Opposition Brief — Lawrence Paper Co. v. Gomez

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Supreme Court, U.S.

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Y) AUG 30 1995

No. 95-180 pale

een sen

In The ee «

Supreme Court of the United States

October Term, 1995

THE LAWRENCE PAPER COMPANY,

Petitioner,

GEORGE R. GOMEZ, Workers Compensation Director

of the State of Kansas and THE STATE OF KANSAS,

Respondents.

On Petition For Writ Of Certiorari

To The Supreme Court Of The

State Of Kansas

BRIEF IN OPPOSITION

C. MicHAet LENNEN

Morris, LAING, Evans,

Brock & KENNEDy, CHARTERED

200 West Douglas, Fourth Floor

Wichita, Kansas 67202-3084

(316) 262-2671

Counsel of Record

A. J. Koricu, #08134

STATE OF KANSAS,

Department of Human Resources

401 Topeka Avenue

Topeka, Kansas 66603

(913) 296-4902

Counsel for Respondents

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED FOR REVIEW

Whether Kan. Stat. Ann. 44-511(a)(2)(E), which pro-

vides that the value of discontinued employer-paid

insurance and employer contributions to pension and

profit-sharing plans should be included with other forms

of compensation received by employees in the statutory

definition of “wages” used to compute workers compen-

sation benefits, is preempted by the Employee Retirement

Income Security Act, 29 U.S.C. § 1001 et seq. (1988).

LIST OF PARTIES

Petitioner: The Lawrence Paper Company

Respondents: George R. Gomez, Workers Compensation

Director for the State of Kansas

The State of Kansas |

iii

TABLE OF CONTENTS

Page

Question Presented for Review .................... i

EE ELA RL REESE NS am ae aa ii

PE So in b's ib bye dhe able evincbdb venieces iii

ID ins go aii hiri ba du eld MWS vB ed 06 v 0c Vv

ST OT VIN Gabe voncdssdbosde cede vibedececs 1

Statutory Provisions Involved...................... 2

i eg oe 3

Reasons for Denying the Writ of Certiorari ........ 5

SENET SEARED VDOC Hew bovis bib sdceestercéccécceces 5

A. The Kansas Supreme Court Considered and

Correctly Applied Greater Washington Board of

Trade and Blue Cross. As the Challenged Kansas

Law Differs Materially From the District of

Columbia Law at Issue in Greater Washington

Board of Trade and Has Only a “Tenuous,

Remote or Peripheral” Relationship to ERISA

Plans, this Court’s Decisions Do Not Warrant a

Finding That The Kansas Law is Preempted by

OG hed etnies b nnd eaipna'e bs 60 0.0100.

The Kansas Supreme Court’s Conclusion That

Mere Generic Mention of an ERISA Plan or

Benefits in a State Statute does not Require

Preemption is Fully Supported by Decisions of

This Court, Including Greater Washington Board

Be I PRE CIs ccs cteccicscdecvcves

TABLE OF CONTENTS - Continued

Page

C. The Kansas Supreme Court Correctly Inter-

preted and Applied Blue Cross in Concluding

Preemption is not Required Where the Kansas

Statute Imposes No Legal, Structural Contribu-

tion or Benefit Requirements on ERISA Plans

and Where Its Only Relationship With ERISA

Plans is Economic.......-.--++seeeeeeeeeeees 14

D. The KWCA Treats ERISA Benefits Neutrally in

Calculating Workers Compensation Benefit

Levels and, Contrary to Petitioner’s Assertion,

Neither Favors Nor Disfavors Employers Who

Provide ERISA Benefit Plans .............+-- 15

E. Petitioner Fails to Identify Any Conflict or

Confusion in Lower Federal Courts or State

Courts Regarding ERISA Preemption of State

Workers Compensation Schemes ..........--. 17

Comcientiaes 6 cvckadibcncdarestboettcaternee 21

TABLE OF AUTHORITIES

Pages

Cases

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

(1961) .'.05. Sh dee Ceear cess ektetnpeeunveegees cede oe 14

Combined Mgt. v. Superintendent of Bur. of Ins., 22

F.3d 1 (1st Cir. 1994) ......cccccccccccccrcecccceees 7

District of Columbia v. Greater Washington Board

of Trade, 506 U.S. ___, 113 S. Ct. 580

CNR cpacducckee¥s icbetecqacerccatners 5, 6, 8, 10, 12

FMC Corporation v. Holliday, 498 U.S. 52 (1990)...... 15

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987) .... 13

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

(2nd Cir. 1985), aff'd, 477 U.S. 901 (1986).....-..-. 20

Guidry v. Sheet Metal Workers National Pension

Fund, 39 F.3d 1078 (10th Cir. 1994) (en banc),

cert. denied, 115 S. Ct. 1691 (1995).....-----eeeeeee 19

Holland v. Burlington Industries, Inc., 772 F.2d 1140

(4th Cir. 1985), cert. denied, 477 U.S. 903 (1986) .... 20

Hook v. Morrison Milling Co., 38 F.3d 776 (Sth Cir.

