tices that are excluded from that definition. 29 C.F.R.

2510.3-1(b).'* These provisions must be construed to-

17 As noted above (see note 6, supra), appellants have aban-

doned any argument based on Section 186(c)’s reference to “pooled”

severance benefits. Rather, they argue here that as a general

matter Congress sought only to regulate those welfare plans that

are constituted as a separate entity. But, as we understand their

argument, this is merely another way of saying that ERISA only

covers plans that are separately funded. The appellant in the

related case argues that an ERISA plan must have a separate

identity (85-944 J.S. 14-19) and that the plan must “be funded

(id. at 20-23).

18 The “payroll practices” regulation identifies payroll and other

practices that do not constitute welfare plans. 29 C.F.R. 2510.3-

16

gether in order to give effect to each, and one provision

should not be construed so as to negate the other. See

Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979) ;

Federal Power Commission v. Panhandle Eastern Pipe

Line Co., 337 U.S. 498, 514 (1949). Under appellants’

reading of the regulations, however, the “payroll prac-

tices” exception would largely nullify the effect of the

preceding provisions construing ‘welfare plan” by ex-

cluding from coverage all unfunded severance benefit

plans.

Appellants acknowledge that the regulations do not ex-

pressly identify severance benefits as a payroll practice.

They contend, however, that there is “no logical basis”

for treating severance benefits differently than sick leave

and holiday and vacation pay, types of benefits that are

excluded from coverage by the payroll practice regulation

when paid from an employer’s general assets (85-441

J.S. 17-18). Their argument misapprehends both the

purpose and the effect of the Department’s regulations.

Congress did not intend to make ERISA a vehicle for

regulating ordinary wage practices. Rather Congress

sought in ERISA to regulate the wide variety of fringe

benefit programs that had developed as ‘a means of

compensating workers in lieu of increased wages” as a

result of wage freezes imposed during World War II and

the Korean conflict. S. Rep. 93-127, 93d Cong., 1st Sess.

3 (1973); see H.R. Rep. 93-533, 98d Cong., Ist Sess. 2-4

(1973). The Department’s purpose in exempting payroll

practices is to give effect to the fundamental distinction

Congress recognized between wages (and similar types of

compensation), which Congress did not intend ERISA to

regulate, and fringe benefit compensation, which Congress

sought to bring under federal control. Severance benefits,

1(a) (1). The “payroll practices” enumerated in the regulation in-

clude standard forms of employee compensation, such as overtime

pay and shift, holiday or weekend premiums (29 C.F.R. 2510.3-

1(b) (1)), and various paid leave arrangements, such as sick leave,

holidays, and vacations, whereby an employee continues to receive

compensation out of the employer’s general assets during pericds

of absence (29 C.F.R. 2510.3-1(b) (2) and (3)).

17

unlike vacation pay, holiday pay, and sick leave, are

invariably paid after or at the time the en ployee leaves

employment. Thus severance benefits are more like un-

employment benefits (a type of fringe benefit also listed

in the Section 1002 definition of welfare plans) than like

wages for days an employee would otherwise be working

but for the employer’s willingness to excuse him for vaca-

tion or sickness. As the Ninth Circuit aptly observed

in Scott, in contrast to severance benefits, “[t]he prac-

tices described in the! [payroll practices] regulations

require disbursements of funds easily analogized to ordi-

nary wages, and the payments involved invariably take

place during the term of employment” (754 F.2d at 1503).

Congress had two broad concerns in enacting ERISA:

failure to pay promised fringe benefits to employees, and

mismanagement of funds accumulated to finance employee

benefits. The Department’s regulations exclude from cov-

erage unfunded plans providing vacation and holiday pay

and sick leave because, unlike severance benefits, such

payments are like ordinary wages and do not reflect ei-

ther of Congress’s concerns. See California Hospital

Ass’n V. Henning, 770 F.2d 856 (9th Cir. 1985), petition

for cert. pending, No. 85-1648. The regulations do in-

clude within ERISA’s coverage plans establishing trust

funds for payment of vacation and holiday pay and sick

leave; but they do so not because welfare plans must be

funded in order to be covered by ERISA, but rather be-

cause such trust funds raise the second of Congress’s

concerns, avoiding mismanagement of benefit funds.

Therefore the Labor Department’s regulations provide no

basis for concluding that severance payments are not em-

ployee welfare benefit plans within the meaning of

ERISA.

ce. Appellants and state amici argue (85-460 J.S. 17

& n.15; States Amici Br. 12, 14) that to be covered by

ERISA, welfare plans must have certain “basic,features”

suggested by the statutory requirements for covered pen-

sion plans. Another way of stating this ai'gument is that

an employer shovild not be able to rely on ERISA’s pre-

emption provision if the employer has not complied with

18

ERISA’s reporting, disclosure, and fiduciary require-

ments. But whichever way one states the argument, it

has no support in the statute; indeed it stands the statute

on its head.

