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

Amici States

Alaska

Harotp M. Brown

Attorney General

Pouch K

Juneau, AK 99811

Arizona

Bos CorBIN

Attorney General

1275 W. Washington Street

Phoenix, AZ 85007

The Industrial Commission

State Labor Department

DENNIS P. KAVANAUGH

Chief Counsel

800 W. Washington Street,

Suite 304

Phoenix, AZ 85007

California

JOHN K. Van De Kamp

Attorney General

1515 K Street, Suite 511

Sacramento, CA 95814

On behaif of the State

of California and the

California Agricultural

Labor Relations Board

Colorado

DvuANE WoopwarpD

Attorney General

1525 Sherman Street,

3rd Floor

Denver, CO 80203

Connecticut

JOSEPH J, LIEBERMAN

Attorney General

Ropert E. Wasi

Assistant Attorney General

CHARLES A. OVEREND

Assistant Attorney General

90 Brainard Road

Hartford, CT 06114

Attorneys for P. Joseph

Peraro, Commissioner

of Labor

Delaware

CuaRLes M. Oserzy, III

Attorney General

820 North French Street

Wilmington, DE 19801

Florida

Jim SMITH

Attorney General

Department of Legal Affairs

The Capitol, Suite 1502

Tallahassee, FL 32301

Hawaii

CORINNE K. A. WATANABE

Attorney General

Wayne A. Matsuura

Deputy Attorney General

830 Punchbow! Street,

Room 317

Honolulu, HI 96813

Idaho

Jim JONES

Attorney General

State House

Boise, ID 83720

Tilinois

New F. Hartigan

Attorney General

500 South Second Street

Springfield, TL 62701

Attorney for Illinois

Department of Labor

Indiana

LInNLEY E. PEARSON

Attorney General

Office of the Attorney

General

219 State House

Indianapolis, IN 46204

Towa

Bureau of Labor

Legal Division

Water H. JOHNSON

Deputy Commissioner

307 East 7th Street

Des Moines, IA 50319

Kansas

PauL E. PENDERGAST

Chief Counsel

Department of Human

Resources

401 South Topeka Avenue

Topeka, KS 66603

ll

Kentucky

Davip L. ARMSTRONG

Attorney General

State Capitol

Frankfort, KY 40601

- Labor Cabinet

JOHN CALHOUN WELLS

Secretary of Labor and

Commissioner of Workplace

Standards

Betty A. SPRINGATE

General Counsel

U.S. 127 South Building

Frankfort, KY 40601

Louisiana

WituiaM J. Gusts, JR.

Attorney General

Seventh Floor

2-3-4 Loyola Building

New Orleans, LA 70112-2096

Maine

JAMES EK. TIERNEY

Attorney General

State House

Augusta, ME 04333

Maryland

STEPHEN H. Sacus

Attorney General

JOHN K. ANDERSON

Assistant Attorney Generai

Fourteenth Floor

501 St. Paul Place

Baltimore, MD 21202

Attorneys for the Department

of Licensing and Regulation

Dominic N. Fornaro

Commissioner of Labor and

Industry

Massachusetts

Francis X. BELLOTTI

Attorney General

1 Ashburton Place

Boston, MA 02108

Minnesota

Husert H. Humpurey III

Attorney General

102 State Capitol

St. Paul, MN 55155

Montana

Mike GREELY

Attorney General

Justice Building

215 N. Sanders

Helena, Montana 59620

Nebraska

Ropert M. SPIRE

Attorney General

State Capitol

Lincoln, NE 68509

New Jersey

IRWIN W. KIMMELMAN

Attorney General

Micuaen S. BoKaR

Deputy Attorney General

Department of Law and

Public Safety

Division of Law

Labor and Commerce

Section

Richard J. Hughes Justice

Complex, CN 112

Trenton, NJ 08625

New Mezico

PauL BARDACKE

Attorney General

Post Office Drawer 1508

Bataan Memorial Buiiding

Santa Fe, NM 87504

New York

RoBertT ABRAMS

Attorney General

Two World Trade Center

New York, New York 10047

Oklahoma

MIcHAEL C. TURPEN

Attorney General

Office of the Attorney General

Room 112, State Capitol

Oklahoma C: y, OK 73105

Department of Labor

WituraMm R. “Bit” PauLkK

Commissioner of Labor

Room 318, State Capitol

Oklahoma City, OK 73105

Oregon

DavE FROHNMAYER

Attorney General

Justice Building

Salem, OR 97310

Pennsylvania

LeRoy S. ZIMMERMAN

Attorney General

Sixteenth Floor

Strawberry Square

Harrisburg, PA 17120

iv

Texas

Department of Labor and

Standards

Larry E. Kosta

Division Director

Post Office Box 12157

Austin, TX 78711

Vermont

JEFFREY L. AMESTOY

Attorney General

109 State Street

Montpelier, VT 05602

Virginia

WituiamM G. Broappus

Attorney General

JOHN B. PURCELL

Assistant Attorney General

Supreme Court Building

101 North Eighth Street

Richmond, VA 23219

West Virginia

CHARLES G. BRown

Attorney General

State Capitol, Room 26-E

Charleston, WV 25305

Wisconsin

Bronson C. LAFOLLETTE

Attorney General

Davip RIcE

Assistant Attorney General

123 West Washington Avenue

Post Office Box 7857

Madison, WI 53707-7857

Wyoming

Department of Labor

MicHaEL J. SULLIVAN

Commissioner of Labor

Herschler Building

Cheyenne, WY 82002

TABLE OF CONTENTS

PAGE

MCE ARIS oeccsscssestricccsetonesevecerpnleaneuapininieane ee i

Teble OF AWOTIG opccicincnenenee vil

Statement of Interest of Amici Curtae ......0000020220..... 1

Pamaaary oF DIGG ciscccccctomniaicteinaanden 3

ARGUMENT:

I. THIS COURT SHOULD GRANT PLENARY

CONSIDERATION BECAUSE THE ISSUE

PRESENTED IS OF GREAT IMPORTANCE

TO ALL STATES AND MILLIONS OF EM-

PLOYEES THROUGHOUT THE COUNTRY... 4

Il. WHETHER A SIMPLE PROMISE TO PAY

SEVERANCE BENEFITS CONSTITUTES A

“WELFARE BENEFIT PLAN” WITHIN THE

MEANING OF ERISA IS A SUBSTANTIAL

QUESTION WARRANTING THIS COURT'S

PLENARY CONSIDERATION ow... 9

A. Congress Did Not Intend That ERISA Reg-

ulate Employer Promises to Pay Benefits to

SEROED ccna eine 9

1. Congress Intended ERISA to Regulate the

Unregulated Field of Benefit Plans 0... 9

2. Congress Did Not Intend ERISA to Sup-

plant and Nullify Direct Employer Liability

for Employee Benefits _.22.... eee 12

vi

PAGE

B. United States Department of Labor Regula-

tions Interpreting ERISA Establish That an

Employer’s Promise to Pay Benefits Directly

to Its Employees Out of the Company’s Gen-

eral Assets Is Not a “Plan” Within the Mean-

en corenenr CATIA Se salon 15

CROOPCE AIT ancinkctittcsteranth eae eee eae 17

BPUUGOEE cciciccccnnasinanaee PPLE ee Ue . Al

Vii

TABLE OF AUTHORITIES

Cases: PAGE

Gilbert v. Burlington Industries, Inc., 765 F.2d 320 (2d

Cir. 1985), appeal filed sub nom. Roberts v. Burling-

ton Industries, Inc., 54 U.S.L.W. 3179 (U.S. Oct. 1,

Pe is ND asec nccrcccacientonicianeeerenceccaianacaeiilins 2

Horn v. Mullins, 650 F.2d 35 (4th Cir. 1981) 2000000000..... 8

Nachman Corp. v. Pension Benefit Guaranty Corp., 446

ee I SITE cis ecssietnatcsaccegsasaieaiedaabeaseinemmeiicliauiiates 9, 13, 14

People v. Vetri, 309 N.Y. 401, 1381 N.H.2d 568 (1955) ... 3

Pompano v. Michael Schiavone & Sons, Inc., 680 F.2d

RR Ee i carnations 7-8

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) ........ 9

Smith v. CMTA-IAM Pension Trust, 654 F.2d 650 (9th

CA SINE? Suiaaiaencctatecoaesnastnaenccaeetton ae ccea aces, 8

Federal Statutes:

Age Discrimination in Employment Act, as amended,

29 U.S.C. § 621 et seq. (1982)

14 S080. 400 cee 4

Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e

et seq. (1982)

Ey Se CGA, GI circ ornecendsnrereceeeseonines 4

Employee Retirement Income Security Act of 1974, as

amended, 29 U.S.C. § 1001 et seg. (1982) 0000000... passim

OO Be ee 6 i ilccconten ee ae 15

Oe re NI sssccc cscs ssabudiuises dhesScbvocecasiced at ae

€ 2 ik (12% ee ee Ree 2) 13

vill

Federal Statutes (continued): PAGE

§ 104, 29 U.S.C. § 1024 ......... jalcaniesraitaacassobenmianinaiasiae 13

§ 111(a)(1), 29 U.S.C. § 1031(a) (1) 0 eee 10

IE Ss EIIE vtcienisieevtees-éovsereeneccevewendiconssecsianal 11

Bs EY DDN evcesesichineesevsverescsniecebasenevennsonstnecaine 11

ee aS ce cern 11,13

EF Ee ITP dckectnrecisnesivvevenimenvesettesnvesnsestiiions 11

Re Ne rc isncacsencnsceccetcseueammisesenoniconievens 11

§ 406, 29 U.S.C. § 1106 ............. iadguniiadiaanamaiansieadins 13

§ 407, 29 U.S.C. § 1107 ....... cebedacesasebaucnsetasnasileiiaseaan 13

EE Se OR Da) t ) 7,11

§ 502(d), 29 U.S.C. § 1182(d) ...0 eee snireadeeaa 13

© CORTE), BB ULC. SE TEGIE) cacncnnvsececccscerveseevscceeseoeees 11

Oe a irene 11

Sy MT Ts 0 DUIS cccsinensasinscdecsnicctietesencctinnepeniseoses 11

§ 4028, 29 WS.0, § BBLS acccceceecenennacancenennnececeseeveeeeee 11

Fair Labor Standards Act of 1938, as amended, 29

U.S.C. § 201 et seq. (1982)

eR ge Ce Reenter noe 4

Welfare and Pension Plans Disclosure Act, 29 U.S.C.

§ 301 et seq., repealed by §111(a)(1) of the Em-

ployee Retirement Income Security Act of 1974, as

amended, 29 U.S.C. § 1031(a)(1) (1982) ...00 10

Federal Court Rules:

Rules of the United States Supreme Court, Rule 36.4 .... l

2

ix

State Statutes: PAGE

N.Y. Gen. City Law §$18 and 20(27) (McKinney

RUPIIIIIT'c.-<- cicstsasstcpcccuispuacecbeebanneksiqusausceundasodosehanaestuammaavcnmvencatiies )

N.Y. Labor Law § 191, subd. 3 (McKinney Supp. 1984-

1-5) | INS A ER SLE aes 5

N.Y. Social Serv. Law § 390 (McKinney 1983) 20000... = 5

N.C. Gen. Stat. § 95-25.7 (1981) 20.2.2... eee ccee teen es =

Regulations:

29 C.F.R. § 2510.3-1 ...... POET REC AES TT .-

40 Fed. Reg. 24642 (June 9, 1975) oo... 15

Legislative History:

120 Cong. Rec. 4285 (Feb. 26, 1974), reprinted in 2

Legislative History of the Employee Retirement In-

come Security Act of 1974, 94th Cong., 2d Sess. 3388

SILI; SP UII SIPIPUNTY ” sciacccccoccuudsaatabsbascdccctimmmiaatcsenestansecsans 12

H.R. Rep. No. 533, 93d Cong., 2d Sess., reprinted in

1974 U.S. Code Cong. & Ad. News 4639 ...... 9, 10, 12

Senate Committee on Labor and Public Welfare, Final

Report on Welfare and Pension Plans Investigation,

S. Rep. No. 1734, 84th Cong., 2d Sess. (1956) ....10, 11, 12

Senate Committee on Labor and Public Welfare, In-

terim Report of Activities of the Privete Welfare

and Pension Plan Study, 8S. Rep. No. 634, S2d Cong.,

eS SRL Ce aese . a F

Other Authorities:

“Employee Benefits in Medium and Large Firms,

1984”, U.S. Department of Labor. Bureau of Labor

Statistics, Bulletin 2237 (June 1985) oe 6

1906, Op. N.Y.S. Att’y Gen. 448 ; 7

No. 85-944

IN THE

Supreme Court of the United States

Ocroper TERM, 1985

JoHn C. Brooxs, Commissioner of Labor

of the State of North Carolina,

Appellant,

—against—

Bururneton Inpustriss, Inc., et al.,

Appellees.

ON APPEAL FROM THE UNITED STATES COURT

OF APPEALS FOR THE FOURTH CIRCUIT

BRIEF OF AMICI CURIAE STATE OF NEW YORK,

ET AL. IN SUPPORT OF APPELLANT

JOHN C. BROOKS

Statement of Interest of Amici Curiae

This brief is filed on behalf of 33 states as amici curiae

pursuant to Rule 36.4 of the Supreme Court Rules, in

support of the Jurisdictional Statement of appellant John

C. Brooks, Commissioner of Labor of the State of North

Carolina.

The issues raised by the appeal in this case are of

critical importance to all states, including New York and

the thirty-two other amici joining in this brief.* The

* This case is of particular interest to the State of New York,

because its Commissioner of Labor has appealed to this Court

(footnote continued on following page)

2

Court of Appeals for the Fourth Cireuit held that N.C.

Gen. Stat. § 95-25.7, which requires employers to pay their

employees all promised wages promptly after termination

of the employment relatienship, is preempted by the Em-

ployee Retirement Income Security Act, as amended,

(“ERISA”) 29 U.S.C. § 1001 et seq., to the extent that the

State law would require appellee Burlington Industries,

Ine. (“Burlington”) to comply with its severance pay

policy. In addition to North Carolina, at least 46 states

and the District of Columbia have similar laws designed

to enforce employer obligations to pay wages due to em-

ployees, and 31 of those jurisdictions include severance

pay among the wages whose payment is enforced. These

jurisdictions have established and maintain programs to

assist their citizens in the enforcement of rights acquired

through the employment relationship. By virtue of these

laws and programs, these states’ capacity to aid employees

in obtaining wrongfully denied benefits is far greater than

any remedy provided by ERISA or any federal agency.