WDDR) .nccccccccdndesssngeviccddvtecsecdtvedtevecces 7

Ingersoll-Rand Company v. Perry McClendon, 498

U.S. 133 (1990) ..... 2. cece cece cece eeeeeeenereceenes 6

Keystone Chapter, Assoc. Builders v. Foley, 37 F.3d

945 (3rd Cir. 1994), cert. denied, 115 S. Ct. 1393

(TDDB) bovic cecccccceccccccgercscccccssecess 17, 18, 19

Mackey v. Lanier Collection Agency & Serv., 486 US.

825 (1988)... 2. ee cece cece eee eee e eee eeeeeeeeeees 16, 19

Minnesota Chapter of Assoc. Builders v. Dept. of

Labor, 47 F.3d 975 (8th Cir. 1995) ....------+++ 18, 19

TABLE OF AUTHORITIES - Continued

Pages

New York State Conference of Blue Cross & Blue

Shield Plans v. Travelers Ins., 514 U.S. __, 115 S.

Ct. 1671 (1995) ....--eeeeeeeeeee 5, 6, 8, 10, 12, 14, 15

Shaw v. Delta Airlines, Inc., 463 U.S. 85 (1983).....-- 15

Simas v. Quaker Fabric Corporation of Fall River, 6

F.3d 849 (1st Cir. 1993) ......-ceeeeceeeeeeeeees 19, 20

STATUTES

29 U.S.C. § 1002(3) «0.0 fee e cece ener cere eeeenerereees 6

29 U.S.C. § 1003(a) «1... cece cece rece r er eeeeeeenenes 2, 6

29 U.S.C. § 1003(b) . 0... cece cece cere ee eeeeneenenes 2, 6

29 U.S.C. § 1003(b)(3)....- cece cere cere eee eeeeeeeeneee 2

29 U.S.C. § 1144(a) ... cece cece cece renee eeeeneenees 2, 6

D.C. Code Ann. § 36-307(a-1)(1) (1992)... -. eee eeeeeee 4

Kan. Stat. Ann. 44-511(a)(2) and (3)... 66. c ec ee eee enes 2

Kan. Stat. Ann. 44-511(a)(2)(E) «0.6.6 cece cee eee 4

Kan. Stat. Ann. 44-511(a)(3). 0... cece cece een ee eens 3

Mo. Rev. Stat. Section 287.250.2 (1993 Cum. Supp.) .... 10

Mont. Code Ann. § 39-71-123(2) (1993) .......eeeeees 10

No. 95-180

In The

Supreme Court of the United States

October Term, 1995

THE LAWRENCE PAPER COMPANY,

Petitioner,

Vv.

GEORGE R. GOMEZ, Workers Compensation Director

of the State of Kansas and THE STATE OF KANSAS,

Respondents.

On Petition For Writ Of Certiorari

To The Supreme Court Of The

State Of Kansas

BRIEF IN OPPOSITION

The Respondents, George R. Gomez and the State of

Kansas, respectfully request that this Court deny the

Petition for Writ of Certiorari seeking review of the opin-

ion of the Kansas Supreme Court in this case.

OPINIONS BELOW

The opinion of the Kansas Supreme Court sought to

be reviewed by Petitioner is correctly set forth in Peti-

tioner’s Appendix A. Petitioner correctly attaches the

opinions and describes the procedural history of the case.

——————

and

The

(3):

STATUTORY PROVISIONS INVOLVED

Federal statutes relevant to this matter are 29 U.S.C.

§ 1144(a), which states:

Except as provided in subsection (b) of this

section, the provisions of this subchapter and

subchapter III of this chapter shall supersede

any and all State laws insofar as they may now

or hereafter relate to any employee benefit plan

described in section 1003(a) of this title and not

exempt under section 1003(b) of this title.