As the district court stated (J.S. App. A28), “[t]he

existence of a ‘plan’ under ERISA is to be determined

solely by an examination of the Act’s ‘coverage’ and ‘defi-

nitional sections.” The ERISA provisions that state “the

responsibilities of fiduciaries and administrators of plans

covered by ERISA * * * do not set forth prerequisites

for ERISA coverage” (J.S. App. A29 (emphasis in orig-

inal) ). In other words, if an employer’s benefit policy

meets the definition of employee welfare benefit plan set

forth in ERISA, then the employer must comply with

ERISA’s reporting, disclosure, and other requirements.

He cannot exempt himself from ERISA by refusing to

comply with the statute. The Eleventh Circuit has rec-

ognized the obvious incongruity of permitting persons

who establish or maintain informal or unwritten plans

to circumvent the Act merely because an administrator

failed to satisfy applicable reporting or fiduciary stand-

ards (Dillingham, 688 F.2d at 1372). And appellants

have not been able to point to anything in the statute

or legislative history suggesting that an exception to

ERISA’s preemption provision should be created as a sort

of remedy for noncompliance with ERISA. To the con-

trary, the remedies for noncompliance are expressly set

forth in the statute itself. Section 1132(a) of Title 29

provides injunctive remedies to compel compliance with

ERISA, and Section 1131 provides criminal penalties for

willful violation of the reporting and disclosure require-

ments for employee welfare benefit plans.

d. Appellants and state amici argue (85-460 J.S. 10-

11; States Amici Br. 5) that Congress could not have in-

tended ERISA to cover, and therefore preempt, state

regulation of unfunded severance pay plans because to do

so would upset the traditional balance of federal-state

regulation in the labor relations field as recognized by

this Court in cases such as Motor Coach Employees Vv.

Lockridge, 403 U.S. 274, 289 (1971). However, cases

19

construing the National Labor Relations Act (NLRA),

29 U.S.C. 151 et seg., and other federal statutes govern-

ing labor-management relations are irrelevant to the

question of whether ERISA preempts state laws that

relate to covered employee benefit plans. As this Court

recently noted, “[u]nlike ERISA, the NLRA contains no

statutory preemption provision,” and “there is no sug-

gestion in the legislative history of the [NLRA] that

Congress intended to disturb the myriad state laws then

in existence that set minimum labor standards, but were

unrelated in any way to the processes of bargaining or

self-organization.” Metropolitan Life Insurance Co., slip

op. 22, 30.

ERISA, unlike the NLRA, explicitly sets forth an ex-

pansive preemption command, the legislative history of

the Act confirms Congress’s intent to occupy the field of

employee benefit plan regulation, and this Court has in-

terpreted the operative statutory phrase, “relate to any

employee benefit plan,” in a broad, literal fashion. Shaw,

463 U.S. at 95-100. Moreover, contrary to appellants’

and state amici’s assertions, the court of appeals’ holding

does not federalize the entire area of state wage regula-

tion. Rather, it merely precludes state regulation of

those specialized forms of compensation covered by

ERISA. Nothing in ERISA precludes the states from

continuing to regulate routine wage or salary arrange-

ments, or other practices described in the payroll prac-

tices regulatioi.'®

19 Relying on this Court’s decision in Nachman Corp. v. Pension

Benefit Guaranty Corp., 446 U.S. 359 (1980), appellants (85-441

J.S. 15) and state amici (Br. 15-16) argue that the decision below,

by precluding state law claims of entitlement to severance benefits,

improperly limits a participant’s remedies for alleged denial of

benefits to an ERISA action to enforce the plan’s liability while

foreclosing an action to enforce an employer’s liability under the

plan. This argument is without merit. ERISA plainly authorizes

plan participants “to enforce * * * the terms of the p¥an” against

any proper defendant from whom relief is available. 29 U.S.C.

1132(a). As appellants recognize, implicit in Nachman is the

recognition that ERISA authorizes causes of action against an

employer as wel! as against a plan. However, as the court below

20

To permit state law actions for recovery of benefits

under an employee benefit plan would run afoul of

ERISA’s preemption provision because it would subject

ERISA plans and fiduciaries to potentially conflicting

benefit liabilities and varying requirements for plan ad-

ministration depending on the state in which an action

was brought.*° With respect to the single plan at issue

in this case, for example, Burlington could be subject to

differing duties and responsibilities and liable for differ-

eni benefits in as many as 16 different states. Congress

preempted state laws in ERISA precisely to free plans

and their administrators from such inconsistent and

varying legal requirements. A participant’s or benefi-

ciary’s right to benefits under a plan, therefore, must be

enforced, if at ail, pursuant to ERISA.”!