If the Fourth Circuit’s dezision is upheld, these states

will be precluded from carrying out their traditional

wage and hour enforcement responsibilities in the unfor-

tunately all-too frequent instances that employers fail to

keep their promises to pay severance benefits. The states’

substantial interest in retaining their authority to protect

their citizens from such abusive employment practices

prompts the amici to submit this brief in support of the

North Carolina Commissioner of Labor.

(footnote continued from previous page)

from the decision in Gilbert v. Burlington Industries, Inc., 765

F.2d 320 (2d Cir. 1985), appeal filed sub nom. Roberts v. Burling-

ton Industries, Inc., 54 U.S.L.W. 3179 (ILS. Oct. 1, 1985) (No.

85-441), which involves the same issues presented in this appeal.

Summary of Argument

This Court should grant plenary consideration of the

substantial federal question of preemption raised by this

appeal. Whether ERISA preempts state wage enforce-

ment statutes insofar as they compel employers to abide

by their own severance pay policies is a question of vital

concern to the states, since protecting employee health and

welfare has historically been their responsibility. The

decision of the Court of Appeals, if allowed to stand, will

radically intrude upon the states’ traditional authority in

this area in a manner never intended by Congress. In ad-

dition, it will deny millions of employees throughout the

country the valuable protection and administrative pro-

cedures afforded by state laws.

Moreover, the precise question raised by this appeal,

whether an employer’s bare promise to pay a benefit such

as severance pay establishes an “employee welfare benefit

plan” within ERISA’s meaning, has never before been

addressed by this Court. In answering that question affir-

matively, the Fourth Circuit misinterpreted the scope of

ERISA’s coverage, which is limited to employee benefit

“plans,” entities distinct from the employer itself, and

does not include a simple payroll practice in which an em-

ployer pays its workers a benefit out of the company’s

general assets.

I. THIS COURT SHOULD GRANT PLENARY CON-

SIDERATION BECAUSE THE ISSUE PRESENTED

IS OF GREAT IMPORTANCE TO ALL STATES

AND MILLIONS OF EMPLOYEES THROUGHOUT

THE COUNTRY.

Almost every state in the nation is affected by the issue

presented by this appeal. Forty-six states and the Dis-

trict of Columbia have laws similar to North Carolina’s

requiring employers to pay promised wages. Thirty-one

of those forty-seven jurisdictions include severance pay

promises as enforceable under their laws. The effect of the

Fourth Circuit’s decision in this case, if not reversed,

would be to preempt these numerous provisions and de-

stroy the traditional balance between federal and state

authority to protect employees’ rights to earned compensa-

tion.

Historically, federal laws regulating employee compen-

sation have permitted the states to establish or maintain

parallel legislation providing similar or more protective

rights, and have left them free to establish administra-

tive mechanisms to make enforcement of claims a real

possibility for workers who might otherwise be unable to

afford the cost of judicial enforcement. See, e.g., §18 of

the Fair Labor Standards Act, 29 U.S.C. § 218; § 14 of

the Age Discrimination in Employment Act, 29 U.S.C.

§ 6383; and § 1104 of the Civil Rights Act of 1964, 42 U.S.C.

§ 2000h-4. Far from preempting state regulation, these

federal laws encouraged the growth of the protective wage

and hour legislation which the Fourth Circuit’s holding

has now thrown into jeopardy.

This appeal merits plenary consideration because, in

enacting ERISA, Congress simply did not intend such a

radical disruption of the states’ traditional authority as

esti ——

:

|

-

4)

would result from the Court of Appeals’ decision.* In-

stead, Congress intended to increase the protections avail-

able to workers in an area that had been entirely unregu-

lated by state law: that is, the realm of employee benefit

funds, entities which are independent from the employers

that establish them and which had escaped meaningful

control because of their legally separate status. See infra,

pp. 9-14. By contrast, simple payroll practices, in which

an employer merely promises to pay a benefit out of the

company’s general assets, had long been adequaiely reg-

ulated by the siates,** and nothing in ERISA or its legis-

lative history suggests that Congress intended to invade

this area of historic state responsibility. Jd.

Indeed, Congress had no reason to disturb or attempt

to improve upon state laws regulating such payroll prac-

tices, since the states had developed effective mechanisms

to assist employees in collecting earned benefits owed to

them directiy from their employers. For example, each

of the thirty-one jurisdictions enforcing severance pay

promises provides an administrative procedure to assist

* The Fourth Circuit’s holding that Burlington’s simple payroll

practice is a benefit “plan,” subject exclusively to ERISA regula-

tion, also could have disasterous consequences for the states’ ability

to legislate in a score of other areas which in some way involve or

touch upon employee benefits. For example, many states regulate

certain professions by requiring periodic or occasional training.

See, e.g., N.Y. Gen. City Law §§ 18 and 20(27). Many states also

regulate child day care centers. See, e.g., N.Y. Social Serv. Law

§ 390. Yet, since ERISA’s definition of a benefit plan expressly

encompasses plans which provide training and day care, under

the Court of Appeals’ holding, any time an employer simply

promises to provide such a benefit, it becomes subject to ERISA

regulation and the states are precluded from enforcing their laws.

** For example, N.Y. Labor Law §191, subd. 3, New York

State’s wage enforcement statute comparable to N.C. Gen. Stat.

§ 95-25.7, derives from legislation (former $$ 196 and 196-¢ of

the Labor Law) which has its origin in statutes first adopted in

1890. See People v. Vetri, 309 N.Y. 401, 405, 131 N.E.2d 568, 570

(1955) ; 1906, Op. N.Y.S. Att’y Gen. 448.

6

in substantiating and collecting employees’ unpaid

wages.* These jurisdictions maintain administrative staffs

to help employees pursue their claims and, in many of

the jurisdictions, to bring criminal actions and/or civil

suits on behalf of the employees against delinquent em-

ployers. Such procedures and assistance have proved to

be crucial in ensuring payment of the promised severance

pay, since the number of employees or the amount of

money involved often is so small that pursuit of a claim

is otherwise practically impossible.**

The Fourth Cireuit’s holding therefore would have a

devasiating impact on the millions of workers in the many

states that enforce employer promises of severance pay

in the event that their employment is ever terminated,***

an effect contrary ‘o Congress’ intent to expand worker

protection. By interpreting ERISA as preempting these

valuable state laws and establishing it as the only basis

*The Appendix to this brief contains examples of assistance

available to employees in several of the amici jurisdictions.

** In the five-year period from 1980-1984, the New York State

Department of Labor handled 16,453 claims for wage supple-

ments and collected $3,073,144 in unpaid benefits. While such

benefits are crucial to a family trying to make ends meet until

new work can be found, at an average of less than $190 per

claim, the cost of court and attorney’s fees makes collection im-

practical in the absence of state administrative assistance.