29 U.S.C. § 1003(b)(3), which provides:

(b) The provisions of this subchapter shall not

apply to any employee benefit plan if -

(3) such plan is maintatned solely for the pur-

pose of complying with applicable workmen's

compensation laws or unemployment compen-

sation or disability insurance laws;

Kansas statutes involved are K.S.A. 44-511(a)(2)

44-511. Average gross weekly wage computa-

tion; average yearly wage; state’s average

weekly wage. (a) As used in this section:

(2) The term “additional compensation”

shall include and mean only the follow-

ing: . . . and (E) employer-paid life insurance,

health and accident insurance and employer

contributions to pension and profit sharing

plans. In no case shall additional compensation

include any amounts of employer taxes paid by

and

the employer under the old-age and survivors

insurance system embodied in the federal social

security system. Additional compensation shall

not include the value of such remuneration until

and unless such remuneration is discontinued. If

such remuneration is discontinued subsequent

| to a computation of average gross weekly wages

under this section, there shall be a recomputa-

tion to include such discontinued remuneration.

(3) The term “wage” shall be construed to

mean the total of the money and any additional

compensation which the employee receives for

services rendered for the employer in whose

employment the employee sustains an injury by

accident arising out of and in the course of such

employment.

STATEMENT OF THE CASE

Under the Kansas Workers Compensation Act

(“KWCA”), an injured employee ordinarily is entitled to

receive benefits based upon a percentage of the

employee’s average weekly wage. The value of discon-

tinued employer-paid life insurance, health and accident

insurance and employer contributions to pension and

profit-sharing plans is encompassed in the average

weekly wage calculation. Specifically, the term “wage” is

defined to mean an employee's salary or hourly pay, plus

“additional compensation.” K.S.A. 44-511(a)(3). “Addi-

tional compensation”, in turn, is defined to include such

items as gratuities, cash bonuses, employer-provided

room and board and the value of “employer-paid life

insurance, health and accident insurance and employer

aaa aii

contributions to pension and profit sharing plans . . . ; &

such remuneration is discontinued. K.S.A. 44-511(a)(2)(E).

K.S.A. 44-511(a)(2)(E) was enacted in 1974 and, with

the exception of a technical amendment in 1977, has

remained unchanged since that time. This statutory pro-

vision is directed solely toward determining benefits to

be paid injured workers under the KWCA. Neither the

challenged statute nor any other provision of the KWCA

requires an employer to establish or maintain an ERISA-

covered employee benefit plan or its equivalent — regard-

less of whether an employee is receiving workers com-

pensation benefits. Similarly, the KWCA does not prevent

employers from amending, modifying or terminating an

ERISA-covered employee benefit plan. The KWCA is

completely silent on either the type or amount of an

employer’s contributions to, or the benefits to be paid by,

an ERISA-covered employee benefit plan. Finally, the

KWCA does not establish any terms, rules or regulations

under which an ERISA-covered employee benefit plan

must operate.

Petitioner’s workers compensation plan is main-

tained and administered separately from its ERISA-cov-

ered plans. The only link between Petitioner’s ERISA-

covered benefit plans and its workers compensation plan

is economic, in that any increase or decrease in employer-

paid ERISA fringe benefits can potentially affect Peti-

tioner’s workers compensation liability. The converse

relationship, however, does not exist. That is, a change in

workers compensation benefit levels has no effect on

Petitioner’s liability for ERISA-covered fringe benefits.

Petitioner’s personnel director who is responsible for

administration of Petitioner's workers compensation

plan, as well as its ERISA-covered employee benefit

plans, testified below he was unaware of a single instance

where there had been a recomputation of an employee's

wages to take into account the value of discontinued

ERISA-plan benefits.

REASONS FOR DENYING THE

WRIT OF CERTIORARI

ARGUMENT

A. THE KANSAS SUPREME COURT CONSIDERED

AND CORRECTLY APPLIED GREATER WASH-

INGTON BOARD OF TRADE AND BLUE CROSS.

AS THE CHALLENGED KANSAS LAW DIFFERS

MATERIALLY FROM THE DISTRICT OF COLUM-

BIA LAW AT ISSUE IN GREATER WASHINGTON

BOARD OF TRADE AND HAS ONLY A “TEN-

UOUS, REMOTE OR PERIPHERAL” RELATION-

SHIP TO ERISA PLANS, THIS COURT’S

DECISIONS DO NOT WARRANT A FINDING

THAT THE KANSAS LAW IS PREEMPTED BY

ERISA.

The ERISA preemption provision invoked by Peti-

tioner and applied by the Kansas Supreme Court in this

case states:

Except as provided in subsection (b) of this sec-

tion, the provisions of this subchapter and sub-

chapter III of this chapter shall supersede any

and all State laws insofar as they may not or

hereafter relate to any employee benefit plan

<< ealaaiaiaiaiaaiaaatatata a a a i

described in section 1003(a) or this title and now

exempt under section 1003(b) of this title.

