# Opposition Brief — Lawrence Paper Co. v. Gomez

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1995
- **Citation:** 516 U.S. 869

## Text

Supreme Court, U.S.
> ee ee
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,
V.

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).

ii

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

iv

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

v

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

vi

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.

7

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.

SI

1

——————

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.

S

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

a.

4

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

6

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-

~~

9

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.

10

(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

11

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

12

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

13

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.

14

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.

15

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

16

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

17

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

18

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:

19

(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

20

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

21

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
200 West Douglas, Fourth Floor
Wichita, Kansas 67202-3084
(316) 262-2671

Counsel Of Record

A. J. Koricn, #08134

STATE OF KANSAS,

Department of Human Resources
401 Topeka Avenue

Topeka, Kansas 66603

(913) 296-4902

Counsel for Respondents

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386002_1581%3A2. Public record. Not legal advice.