*** Although many of the employees in this case found employ-

ment with Burlington’s successor, the Court of Appeals’ decision

is equally applicabie in situations where employees are out of

work for long periods of time. The potential effect of the court’s

ruling is indicated by a recent study of twenty-one million em-

ployees from a cross-section of the nation’s medium and large

private firms. That study shows that sixty-one percent of pro-

fessional and administrative employees, fifty-seven percent of

technical and clerical employees and thirty percent of production

employees are eligible for severance pay under their employers’

policies. Sce “Employee Benefits in Medium and Large Firms,

1984," U.S. Department of Labor, Bureau of Labor Statisties,

Bulletin 2237 (June 1985).

a -____

2

i

7

for collecting severance pay, the Court of Appeals’ deci-

sion virtually ensures that most claims for such benefits

will never be satisfied. ERISA requires an employee to

bring a civil action in federal or state court in order to

collect even one week’s worth of severance pay, since

ERISA does net provide an administrative mechanism for

the collection of benefits. 29 U.S.C. § 1132(a). The thirty-

one jurisdictions enforcing severance pay obligations have,

collectively, more than a thousand persons on staff to

assist employees in pursuing their claims, while the United

States Department of Labor has almost no facilities or

personnel to handle employee complaints.*

Furthermore, an employee forced to pursue a claim

for severance pay under ERISA may be much less likely

to vindicate the claim than under state law, because

ERISA generally has been interpreted to impose only a

fiduciary standard of conduct on a plan administrator who

fails to pay a promised benefit. The employee in such a

ease has the burden of proving that the administrator

acted arbitrarily or capriciously in denying the benefit,

rather than being able to simply enforce the employer’s

promise as a contractual obligation. See, e.g., Pompano

v. Michael Schiavone & Sons, Inc., 680 F.2d 911 (2d Cir.

* For example, the New York State Department of Labor, Divi-

sion of Labor Standards, employs approximately 125 professionals

to investigate and conciliate complaints of employer failures to

pay wages and benefits within the State. The Division maintains

eleven district and sub-district offices throughout the State to

receive such complaints.

By contrast, the United States Department of Labor

(“USDOL”), Office of Pension and Welfare Benefit Programs.

has only two offices for all of New York, New England and part

of New Jersey. These two offices employ only 37 investigators,

whose principal function is to inspect trust fund records to dis-

cover mismanagement or fraud in the handling of fund assets by

fund trustees, not to assist employees in obtaining earned but

unpaid benefits. In no case does the USDOL bring a eivil or

criminal action to compel payment of benefits due to an employee.

OE

8

1982) ; Horn v. Mullins, 650 F.2d 35 (4th Cir. 1981); Smith

v. CMTA-IAM Pension Trusi, 654 F.2d 650 (9th Cir.

1981). As this case so well demonstrates, when employees

are subjected to that burden of proof, they are often un-

able to recover benefits which they might otherwise re-

cover under state laws, since the state laws generally only

require the employee to establish that the employer prom-

ised to pay the benefit and then defaulted on the promise.

The direct consequence of decreasing the likelihood that

employees will receive their promised severance pay is an

increase in the social and economic burdens upon the states

and their citizens. If employees are not paid their sever-

ance wages when due, they and their families often suffer

severe financial hardship. Many wage earners live on

such tight budgets that the loss of just one paycheck can

result in a family crisis. Rent goes unpaid, utilities are

shut off, and even sufficient amounts of food and other

necessities can become unaffordable. When such financial

crises strike families, states bear the financial burden

through social service programs designed to protect the

general welfare of their citizens. Unemployment benefits,

general and special assistance, and other costly forms of

social relief increase when earned wages go unpaid. These

social programs cost the state and their taxpayers sub-

stantial sums of money.

Since the Fourth Circuit’s decision thus would cripple

employees’ ability to recover earned but unpaid severance

pay, create substantial burdens on state economies and

taxpayers, and destroy the balance of state and federal

authority to protect employee wages and benefits, this

Court should grant plenary consideration of this appeal

to restore the proper balance that Congress intended and

to preserve state authority in an area of critical impor-

tance to working people.

Il. WHETHER A SIMPLE PROMISE TO PAY SEVER-

ANCE BENEFITS CONSTITUTES A “WELFARE

BENEFIT PLAN” WITHIN THE MEANING OF

ERISA IS A SUBSTANTIAL QUESTION WAR-

RANTING THIS COURT’S PLENARY CONSID-

ERATION.

A. Congress Did Not Intend That ERISA Regulaie Employer

Promises to Pay Benefits to Employees.

1. Congress Intended ERISA to Regulate the Unregulated

Field of Benefit Plans.

HRISA’s legislative history demonstrates unequivocally

that Congress viewed it as regulating entities separate and

distinct from employers. Even though benefit funds were

established by employers (and sometimes by unions), they

had a legal existence of their own in which they, not the

employers who established them, were liable for payment

of benefits. It was precisely the separate and independent

status of these funds that lead to the problems which Con-

gress sought to remedy through ERISA.

In 1974, after extended study, Congress enacted ERISA

to protect the interests of participants in employee benefit

plans. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983).

One of the central purposes of ERISA was to prevent the

“‘great personal tragedy’ suffered by employees whose

vested benefits are not paid when pension plans are termi-

nated.” Nachman Corp. v. Pension Benefit Guaranty

Corp., 446 U.S. 359, 374 (1980).

The subject of congressional concern, the benefit plan,

was a “relatively modern economic institution” which had

become an important social and economie factor only since

the mid-1940’s. H.R. Rep. No. 533, 98d Cong., 2d Sess.

—, reprinted m 1974 U.S. Code Cong. & Ad. News

4639, 4640. Benefit plans, Congress found, were subject to

10

only minimal, inadequate federal regulation* and were

virtually unregulated by state legislation. Id. at 4641-42.

See Senate Committee on Labor and Public Welfare, Final

Report on Welfare and Pension Plans Investigation, S.

Rep. No. 1734, 84th Cong., 2d Sess. 68 (1956) ; Senate Com-

mittee on Labor and Public Welfare, Interim Report of

Activities of the Private Welfare and Pension Plan

Study, S. Rep. No. 634, 92d Cong., 2d Sess. (1972). The

plan participants were left to rely upon the state common

law of trusts, codified in only a few states, which Con-

gress found insufficient because state law, like existing

federal law, did not adequately protect the security of

pension benefits. See H.R. Rep. No. 533, 93d Cong., 2d

Sess. , reprinted in 1974 U.S. Code Cong. & Ad. News

at 4643.

Employers’ compensation practices, on the other hand,

were not a recent phenomenon and had for decades been

effectively supervised by state courts and administrative

systems, pursuant to legislation and common law contract

principles. Congress’ concern thus was not with enforcing

employer contractual obligations to employees, but with

the inability or unwillingness of benefit plans to meet their

benefit obligations to participants because of overly strict

vesting requirements, inadequate funding, and misfeasance

and malfeasance by the administrators and trustees.**

* Not unti! 1958 did Congress enact legislation, the Welfare and

Pension Plans Disclosure Act, repealed by ERISA, which was

specifically designed to regulate benefit plans. See 29 U.S.C. § 301

et seq., repealed by ERISA § 1il(a)(1), 29 U.S.C. § 1081(a) (1).

By requiring the disclosure of information about plans, that Act

was intended to permit the participants to protect themselves.

However, without substantive standards for plan operation, its

intent was not fully Achieved. H.R. Rep. No. 533, 93d Cong., 2d

Sess. , reprinted in 1974 U.S. Code Cong. & Ad. News at 4641-

42.

** Tn 1971, the Senate Committee on Labor and Public Welfare

reported on a number of case histories illustrating these flaws in

(footnote continued on following page)

11

In ERISA, therefore, Congress prescribed minimum

standards of vesting, funding, and fiduciary conduct to

minimize the risk that workers would lose expected bene-

fits. 29 U.S.C. §§ 1053, 1082, and 1102-1104. It provided

a system of compulsory benefit insurance to protect the

security of benefit rights in the event of benefit plan termi-

nation. 29 U.S.C. §§ 1321-1323. Congress also created a

federal right of action for employees to recover benefits

due from a plan. 29 U.S.C. § 1182(a) and (f). Such pro-

visions would have been superfluous if Congress’ intent in

ERISA had been to regulate an employer’s contractual

liability to its employees and provide a remedy for an

employer’s breach of its contract obligations.