29 U.S.C. § 1144(a). Employee benefit plans described in

section 1003(a) and subject to ERISA coverage are:

employee welfare benefit plans and employee pension

benefit plans. 29 U.S.C. § 1002(3).

As this Court observed in District of Columbia v.

Greater Washington Board of Trade, 506 U.S. __, 113 S$. Ct

580 (1992):

Among the plans exempt from ERISA coverage

under § 4b are those ‘maintained solely for the

purpose of complying with applicable work-

men’s compensation laws or unemployment

compensation laws or unemployment compen-

sation or disability laws.’ § 4(b)(3), 29 US.C.

§ 1003(b).

113 S. Ct. at 582.

The congressional purpose in enacting the preemp-

tion provision was:

‘to ensure that plans and plan sponsors would

be subject to a uniform body of benefits law; the

goal was to minimize the administrative and

financial burden of complying with conflicting

directives among States or between States and

the Federal Government . . . [and to prevent] the

potential for conflict in substantive law . . . re-

quiring the tailoring of plans and employer con-

duct to the peculiarities of the law of each

jurisdiction.’ Ingersoll-Rand Company v. McClen-

don, 498 U.S. at 142 (1990).

New York State Conference of Blue Cross & Blue Shield Plans

v. Travelers Ins., 514 U.S. __, 115 S. Ct. 1671, 1677 (1995).

Respondents acknowledge that ERISA preemption is

intended to prevent states and their subdivisions from

taking actions that directly or indirectly regulate ERISA-

covered employee benefit plans or that have more than a

“remote, tenuous or peripheral” connection to covered

plans. Respondents also acknowledge that — notwith-

standing the ERISA exemption accorded state workers

compensation laws — the Kansas law would be subject to

preemption if it directly or indirectly regulated or

affected ERISA-covered benefit plans or had more than a

“remote, tenuous or peripheral” connection to such plans.

In this case, however, the challenged provision of the

KWCA imposes no legal or regulatory burden on ERISA-

covered employee benefit plans. It creates no “conflicting

directives” for ERISA plan administrators or otherwise

interferes with the establishment or maintenance of a

uniform federal ERISA regulatory scheme. No ERISA pol-

icy would be advanced and no congressional concern

alleviated by preemption of the Kansas statute. To the

contrary, the position advocated by Petitioner runs

squarely counter to express congressional intent to

exempt state workers compensation laws from ERISA

preemption.

The preemptive sweep of ERISA, although broad, is

not unlimited. As explained in Combined Mgt. v. Superin-

tendent of Bur. of Ins., 22 F.3d 1 (1st Cir. 1994): “Congress

explicitly exempted state workers’ compensation schemes

from ERISA’s purview, . . . leaving intact the states’

traditional regulation and oversight of this specialized

system of insurance.” Id. at 4. See also Hook v. Morrison

Milling Co., 38 F.3d 776, 786 (5th Cir. 1994) (“ ‘[A] preemp-

tion provision designed to prevent state interference with

federal control of ERISA plans does not require the cre-

ation of a fully insulated legal world that excludes these

plans from regulation of any purely local transaction... . ’

ERISA was not meant to consume everything in its

path.”). Moreover, this Court has consistently held that

“[p]reemption does not occur . . . if the state law has only

a ‘tenuous, remote, or peripheral’ connection with cov-

ered plans.” Greater Washington ‘Board of Trade, 506 U.S.

__, 113 S. Ct. at 583 n.1.

Petitioner argues the Kansas Supreme Court's deci-

sion is inconsistent with Greater Washington Board of Trade,

and, consequently, preemption of the Kansas statute is

required. Petitioner’s argument, however, does not

account for the significant distinction between the Dis-

trict of Columbia law considered in Greater Washington

Board of Trade and the KWCA provision at issue here. It

does not reflect this Court’s working “ ‘assumption that

the historic police powers of the States were not to be

superseded by the Federal Act unless that was the clear

and manifest purpose of Congress.’ ” Blue Cross, 514 U.S.

__, 115 S. Ct. at 1676 (citation omitted).

The District of Columbia law preempted by Greater

Washington Board of Trade required employers who fur-

nished health insurance coverage for employees to con-

tinue to furnish equivalent insurance to injured

employees receiving workers compensation benefits.

Specifically, it stated:

Any employer who provides health insurance

coverage for an employee shall provide health

insurance coverage equivalent to the existing

health insurance coverage of the employee

while the employee receives or is eligible to

o=mw-

receive workers’ compensation benefits under

this chapter.