pointed out, “Nachman and its progeny were based on federal rather

than state law” (J.S. App. Al6). The Court in Nachman did not

address, nor did it have occasion to consider, questions concerning

ERISA preemption of state law actions premised on an employer’s

liability under an unfunded welfare benefit plan. While ERISA

preempts state law claims, it expressly provides that it does not

“alter, amend, modify, invalidate, impair, or supersede any iaw of

the United States” (29 U.S.C. 1144(d)). Therefore, the fact that

an employer is subject to a federal law claim that relates to ERISA

does not mean that an employer is subject to a state law claim

relating to ERISA. For this reason, state amici’s reliance (Br.

17-19) on Murphy v. Heppenstall Co., 635 F.2d 233 (3d Cir. 1980),

cert. denied, 454 U.S. 1142 (1982), is similarly misplaced, since the

court there acknowledged that “[t]he employees’ contract claim

against the employer is not a state law claim” (635 F.2d at 237).

20 The legislative history of the Act demonstrates that Congress

intended contract claims involving ERISA plans to be determined

under federal common law. Thus, the sponsors of the Act envi-

sioned that the federal courts would develop “a body of Federal

substantive law * * * to deal with issues involving rights and

obligations under private welfare and pension plans.” 120 Cong.

Rec. 29942 (1974) (remarks of Sen. Javits). See also H.R. Conf.

Rep. 93-1280, 93d Cong., 2d Sess. 327 (1974) ; 120 Cong. Rec. 29933

(1974) (remarks of Sen. Williams).

21 Contrary to state amici’s claims (see, e.g., States Amici Br. 4-

6), participants and beneficiaries are not powerless to enforce

ERISA. They are expressly authorized to bring suit by 29 U.S.C.

21

Appellants and state amici advert to the irony that,

while intending to protect the interests of plan partici-

pants and beneficiaries, Congress, by constituting em-

ployee benefit plans as exclusively a federal concern, has

preempted state statutes that may in some situations pro-

vide greater protections than those afforded by the fed-

eral statute. But, as we have shown, Congress plainly

intended ERISA to cover severance pay plans and con-

sciously preempted all state laws that relate to covered

plans in order to provide a favorable environment for

the growth of such plans. As the Fourth Circuit con-

cluded in the related case brought by other former Bur-

lington employees, “[t]he fact that employees may some-

times wish to forego [the] advantages of ERISA cover-

age in favor of arguably more generous state statute[s]

does not allow us to escape the clear direction of Con-

gress”) 85-929 Pet. App. A24-A25).*

1132(a) and may obtain attorney’s fees in appropriate cases under

29 U.S.C. 1132(g).

22 The former Burlington employees who brought suit in North

Carolina contend in their petition for a writ of certiorari (85-929

Pet. 24-28) that the courts of appeals have created varying legal

rules under ERISA to construe severance pay provisions, and that re-

view by this Court is warranted for that reason. As we have noted

(see note 11, supra), the Second Circuit in this case decided that

Burlington’s construction of its severance pay policy ought to be

scrutinized because of its failure to comply with ERISA’s reporting

and disclosure provisions, while the Fourth Circuit in the related

case determined that Burlington’s construction of its policy is not

arbitrary and capricious. The Ninth Circuit has stated that “less

deference” is due an employer’s construction in circumstances such

as those presented here. Jung, 755 F.2d at 712. While there are

differences in the language used by the courts, as petitioners note,

each court purports to apply the arbitrary and capricious standard.

It is not clear whether any differences in result will occur, since the

Second Circuit has not rejected Burlington’s construction of its

severance pay provision but. instead left that issue for initial deter-

mination by the district court. In our view, the question of the

appropriate standard of review to apply in cases involving the con-

struction of terms in unfunded welfare plans would benefit from

further development by the lower federal courts. If the Court

disagrees, it should grant the petition in No. 85-929, limited to

Questions 1 and 2,

22

CONCLUSION

The judgment of the court of appeals should be af-

firmed. If the Court concludes that an appeal is improper,

and treats the jurisdictional statements as petitions for

a writ of certiorari pursuant to 28 U.S.C. 2103, the peti-

tions should be denied.

Respectfully submitted.

CHARLES FRIED

Solicitor General

CAROLYN B. KUHL

Deputy Solicitor General

CHRISTOPHER J. WRIGHT

Assistant to the Solicitor Gexzral

GEORGE R. SALEM \

Deputy Solicitor of Labor

ALLEN H. FELDMAN

Associate Solicitor

BETTE J. BRIGGS

Attorney

Department of Labor

May 1986

YY U. S. GOVERNMENT PRINTING OFFICE; 1986 491507 20235