The problems which ERISA was enacted to remedy

the lack of employee knowledge about plan terms and con-

ditions, and the risk of loss of benefits in the event of

plan termination because of underfunding, lack of vesting

provisions, and negligent or fraudulent plan management

—were problems which prior to ERISA had no adequate

remedy in the law. There existed no federal and only a

few state statutes providing a right for an employee to

sue a plan and, even if an employee did sue under state

law, the common law of trusts which was generally ap-

plied to that type of a claim was not adequate to pro-

(footnote continued from previous page)

the private benefit plan system. For example, in one case, a joint

union-employer trust plan had no vesting provision and had

$800,000 in loans outstanding for which there was no collateral.

Similarly, the Senate Committee pointed to a major aerospace

company’s pension plan in which 20,000 out of 60,000 participants

left the plan without entitlement to any benefit, even though one-

fourth of those 20,000 had over five years of service. Further-

more, that plan’s liabilities exceeded its assets by more than $75

million. Thus, the report concluded, “if the plan were to termi-

nate today, employees with vested benefits would have no legal

remedy to obtain ajl their vested benefits.” S. Rep. No. 1734,

84th Cong., 2d Sess. (1956), Appendix at 138.

12

tect the employee’s rights.” See Senate Committee on

Labor and Public Welfare, Final Report on Welfare and

Pension Plans Investigation, 8S. Rep. No. 1734, 84th Cong.,

2d Sess. 65-68 (1956).

2. Congress Did Not Intend ERISA to Supplant and Nullify

Direct Employer Liability for Employee Benefits.

Congress was well aware that employers, having estab-

lished a plan, had no financial responsibility for benefit

payments beyond the contributions they were committed

to make.** Senate Committee on Labor and Public Wel-

fare, Interim Report of Activities of Private Welfare and

Pension Plan Study, 8. Rep. No. 634, 92d Cong., 2d Sess.

74 (1972). Given thai understanding and the fact that

states had been regulating employer compensation prac-

* The report on the House version of ERISA states:

In almost every instance, participants lose their benefits not

because of some violation f federal law, but rather because of

the manner in which the plan is executed with respect to its

contractual requirements of vesting or funding. Courts

strictly interpret the plan indenture and are reluctant to

apply concepts of equitable relief or to disregard technical

document wording. Thus, under present law, accumulated

pension credits can be lost even when separated employees

are Within a few months, or even days, of qualifying for re-

tirement.

H.R. Rep. No. 533, 93d Cong., 2d Sess. , reprinted in 1974

U.S. Code Cong. & Ad. News at 4643 (emphasis added).

** For example, Representative Erlenborn commented:

At the present time the legal foundation of pension plans

is that the employer sets up a pension trust and promises to

make periodic contributions into that trust. If there are

sufficient assets, the employee will get the pension that has

been described; if there are not, he does not get it; he gets

something less. But the employer up until the present time

generally has not made a promise to pay the pension, only

to make periodic contributions,

120 Cong. Rec. 4285 (Feb. 26, 1974), reprinted in 2 Legislative

History of the Employee Retirement Income Security Aci of

1974, 94th Cong., 2d Sess. 3388 (Comm. Print 1976).

13

tices for decades, it is plain that ERISA was not intended

to regulate employer-employee agreements involving bene-

fits, and nothing in its text indicates otherwise.” To the

extent Burlington’s policy constitutes an obligation to pay

benefits directly to its employees, the policy is not gov-

erned by ERISA.

That ERISA does not regulate or limit an employer's

direct contractual obligations to its employees was noted

by this Court in Nachman Corp. v. Pension Benefit Guar-

anty Corp., 446 U.S. 359 (1980). In Nachman, the Court

found a difference between “plan liability” for benefits

and “direct employer liability” for benefits. The em-

ployer in Nachman disclaimed liability in the plan docu-

ment for payment of benefits. When the plant closed and

the plan was terminated, the play had only enough assets

to cover 35 percent of the vested benefits. ERISA pro-

vides insurance for such terminations through the Pen-

sion Benefit Guaranty Corp. (“PBGC”), but imposes re-

invbursement liability on the employer for benefits paid

by PBGC for up to 30 percent of the employer's net

worth.

The employer asked the court for a declaration that it

had no reimbursement liability, since it had disclaimed

liability for any benefits beyond those which the plan’s

funds could satisfy and the plan could not satisfy the

full amount of the benefit obligations. The employees,

*The statutory provisions are directed to the regulation of a

“plan” as an entity apart from an “employer.” See 29 U.S.C

§§ 1022 and 1102. Under ERISA, the plan is to have a plan

administrator who is required to publish and file an annual report

for the plan. 29 U.S.C. §$§ 1023 and 1024. A plan may sue and be

sued, and a judgment against a plan is not enforceable against

the emplover who established it. 29 U.S.C. §1182(d)(1) and (2)

ERISA also prohibits certain transactions between a plan and the

employer. 26 U.S.C. §§ 1106(a) and 1107

14

the company argued, had no right to the full amount;

therefore, it had no reimbursement liability.

Holding that a plan’s liability governed by ERISA und

addressed by plan termination insurance is separate from

an employer’s direct liability for benefits, this Court re-

jected the employer’s argument. The Court distinguished

clearly between the rights of employees to benefits which

are enforceable against the plan and the rights employees

may enforce directly against their employer: even if an

employer by agreement limits its direct lability for bene-

fit payments to employees, by doing so it cannot limit

its employees’ rights against the plan, rignts which are

regulated by ERISA. Td. at 378. The -employer’s dis-

claimer operated to protect it only from direct liability

for benefit claims, and, indeed, this Court noted, had the

employer not disclaimed liability, “the employees could

sue the employer directly.” Jd. at 379 n.29.

The Fourth Circuit’s decision in this case therefore is

contrary to this Court’s interpretation of ERISA in

Nachman. Nachman distinguished between plan liability

and employer liability and acknowledged that, in the ab-

sence of a disclaimer by the employer, employees could

sue their employer directly. Given this Court’s acknowl-

edgement that ERISA does not alter the direct liability

of an employer for benefits, the decision of the court below

is simply incorrect: an employer’s simple promise to di-

rectly pay its employees a benefit out of the company’s

assets may be enforced under state law.

15

B. United States Department of Labor Regulations Interpret-

ing ERISA Establish That an Employer’s Promise to Pay

Benefits Directly to Its Employees Out of the Company’s

General Assets Is Not a “Plan” Within the Meaning of

ERISA.

The potentially un’imited breadth of the definition of

“employee welfare benefit plan’ in §3(1) of ERISA

prompted the USDOL to issue a clarifying regulation in-

terpreting that definition to exclude employer “payroll

practices” in which an employee receives compensation Ci-

rectly from employer assets. 29 C.F.R. § 2510.3-1. As ex-

amples of these “payroll practices” excluded from ERISA’s

coverage, the regulation lists sick leave pay, id., § 2510.3-

1(b)(2), and holiday and vacation pay, zd., § 2510.3-1(b)

(3) (i), each of which is, like severance pay, a benefit enu-

merated in the section of ERISA deseribing the benefits

which may be the subject of an ERISA plan. 29 U.S.C.