D.C. Code Ann. § 36-307(a-1)(1) (1992). As noted by the

Kansas Supreme Court, the practical effect of the District

of Columbia law was to prevent an employer from dis-

continuing ERISA-covered health insurance coverage for

employees receiving workers compensation benefits once

an ERISA plan had been established. (Petitioner’s App.,

All). The KWCA imposes no such mandate. The Kansas

law merely looks to the value of ERISA benefits, if dis-

continued, as one factor to be included in the definition

of “wages” used to compute workers compensation bene-

fit levels. As a result, there is a significant factual distinc-

tion in the degree of relationship or connection between

ERISA plans and the Kansas and District of Columbia

laws.

The difference can be illustrated by comparing

employer mandates under the two statutory provisions.

Under the District of Columbia law, an employer who

established an ERISA-covered health insurance plan was

not free to terminate it and provide no equivalent health

insurance coverage. Under the same circumstances, a

Kansas employer is free to terminate an ERISA-covered

health plan and has no obligation to provide an equiva-

lent plan or coverage.

As explained by the Kansas Supreme Court:

[T]he District of Columbia law did more than

merely attach a dollar value to a fringe benefit

and include a percentage of that value in com-

puting workers compensation benefits. The Dis-

trict of Columbia law essentially mandated the

continuation of ERISA-covered benefit plans.

(A11). Contrary to Petitioner’s claim, the Kansas statute

is fundamentally different from that considered in Greater

Washington Board of Trade. As a result, neither Greater

Washington Board of Trade nor any other decision of this

Court requires a finding of preemption in this case.

B. THE KANSAS SUPREME COURT’S CONCLUSION

THAT MERE GENERIC MENTION OF AN ERISA

PLAN OR BENEFITS IN A STATE STATUTE DOES

NOT REQUIRE PREEMPTION IS FULLY SUP-

PORTED BY DECISIONS OF THIS COURT,

INCLUDING GREATER WASHINGTON BOARD OF

TRADE AND BLUE CROSS.

Both the Kansas Supreme Court and Petitioner

observe that the Kansas approach is not unique in state

workers compensation systems but rather is shared by a

number of states. (A6; Petition for Cert., p. 14). Quoting

statutes from Missouri and Montana, Petitioner also

points out that other states stand in “stark contrast” to

Kansas and have expressly excluded fringe benefits fur-

nished by employers:

See, e.g., Mo. Rev. Stat. Section 287.250.2 (1993

Cum. Supp.) (term “wages” does not include

fringe benefits such as retirement, pension,

health and welfare, life insurance or “other

employee or dependent benefit plan furnished

by the employer for the benefit of the

employee”).

(Petition for Cert., p. 15). Similarly, the Montana statute

provides that “wages do not include . . . (d) contributions

made by the employer to a group insurance or pension

plan.” Mont. Code Ann. § 39-71-123(2) (1993). That states

have chosen to structure their workers compensation sys-

tems in differing ways, however, lends no comfort to

Petitioner’s preemption claim. Rather, such differences

were expressly contemplated by Congress when enacting

ERISA’s exemption and preemption provisions. ERISA

preemption was intended to ensure that ERISA plans

would be governed by a uniform body of ERISA law and

regulation; it was not intended to create a national system

of uniform state workers compensation systems.

Plaintiff urges this Court to conclude that the mere

generic reference to fringe benefits provided under a plan

that is subject to ERISA coverage dictates preemption

without consideration of either the actual effect, if any, of

the state law on ERISA-covered plans, or the underlying

federal policies sought to be effectuated by ERISA pre-

emption. The obvious error of this argument is demon-

strated by the very language of the Missouri and

Montana statutes quoted favorably by Petitioner as exam-

ples of state laws that do not run afoul of ERISA preemp-

tion. Petitioner ignores that the two state statutes, like the

Kansas law, refer generically to benefits provided under

employee benefit plans covered by ERISA.

On its face Petitioner’s “mere mention” theory pro-

duces an incongruous result, frustrating state efforts to

shape workers compensation laws in ways that are not

violative of ERISA and consigning ERISA benefits to a

statutory black hole. Under the “mere mention” theory of

preemption, if a state statute were specifically to include

the value of discontinued ERISA benefits in the wage

base used to compute workers compensation benefits, the

statute would be preempted. Conversely, if the state stat-

ute were specifically to exclude the value of such discon-

tinued benefits from the wage base, it would be similarly

preempted.

Petitioner’s argument simply lacks logic or wisdom.

Certainly, it flies in the face of common sense to conclude

that Congress, which excluded workers compensation

plans and statutes from ERISA preemption, intended to

leave states incapable of addressing how employee bene-

fits should be treated in their state workers compensation

laws. Obviously, something more than the mere mention

of an ERISA plan or plan benefits in a workers compensa-

tion statute is necessary to invoke preemption. The stat-

ute must have some tangible legal or administrative

impact, albeit direct or indirect, on an ERISA plan. And,

as explained in Greater Washington Board of Trade and

other preemption cases decided by this Court, the impect

must be more than “tenuous, remote or peripheral.”

