The issue in this appeal is whether an employee, while suspended without pay, was â€œactively at workâ€ and thus qualified to receive short-term disability benefits under his employer’s ERISA plan. Pollett v. Rinker Materials Corp, — F.3d —-, 2007 WL 442975 (6th Cir. 2007) (February 13, 2007)
What might appear a simple issue drew sharply divided opinions from the Sixth Circuit Court of Appeals. Ascertaining when an employee is “actively at work” has broad implications, thus making the decision one of special interest.
The employer in this case, Rinker Materials Corp. , maintained a self-funded ERISA short-term disability plan that provided up to 70% of an employee’s basic weekly earnings on the fifteenth day of continuous disability, for a maximum of 12 weeks.
The sticking point was that, to qualify for benefits, an employee must be â€œactively at workâ€ at the time of the disability notice. The plan provided that:
[a]n employee will be considered actively at work if he was actually at work on the day immediately preceding: Â·Â·Â· an excused leave of absenceÂ·Â·Â·Â·â€ *
[* See plan language quotation at end of case note below]
The Majority View
The majority opinion noted the facts as follows:
On Wednesday January 29, 2003, Defendant Rinker Materials Corporation suspended Plaintiff William Pollett for three days without pay while Rinker investigated an incident involving a broken conveyor belt and Pollett’s alleged failure to properly respond. A year prior, Rinker had suspended Pollett for negligently operating a forklift. On Friday January 31, 2003, Pollett’s physician declared Pollett unable to work due to numerous physical ailments. That same day, Pollett notified Rinker he was unable to work and provided Rinker with his physician’s written assessment. Following his three day suspension, Pollett reported for work on Monday February 3, 2003. Pollett’s supervisor did not allow him to return to work. Instead, the supervisor informed Pollett that Rinker was terminating his employment due to violations of company policy regarding plant safety. (emphasis supplied)
The employee argued that a suspension without pay equated with an excused leave of absence. Thus, he qualified as an active employee because he was at work the day before Rinker suspended him.
The Court disagreed. The Court observed that a suspension and excused leave are similar in that they both create an absence from work. Nonetheless, the Court further reasoned that “to equate a suspension without pay with an excused leave defies common sense”.
The opinion states:
A suspension without pay constitutes a unilateral penalty which an employer imposes upon an employee. In contrast, an excused leave is more akin to a bilateral understanding during which an employer grants an employee permission to be absent from work. During an excused leave the employee suffers no monetary or other penalty and all employment privileges remain intact. An excused absence connotes a lack of punishment while a suspension implies the exact opposite . . . The plain meaning of the phrase â€œsuspended without payâ€ denotes Rinker barred Pollett from employment and all its attendant privileges during the period of his suspension.
On this basis the Court affirmed the district court opinion in favor of the employer. (Note: The case was decided on a de novo standard of review limited to the administrative record.)
The Dissenting View
Circuit Judge Clay dissented in a strongly worded opinion. He begins:
Relying on speculation and conjecture, and without citing any case law or other authority, the majority concludes that Plaintiff is not eligible for short-term disability benefits pursuant to an employee benefits plan governed by the Employee Retirement Income Security Act of 1974 (â€œERISAâ€), 29 U.S.C. Â§ 1001 et seq. The majority bases this conclusion on its contention that Plaintiff was not actively employed as required by the ERISA plan because he was suspended at the time of his disability. There is simply no factual or legal basis for the majority’s conclusion. In the instant case, I would find that both the policy language and intent underlying the ERISA plan, and the appropriate construction of ambiguous plan terms, compel a finding of eligibility.
Judge Clay does not stop there. He then takes the majority to task for the abbreviated statement of facts. Observing that “the majority opinion provides little by way of factual background, a more complete recitation of the facts is appropriate here.”