§ 1002.*

The USDOL excluded such practices from ERISA

coverage because they are “associated with regular wages

or salary,’ and, furthermore, because “the abuses which

created the impetus for the reforms in [ERISA] were not

in this area, and there is no indication that Congress

intended to subject these practices to [ERISA’s] cover-

age,” notwithstanding that the broad language of the

definition of “plan” could arguably cover them. Notice of

Proposed Rulemaking, 40 Fed. Reg. 24642, 24642-43 (June

9, 1975). However, the regulation excludes these “payroll

practices” only if the compensation is paid directly from

the employer out of its general assets. 29 C.F.R. § 2510.3-1

(b). This is in accord with Congress’ intent since, where

* While the regulation does not specifically mention severance

pay, it expressly states that the listed practices are only examples

and that the list is not meant by the USDOL to be exhaustive.

29 C.F.R. § 2510.3-1(a) (4).

16

the employer itself is obligated to make the payments,

there is no need for any special protectfon to secure the

employees’ benefits because the employees may sue the

employer directly for the benefits, and a remedy under

ERISA would add nothing to that long-established right.

Only where there exists an entity other than the employer

liable for the payments would the concerns of Congress

require ERISA coverage.

No logical basis exists for distinguishing severance pay

from the other “payroll practices” which the USDOL reg-

ulation excludes from ERISA’s coverage. Severance pay,

under Burlington’s policy, is compensation paid directly

by the employer out of its general assets, it is caleulated

on the basis of an employee’s reguiar wages and length of

service, and it is treated by Burlington as regular wages.

It is an obligation for which Burlington itself, and not a

separate and distinct pian, is liable.

Accordingly, under the reasoning of the USDOL regu-

lation interpreting the scope of ERISA’s coverage, Bur-

lington’s simple promise, contained in its personnel man-

ual, to pay severance pay to its employees is not a

“welfare benefit plan” within the meaning of ERISA.

Burlington’s severance pay policy therefore is not sub-

ject to ERISA’s exclusive regulation, and state statutory

and common law remedies remain viable means of enfore-

ing that policy.

17

CONCLUSION

For all of the foregoing reasons, this Court should

summarily reverse the opinion of the Fourth Circuit or

grant plenary consideration of the significant question

raised by the appeal of the North Carolina Commissioner

of Labor in this case.

This 3lst day of December, 1985.

Respectfully submitted,

Rosert ABRAMS

Attorney General of the

State of New York

Attorney for Amici Curiae

Office & P.O. Address

Two World Trade Center

New York, New York 10047

(212) 488-2901

Rogpert HERMANN

Solicitor General

Counsel of Record

O. Peter SHERWOOD

Deputy Solicitor General

Carutin MEYER

Assistant Attorney General

In Charge of Labor Bureau

JANE Laver BARKER

ANDREW ScHULZ

Assistant Attorneys General

Al

APPENDIX

Summary Description of Wage Payment Laws of

Alaska, Connecticut, District of Columbia, Hawaii,

Illinois, Maryland, Montana, Oklahoma, Vermont

and Wisconsin

ALASKA

Alaska has two wage collection statutes. One provides

specifically for actions arising from violations of the mini-

mum wage and/or overtime laws. This statute is com-

monly referred to as the “Alaska Wage and Hour Act,”

and closely parallels the Fair Labor Standards Act of

1938, as amended. See AS 23.10.050-.150

The second statute relates to wage claims, in general.

See AS 23.05.140-.260. Claims accepted under this statute

involve the contractual aspect of employment which deal

with fringe benefits, primarily vacation or severance pay.

An Alaska wage earner may choose a civil remedy either

through the resources of the Department of Labor or on

his own under a workman’s independent right of action.

The second remedy is exclusively used where the wages

or benefits in question exceed the department’s statutory

minimum, exclusive of penalties, of $5,000. The Depart-

ment has the authority to use internal administrative ad-

judication processes to resolve complaints. These pro-

cesses, however, are not obligatory and the Department

may move a claim directly into the courts for a final solu-

tion.

The courts are generally reserved tor serious disputes

or for employers subject to recidivism. Most claims are

handled quickly using one or more informal conferences

involving an investigator, the claimant, and the employer

or employer representative, frequently an attorney. The

\ A2

Appendix

more formal hearing process is reserved for faci finding

to clarify complicated questions of law,\or to determine

if criminal as well as civil sanctions are in order.

In Alaska there are currently 12 investigators and 4

technicians who investigate claims for wages and benefits

or enforee other labor laws. ‘The Department investigates

and resolves 1,600 claims per year with the average resolu-

tion time, outside of court, being 5 mouths. it may take

from 7 months to 2 years to litigate a claim depending on

the amount of the claim and legal complexities which dic-

tate whether the matter will be heard at the district or

superior court level. About 10 percent of the Department’s

eases require formal litigation for resolution. The Depart-

ment’s resources are without charge to the claimant while

legal fees in the private sector begin at about $85 per hour.

CoNNECTICUT

The Connecticut Commissioner of Labor, through the

Department of Labor, Division of Regulation of Wages,

oversees enforcement of Counecticut’s wage payment laws.

See Connecticut General Statutes §§ $1-7la through 31-7h,

31-72 aud 31-76k. Specifically, §51-76k requires an em-

ployer to pay terminated employees all accrued fringe

benefits where the employer has a policy or is party to a

collective bargaining agreement providing for payment of

such benefits upon termination. The fringe benefits covered

by § 31-761 include vacations, holidays, sick days and sever-

ance pay. When the Department of Labor receives a com-

plaint from a terminated employee that promised fringe

benefits have not been paid, it engages in an administra-

tive investigation through the mails or in person using

one of its six Wage Employment Agents. An administra-

tive hearing may be held if necessary to determine dis-

A3

A ppendiz

puted issues. When it determines that an employer has

unlawfully failed to pay fringe benefits, the Department

of Laber can initiate either a criminal action under § 31-71lg

or a civil action under § 31-72 to collect double damages.

DIstRIicT oF COLUMBIA

The District of Columbia Wage Payment and Wage

Collection Law, 36 D.C. Code §§ 101-110 (1981 ed.) enacted

by Congress in 1956 (70 stat. 976), requires employers to

make timely payment of wages to employees employed in

the District of Columbia.

When an employer fails to pay wages (including vaca-

tion pay and severance pay) as required, an aggrieved

employee has two recourses: he or she may file an action

in court to recover the unpaid wages and liquidated dam-

ages, or file a complaint with the Office of Wage-Hour,

D.C. Department of Employment Services. If the em-

ployee chooses the latter course, the employer is notified

by letter of the filing of the complaint and the date and

time of an administrative hearing. If a determination is

made that the employer is in violation of the law, and

refuses to pay wages found due, the case is transferred

to the Corporation Counsel of the District of Columbia

for filing of criminal charges or a civil action.

With a staff of 4 wage-hour compliance specialists as-

signed to investigate complaints and conducting adminis-

trative hearings, the staff during the past 5 years (1980-84)

has processed 4,564 complaints from employees alleging

violations of the Wage Payment and Wage Collection Law.

Slightly more than one miilion dollars has been recovered

in unpaid wages and damages for employees.

.

A4

Appendix

Hawa

In Hawaii, an employee who is not paid all wages due

may either file a claim with the State of Hawaii's Depart-

ment of Labor and Industrial Relations or bring a civil

action in a state court to recover any monies owed.

The Department of La>or and Industrial Relations,

under the statutes and administrative rules and regulations

relating to the Payment of Wages and Other Compensation

Law, Chapter 388, Hawaii Revised Statutes, investigates

and conciliates unpaid wage claims including vacation, sick,

and severance pay. The law does not require the empioyer

to pay any set amount as pay and benefits, but only to pay

what the employer has promised to pay to the employee.