Greater Washington Board of Trade, 506 U.S. __, 113 S. Ct.

580, 583 n.1.

Relying on this Court’s holdings in Greater Washing-

ton Board of Trade and Blue Cross, the Kansas Supreme

Court properly reasoned that it must “‘go beyond the

unhelpful text and the frustrating difficulty of defining its

key term, and look instead to the objectives of the ERISA

statute as a guide to the scope of the state law that

Congress understood would survive.” (A17, quoting

Blue Cross, 514 U.S. __, 115 S. Ct. at 1677). Based upon

this Court’s articulation of congressional purpose in Blue

Cross and an extensive review of federal appellate deci-

sions post-dating Greater Washington Board of Trade, the

Kansas Supreme Court concluded: (a) the mere listing of

ERISA benefits “as one factor to be included in a broader

calculation is ‘in and of itself’ inconsequential for § 514(a)

purposes” and (b) “ERISA preemption does not arise

merely because of a state law that increases a company’s

cost of doing business in a way that could be alleviated

by ERISA preemption.” (A15) (citations omitted).

Support for the Kansas Supreme Court’s decision

may also be found in the distinction between state laws

that affect ERISA plans and those, like the Kansas statute,

that focus instead on ERISA benefits. The significance of

this distinction is explained in Fort Halifax Packing Co. v.

Coyne, 482 U.S. 1 (1987):

It is thus clear that ERISA’s preemptive provi-

sion was prompted by recognition that

employers establishing and maintaining

employee benefits plans are faced with the task

of coordinating complex administrative activ-

ities. .. . Preemption insures that the administra-

tive practices of a benefit plan will be governed

by only a single set of regulations. . . . It is for

that reason the Congress preempted state laws

relating to plans, rather than simply to benefits.

Id. at 11.

Clearly, as determined by the Kansas Supreme Court,

the purposes of ERISA preemption are not in any way

thwarted or undermined by the KWCA. The KWCA

imposes no burden on the interests of employees or their

beneficiaries under ERISA-covered plans. Similarly, it

imposes no substantive requirements or administrative

burdens on ERISA plans or their administrators, nor does

it in any way affect the uniformity of federal ERISA law.

C. THE KANSAS SUPREME COURT CORRECTLY

INTERPRETED AND APPLIED BLUE CROSS IN

CONCLUDING PREEMPTION IS NOT REQUIRED

WHERE THE KANSAS STATUTE IMPOSES NO

LEGAL, STRUCTURAL CONTRIBUTION OR BEN-

EFIT REQUIREMENTS ON ERISA PLANS AND

WHERE ITS ONLY RELATIONSHIP WITH ERISA

PLANS IS ECONOMIC.

In its opinion, the Kansas Supreme Court points out

that Petitioner has alleged no direct administrative con-

nection between the KWCA and any ERISA-covered

employee benefit plan and that the only asserted link is

economic, in that an increase in employer-paid ERISA

fringe benefits may result in an increase in potential

liability under the KWCA. (A7). As previously noted,

however, the converse relationship does not exist. The

KWCA imposes no contribution or benefit obligations on

an ERISA-covered plan or plan administrators. An

increase in workers compensation benefits under the

KWCA requires no change at all in ERISA plan terms or

benefits.

Unlike the New Jersey workers compensation law

that prevented ERISA plans from setting off workers

compensation benefits against ERISA-covered retirement

benefits or pensions; the New York “Human Rights Law”

that prohibited employers from structuring employee

benefit plans in a manner that discriminated on the basis

of pregnancy; or the Pennsylvania law that prohibited

“plans from . . . requiring reimbursement [from the bene-

ficiary] in the event of recovery from a third party” - all

of which were considered by this Court and held to be

preempted in Alessi v. Raybestos-Manhattan, Inc., 451 US.

504 (1981), Shaw v. Delta Airlines, Inc., 463 U.S. 85 (1983)

and FMC Corporation v. Holliday, 498 U.S. 52 (1990) - the

KWCA imposes no requirements relating to employee

benefit levels, structures or administration. Although the

KWCA may affect an employer’s overall cost of doing

business, it imposes no costs or other obligations on an

ERISA plan itself.