If, after an investigation substantiating a claim for unpaid

wages or other compensation is completed and the em-

ployer tails or refuses to pay the employee, the Depart-

ment of Labor and Industrial Relations may file a lawsuit

on the employee’s behalf to coilect the amounts owed. If

the Department prevails in the lawsuit, the Department

may recover, in addition to the unpaid wages, a penalty

in an amount up to the amount of the wages due. The

court must also order the employer to pay the costs of

bringing the action and reasonable attorney’s fees.

When the employee brings a civil suit, the employee, too,

may recover the civil penalties as well as the costs and

reasonable attorney’s fees.

The statute also provides for criminal penalties. It is a

misdemeanor for any employer to fail to pay wages under

the Payment of Wages and Other Compensation Law or

for any officer of a corporation to knowingly permit the

corporation to fail to pay wages. The employer or officer

is subject to a fine of not less than $100 or more than

$10,000,

--

Ad

Appendix

Seven investigators investigate and conciliate the ap-

proximately 1,200 claims which are filed each year with the

Department. Approximately 90 cases were referred to the

Attorney General for legal action during the last completed

fiscal year.

Any complaint filed under ERISA is not accepted in

Hawaii but must be filed in Washington, D.C. with the

Division of Inquiries and Technical Assistance. Whether

or not prompt action is taken on these complaints is not

known. Therefore, it is very important to the people of

Hawaii that the Payment of Wages and Other Compensa-

tion Law continue to be applicable in the area of wages

and benefits.

ILLINOIS

The Wage Claim Division of the Illinois Department of

Labor is responsible for enforcing the Wage Payment and

Collection Act, Ill. Rev. Stat., Ch. 48, pars. 39m-1 to 39m-16

(1983).

Section 2 of the Act includes in its definitions of “wages”

and “final compensation” any compensation owed an em-

ployee by an employer pursuant to an employment con-

tract or agreement between the two parties. Fven before

this language was added to the statute, an Illinois appellate

court construed the Act as covering severance pay claims.

Section 11 of the Act outlines the auties and powers of

the Department, which include the authority to take assign-

ments of wage claims and proceed civilly and to cause

criminal complaints to be prosecuted. The statute also pre-

serves a private right of action. |

Workers who want to file a claim for wages or final com-

pensation fill out a short application form. If the Division

has jurisdiction, it writes to the worker’s employer and

asks for payment or a written response to the claim.

A6

Appendix

If the employer fails to respond, or if the worker dis-

putes the response, the Wage Claim Division schedules

a hearing in one of nine cities: Chicago, Springfield, Rock-

ford, Peoria, Champaign, Marion, Collinsville, Rock Island

or Effingham. At the hearing, a labor conciliator listens to

both sides and examines any witnesses or written evidence.

If the worker and employer do not reach a voluntary set-

tlement, the conciliator either dismisses the elaim or issues

a demand for payment.

If the employer fails to coni ly with the demand, the

Division institutes prosecution. An employer convicted of

violating the Wege Payment and Collection Act can be

sentenced to 30 days in jail or fined $500.00 for each day

on which a violation occurs.

During the fiscal year ending June 30, 1984, the Illinois

Department of Labor received 10,528 wage complaints

claiming $15,498,980 due. Of this amount $3,786,232 in-

volved vacation pay, severance pay or other fringe bene-

fits. The Department held 8,527 hearings on wage claims

during that year and resolved complaints invoiving

$13,977,315. All of this was accomplished with a staff of

fourteen.

MARYLAND

The intent of the Maryland Wage Payment and Collee-

tion Law is to provide a quick, simple method for em-

ployees to collect monies which were due them for services

performed without cost to the employee. There are, of

course, other remedies available to employees. Those rem-

edies are, in most instances, time-consuming and involve

either considerable cost to the employee or require certain

knowledge which the employee does not have. A court

date for a civil suit in the lowest state court is usually

ili

roo

AT

Appendix

two to three months in the future. A fee of $250.000 is

the minimum charged by an attorney to prepare and liti-

gate even the simplest civil suit. Even with the loose and

informal procedures in the small claims court, the em-

ployee generally does not have the knowledge to pursue his

claim.

The vast majority of claims are for relatively small

amounts, usually two weeks’ pay or less. The claimants

are generally in the lowest paid jobs, many working at

minimum wage. In 1983, the average amount collected per

valid claim was $297.18.

The nature of these claims mandates that they be re-

solved as quickly as possible. The vast majority of cases

received by the Employment Standards Service are re-

solved within 30 days. An administrative assistant and

two clerical employees conduct the office functions; office

and field functions are supervised by a Wage and Hour

Investigator Supervisor. Approximately 40 percent of all

claims are investigated by three specialists; the remainder

are assigned to 16 other investigators in their areas of

residence. Generally, the issues involved are emotional,

requiring the investigator to exercise extreme tact and di-

plomacy to resolve the claim quickly and to the reasonable

satisfaction of both parties. Because of the variety of

employers involved, each investigator must have a broad

business background.

The Wage Payment and Collection Law is codified as

Article 100, Section 94, Annotated Cede of Maryland. Sub-

section 94(4)(3) defines wages as “any remuneration, com-

pensation, bonus, commission, and/or fringe benefit

promised in return for services by an employee.” By ad-

ministrative decision, vacation pay, holiday pay, severance

pay, pension payments, insurance payments and any and

A8

Appendix :

all fringe benefits are included in the definition of wages.

Simply stated, the employee must get what he was prom-

ised and this agency stands available to investigate all

claims of nonpayment of promised monies.

A Wage Payment and Collection claim usually is ini-

tiated by a telephone call from an employee: “My boss

won’t pay me what he owes me.” Two claims forms, one

a condensed version of the other, are mailed to the em-

ployee. Once the completed forms are returned to the

Service, confirmation of receipt is seut to the claimant.

The condensed form is then sent to the employer with a

letter explaining that the Commissioner has received a

claim alleging that the employee is due wages which were

earned but not paid.

If the employer agrees that the claim is valid, the em-

ployer is instructed to forward a check to the Employment

Standards Service, payable to the Division of Labor and

Industry. If the employer asserts that the claim in in-

valid, the employer is instructed to provide an explanation

and documentary evidence to support the employer's posi-

tion. The employer is informed that in the event a reply

is not received, an investigator will nieet with the em-

ployer at a specified time and date to attempt to resolve

the claim.

In approximately 20 percent of all Wage Payment and

Collection cases, a check or other adequate response is re-

ceived. In these instances, a decision is made without the

necessity of a personal visit by an investigator. If a re-

sponse is not received or is inadequate, a Wage and Hour

Investigator visits the employer at the scheduled date and

time and attempts to resolve the claim. If agreement is

reached, a check is collected for the claimant. If a claim

cannot be resolved and the claim is determined to be vailid.

Ag

Appendix

the case is sent to the Office of the Attorney General for

appropriate legal action.

During 1984, a total of 2,128 claims were investigated.

A tota! of 467 claims were filed for vacation pay, or 22%

of the total claims filed. Forty-three claims were filed for

severance pay, or 2¢¢ of the total filed.