Acknowledging a state law “might produce such

acute, albeit indirect, economic effects . . . as to force an

ERISA plan to adopt a certain scheme of substantive

coverage” (115 S. Ct. 1683) - a condition clearly not

present in this case - this Court specifically concluded in

Blue Cross “that a law operating as an indirect source of

merely economic influence on administrative deci-

sions . . . should not suffice to trigger preemption... . ”

Blue Cross, 514 U. S. ___, 115 S. Ct. at 1680. Accordingly,

the KWCA provision challenged by Petitioner is not sub-

ject to ERISA preemption on the basis of the indirect

economic influence the KWCA may have on ERISA bene-

fit plans.

D. THE KWCA TREATS ERISA BENEFITS NEU-

TRALLY IN CALCULATING WORKERS COM-

PENSATION BENEFIT LEVELS AND, CONTRARY

TO PETITIONER’S ASSERTION, NEITHER

FAVORS NOR DISFAVORS EMPLOYERS WHO

PROVIDE ERISA BENEFIT PLANS

The KWCA does not distinguish between remunera-

tion paid in money and the value of discontinued fringe

benefits in the definition of “wages” used to calculate

workers compensation benefits. The neutral treatment

afforded discontinued fringe benefits and cash wages

under the KWCA was illustrated in the Kansas Supreme

Court’s opinion:

to.

If an employee has been paid a weekly cash

wage of $100, but receives no other benefits, the

employee's “wage” for the purpose of determin-

ing workers compensation payment levels

under the KWCA is $100. Similarly, under the

KWCA, if an employee has received weekly

compensation of $100 composed of $80 cash and

discontinued ERISA benefits having a value of

$20, the employee’s “wage” is again $100. LPC

[Petitioner], however, urges that the $20 com-

pensation attributable to discontinued ERISA

benefits be ignored.

(All). The illogic of Petitioner’s argument is best illus-

trated if its application is taken to the logical end.

Assume an employee’s wages were composed entirely of

employer paid accident, health, life insurance and

employer contributions to pension and profit sharing

plans and that the value of such benefits was $100. The

employee receives no cash wages. If the employee were_

injured and the enumerated fringe benefits were discon-

tinued, the employee would receive no workers compen-

sation benefits at all under the scenario advanced by

Petitioner. The effect would be two-fold: (1) ERISA bene-

fits would be afforded special treatment vis-a-vis other

forms of compensation and (2) injured workers would be

deprived of workers compensation benefits based upon

their full preinjury level of compensation.

Neither result is dictated by ERISA. Relying on this

Court’s decision in Mackey v. Lanier Collection Agency &

Serv., 486 U.S. 825 (1988), the Third Circuit specifically

counseled against the special treatment of ERISA benefits

sought by Petitioner:

We do not believe ERISA requires a state to

ignore the existence of ERISA benefits when

considering overall remuneration to workers.

... Indeed, Mackey suggests that a law would be

preempted if it counted all remuneration to

workers except benefits from ERISA plans, for

this would be special treatment.

Keystone Chapter, Assoc. Builders v. Foley, 37 F.3d 945 (3rd

Cir. 1994), cert. denied, 115 S. Ct. 1393 (1995).

E. PETITIONER FAILS TO IDENTIFY ANY CON-

FLICT OR CONFUSION IN LOWER FEDERAL

COURTS OR STATE COURTS REGARDING ERISA

PREEMPTION OF STATE WORKERS COMPENSA-

TION SCHEMES.

Petitioner asserts “there is considerable uncertainty

and disagreement in the lower federal and state courts

regarding the scope of ERISA preemption with respect to

workers compensation schemes in general.” (Pet. for

Cert., p. 15). In support of this proposition, Petitioner

cites no state court opinions and four federal court of

appeals decisions — none of which relate to state workers

compensation laws and all of which are consistent with

this Court’s holdings in Greater Washington Board of Trade

and Blue Cross, and with the decision of the Kansas

Supreme Court in this case. In three of the four court of

appeals’ decisions, the courts determined that the state

laws at issue were not preempted.

Keystone Chapter, 37 F.3d 945 (3d Cir. 1994), cert.

denied, 115 S. Ct. 1393 (1995), addressed the Pennsylvania

Prevailing Wage Act and found that it was not preempted

even though some of the benefits counted in the prevail-

ing wage calculation could include ERISA plan benefits.

The Keystone court acknowledged that the Pennsylvania

law would impose additional costs of that state’s public

works contractors, and like any other cost imposed on

any employer, might “influence its choices regarding

ERISA benefits contributions.” 37 F.3d at 959. The court

pointed out, however, that this impact “may be said of

any wage regulation.” Id. Noting that wage laws fall

traditionally within the sphere of the state’s police power,

Keystone explains:

ERISA’s preemption clause aims “to ensure ben-

efit plans will be governed by only a single set

of regulations,” not to bestow on employers a

uniform regulatory and economic environment

for all their activities across the country. Because

states enact their own wage and non-ERISA

benefits regulations . . . employers must adjust

their operations according to locale. This admin-

istrative and financial burden arises from the

“patchwork scheme” of our federal system, a

system whose “separate sphere of governmental

authority” were not preempted by ERISA.

Id. at 960 (citations omitted).

Minnesota Chapter of Assoc. Builders v. Dept. of Labor,

47 F.3d 975 (8th Cir. 1995), similarly concluded that the

Minnesota prevailing wage law was not preempted by

ERISA. The Eighth Circuit identified a number of factors

to be considered in determining whether a state law is

preempted because it “relates to” ERISA plans. They

include whether the law:

(1) negates an ERISA plan provision; (2) affects

relations between primary ERISA entities; (3)

changes the structure of ERISA plans; (4) affects

ERISA plan administration; (5) affects ERISA

plans economically; (6) exercises traditional

state power; and (7) may be preempted consis-

tent with other ERISA provisions.

Id. at 978. Like the Kansas Supreme Court and in accord

with Keystone, the Eighth Circuit explained: “These fac-

tors must be assessed in light of the totality of the state

statute’s impact on the plan.” Id.

Finally, Guidry v. Sheet Metal Workers National Pension

Fund, 39 F.3d 1078 (10th Cir. 1994) (en banc), cert. denied,

115 S. Ct. 1691 (1995), determined that ERISA did not

preempt a Colorado statute which exempted from gar-

nishment 75% of disposable earnings, including compen-

sation denominated as “avails of any pension or

retirement benefits, or deferred compensation plan, avails

of health, accident or disability insurance, or otherwise.”

Id. at 1085 (citation omitted). The Tenth Circuit acknowl-

edged the Colorado law made generic reference to bene-

fits attributable to ERISA-covered plans, but pointed out

that, unlike the Georgia law considered in Mackey and

found to be preempted, it made no specific reference to

ERISA benefits or ERISA plans.

Simas v. Quaker Fabric Corporation of Fall River, 6 F.3d

849 (1st Cir. 1993) is the only federal courts of appeals

case cited by Petitioner where a state statute was deter-

mined to be preempted by ERISA. It is readily apparent

that Simas in no way conflicts with Keystone, Minnesota,

Guidry or the state court decision in this case. Simas

involved a Massachusetts state “tin parachute” law that

required employers to made substantial severance pay-

ments to employees who lost their jobs following corpo-

rate takeovers. The court found the directive to pay

prescribed severance benefits constituted an employee

benefit plan covered by ERISA.! Not surprisingly, Simas

concluded a state statute cannot mandate benefits if they

comprise an “employe benefit plan, no matter how vir-

tuous the statute.” Id. at 856. Because the Massachusetts

law imposed such a plan, it was preempted.

In short, Simas reached a preemption conclusion dif-

ferent from the other decisions cited by Petitioner

because it dealt with a state-imposed severance plan and

because it considered a statutory scheme that differed

materially from the state laws at issue in those cases.

Certainly, there can be no plausible suggestion that the

method of calculating workers compensation benefits

under the KWCA constitutes establishment of an ERISA

employee benefit plan so as to fall within the preemptive

analysis of Simas.

Petitioner’s assertions of “corifusion and difficulty”

in the lower federal courts and state courts in ascertain-

ing the scope of ERISA preemption in workers compensa-

tion matters do not withstand scrutiny. Any confusion

attendant to the issue is that of Petitioner and not of the

1 This is not a novel or startling finding, nor does it reflect

conflict and confusion among lower federal courts, since courts

have generally recognized that severance pay plans are

employee benefit plans squarely falling within the provisions of

ERISA. See, e.g., Holland v. Burlington Industries, Inc., 772 F.2d

1140 (4th Cir. 1985), cert. denied, 477 U.S. 903 (1986); Gilbert v.

Burlington Industries, Inc., 765 F.2d 320 (2nd Cir. 1985), aff'd, 477

U.S. 901 (1986).

eg ti

courts. Respondents respectfully suggest that Petitioner's

reliance on alleged judicial confusion as a basis for its

Petition for Writ of Certiorari is misplaced.

CONCLUSION

For the foregoing reasons, Respondents submit Peti-

tioner’s request for summary reversal is wholly unwar-

ranted and pray that the Petition for Writ of Certiorari be

denied in all respects.

Respectfully submitted,

(C. MicHaset LENNEN

Morris, LAING, EvANs, BROcK

& Kennepy, Chartered