The informal, “let’s get this dispute settled” method of

resolving these claims result in speedy service to the claim-

ant. A more structured approach as practiced by many

federal agencies would resuit in a long protracted period

where, the empioyee would be deprived of wages which are

sorely needed. The great number of claims would necessi-

tate a huge increase in the number of federal compliance

officers to investigate and resolve the claims. Many claims

which are filed with this office are filed as a result of a

referral from the Wage and Hour Division of the United

States Department of Labor. There is no question but

that the individual states are better able to serve the

citizens in the collection of unpaid wages.

MonTANA

Montana’s Wage Payment Act (Montana Codes Anno-

tated §§ 39-3-201 through 39-3-215) provides one of the two

alternatives a wage claimant may use to collect wages.

The other one would be to file a civil suit in court. In

most eases court calendars are extremely burdened with

eases and resolution is extremely slow.

When a wage claim is received in the office of the Labor

Standards Division of the Montana Department of Labor

and Industry, an investigation is commenced and a de-

termination reached, if possible, of the validity of the

claim.

A10

Appendix

In the event that either the claimant or respondent feels

aggrieved by the determination, they have the right to a

hearing. The hearing would be held under the Montana

Administrative Procedure Act with rules of civil proce-

dure and evidence applying.

If either party feels aggrieved by the decision of th.

hearing officer, the only appeal is to the District Court

for judicial review. The Labor Standards Division may

apply to District Court for a judgment or an order en-

forcing the decision of the hearing officer or a default

order. See MCA § 39-3-212.

Employers doing business in Montana are not required

by law to provide vacation pay, but once promised or made

part of the employment agreement that promise must be

complied with. See Attorney General’s Opinion No. 56,

September 17, 1949. Once earned, the vacation pay cannot

be withheld by the employer or forfeited by the employee.

Similarly, severance pay is not required by law to be given

but meets the definition of wages once it’s made part of

the employment agreement.

In fiscal years 1982-1984, the Montana Department of

Labor and Industry handled over 3,000 claims and col-

lected over $1,400,000 in wages and fringe benefits owed.

OKLAEOMA

Title 40, Oklahoma Statutes 1982, § 165.1(3) defines

wages as follows:

“Wages” means compensation owed by an employer

to an employee for labor or services rendered, includ-

ing salaries, commissions, holiday and vacation pay,

overtime pay, severance or dismissal pay, bonuses and

All

Appendix

other similar advantages agreed upon between the em-

ployer and the employee, which are earned and due,

or provided by the employer to his employees in an

established policy, whether the amount is determined

on a time, task, piece, commission or other basis of

calculation.

Under Oklahoma law, holiday pay, vacation pay, sever-

ance pay, dismissal pay, bonuses and other similar advan-

tages agreed upon between the employer and the employee

which are agreed on as an established policy are wages.

Title 40, Oklahoma Statutes 1975, § 165.11 defines the

penalty for failure to pay wages or wage supplements:

A. In addition to any other penalty or punishment

otherwise prescribed by law, any employer who is a

voluntary party to or subject to a bona fide written

agreement to pay or provide benefits or wage supple-

ments to employees or to a third party or fund for the

benefit of employees and who willfully fails, neglects

or refuses to pay the amount or amounts necessary

to provide such benefits or furnish such supplements

within thirty (30) days after such payments are re-

quired to be made by law or by agreement, shall be

guilty of a misdemeanor, and each such failure to make

payment as required herein shall constitute a separate

offense. Where such employer is a corporation, the

president, secretary, treasurer or officers exercising

corresponding functions shall each be guilty of a

misdemeanor.

B. As used in this section, the term “benefits or

wage supplements” inciudes, but is not limited to, re-

imbursement for expenses as agreed prior to contract-

A12

Appendix

ing said expenses; health, welfare and retirement

benefits ; and vacation, separation or holiday pay.

Oklahoma’s wage complaint procedures involves:

(1) A letter apprising the employer of the wage com-

plaint, reciting the law and the criminal remedy and

asking that the employer respond or pay.

(2) If after the 2nd notice te employer we feel the wages

are due and owing based upon the facts, we ask the

District Attorney to prosecute. Penalty for failure

to pay wages is a misdemeanor—punishment is up

to a $500.00 fine, one (1) year in the county jail, or

both.

In 1983, the Oklahoma Department of Labor received

3,058 claims. During that same year, the Department col-

lected approximately $500,000 on 1,197 claims and referred

to civil or criminal court an additional 1,147 claims involv-

ing more than $1,000,000.

VERMONT

In Vermont, when an employer has a written policy or

other written agreement to pay its employees benefits or

wage supplements, then, upon failure to pay such benefits,

the employer becomes liable to its employees for actual

damages and, in the event of fraud, is subject to criminal

prosecution. See Title 21, Vermont Statutes Annotated,

Section 345a.

A terminated employee who has failed to receive sev-

erance pay pursuant to his employer’s written policy or

agreement may complain to the Wage and Hour Division

A13

Appendix

of the Department of Labor and Industry for assistance.

The Wage and Hour Division will investigate the claim

and attempt to resolve it on an informal basis. Approxi-

mately two thirds of the complaints made to that division

are resolved this way. If the unresolved complaint in-

volves fraud, the Department of Labor and Industry will

pursue criminal charges against the employer. If no

fraud is involved, the employee is told of his right to sue

for actual damages, and the Department’s investigation

file is made available for his use in the lawsuit.

WISCONSIN

The Wisconsin Department of Industry, Labor and

Human Relations enforces Chapter 109, Wisconsin Stat-

utes, “Wage Payments, Claims and Collection.” This

chapter requires employers to pay to every employee, at

least once per month or within 15 days after termina-

tion, all wages earned. For the purpose of Chapter 109,

“wages” are defined to mean remuneration payable to an

employee for personal services, including salaries, com-

missions, holiday and vacation pay, overtime pay, sever-

ance or dismissal pay, bonuses, and other similar advan-

tages agreed upon between the employer and the em-

ployee or provided by the employer to the employees as

an established policy. The Department investigates and

tries to adjust controversies between employers and em-

ployees as to alleged wage claims. If the Department

finds wages are due and an employer refuses to pay, it

may file a lawsuit against the employer when the em-

ployee has assigned his claim to the Department. Chapter

109 grants a lien to the Department upon the property

of an employer for the full amount of any wage claim

Al4

Appendix

assigned to it. This lien is given precedence over all other

debts, judgments, decrees, liens or morigages against the

employer. In a case where an employer fails to pay wages

as required by Chapter 109, he is subject to both criminal

penalties and increased liability of up to 50% of the wages

owed. While precise statistics are not availabie, a sig-

nificant portion of the wage claims investigated by the

Department under Chapter 109 are severance pay claims.

Certificate of Service

I hereby certify that I have this day served copies of

the foregoing Brief of Amici Curiae State of New York,

Et Al. upon:

Lacy H. Thornburg

Attorney General of the

State of North Carolina

Tiare B. Smiley

Assistant Attorney General

P. O. Box 629

Raleigh, NC 27602

Attorneys for Appellant

Marion G. Follin, III

Michael K. Curtis

Smith, Patterson, Follin,

Curtis, James & Harkavy

700 Southeastern Building

Greensboro, NC 27401

Attorneys for Plaintiffs-A ppellants

MeNeill Smith

Smith, Moore, Smith,

Schell & Hunter

P. O. Box 21927

Greensboro, NC 27420

Attorneys for Defendants-A ppellees

by depositing true copies of same in the United States

mail, first class postage prepaid at New York, New York.

This 3lst day of December, 19835.

/8/ ANDREW SCHULZ

ANDREW ScHULZ

Assistant Attorney General