He then provides the following account of the incident:
On December 29, 2001, Plaintiff started working in Defendant’s factory as a plant manager. On January 29, 2003, a conveyer belt which Plaintiff was responsible for supervising malfunctioned and caused $2,000 in damages. On that same day, Plaintiff was reprimanded and suspended for three days pending an investigation of the incident. On January 31, 2003, while suspended, Plaintiff was informed by his physician that he â€œis not able to workâ€ because â€œ[h]e has coronary artery disease with persistent angina even after bypass surgery.â€ That same day, Plaintiff informed Defendant of his condition and â€œtendered to his supervisor [ ]â€ pertinent medical documents. On February 3, 2003, Plaintiff reported to work, as he was scheduled to do, at which time he was terminated as a result of the investigation conducted during his suspension. (emphasis supplied)
Since the plan did not define what constitutes an â€œexcused leave of absenceâ€, the dissent would have looked “at other sources to assist its interpretation of the plan.” Turning to a popular legal dictionary, the following definition was noted:
According to Black’s Law Dictionary, a â€œleave of absenceâ€ is â€œ[a] worker’s temporary absence from employment or duty with the intention to return.â€ Black’s Law Dictionary at 901 (7th ed.1999). Applying the plain meaning of this definition, Plaintiff’s employer-ordered suspension simply cannot be distinguished from other employer-authorized leaves of absence.
Continuing Employer-Employee Relationship?
According to the dissent, “[t]he record indicates that there was a continuing employer-employee relationship during Plaintiff’s three-day absence . . . Plaintiff also returned to work on February 3, 2003, as he was scheduled to do.
Consulting the caselaw, Judge Clay noted the following authorities distinguishing a terminated employee from a suspended employee:
â€œThere is a clear distinction between being fired and being temporarily suspended for an investigation, even if that temporary suspension is without pay.â€ Stencel v. Augat Wiring Sys., 173 F.Supp.2d 669, 680 (E.D.Mich.2001); see also Andreu v. Sapp, 919 F.2d 637, 642 (11th Cir.1990) (distinguishing between suspension and termination and finding that plaintiff’s â€œsuspension was pending an internal investigation. If the department intended to permanently remove [plaintiff], no investigation would be necessary.â€); Munno v. Town of Orangetown, 391 F.Supp.2d 263, 269 (S.D.N.Y.2005) (finding that â€œplaintiff was suspended not terminated â€) (emphasis in original)).
The dissenting opinion relied heavily on the defendant’s choice of date for termination. The “Defendant recognized that Plaintiff was still actively employed during his suspension because Plaintiff was not terminated until February 3, 2003, when Plaintiff returned to work.”
Quoting again from Andreu:
â€œIf the suspension had amounted to a permanent removal, [formally] discharging him would not have been necessary.â€ Andreu, 919 F.2d at 642; see also Irrgang v. Masco Corp., No. 01-Civ6944, 2002 WL 253949 (E.D.Pa. Feb.21, 2002) (finding that â€œplaintiff continue[d] to be employed under suspended statusâ€).
Note: The majority was largely influenced by the punitive aspect it perceived in the suspension without pay, reading the suspension as tantamount to a debarment “from employment and all its attendant privileges during the period.” The dissenting opinion turned on the date of termination, noting that if the suspension had amounted to a permanent removal, a formal discharge would not have been necessary.
Regardless of how one views the issue, an important planning point is highlighted by this decision. As noted in the recent series of articles addressing employer and plan obligations when insurance coverage proves unavailable, the employer must carefully assess the risks of committing to benefits for which it does not have the anticipated coverage.
If, for example, the employee in Rinker had been admitted to work upon his return, the period of his absence could suggest ambiguous interpretations for insurance coverage. Assume that a policy or benefit plan defines eligible employees as all employees actively at work on a given date, and that date happened to fall during a period of suspension without pay. If the employee returns to work, what is his or her status as to coverage?
The bottom line – employers must give careful attention to how they define and apply categories of employment status with a view to all benefit programs and policies. The issue has several dimensions and the impact of a decision may have unintended consequences in unforeseen contexts.
See also :: Promises Of Coverage To Employees – What Happens When The Coverage Falls Through? (Part 1), :: Promises Of Coverage To Employees – What Happens When The Coverage Falls Through? (Part 2); :: â€œInstatementâ€ In LTD Plan Appropriate Remedy Where Employer Fails To Enroll Employee; :: Restoration of Benefits Via Reformation of Plan – An Available Remedy Under ERISA?
[Rinker Plan Provision] *
The ERISA plan at issue in this case provides disability coverage for persons who become disabled while on â€œActive Employment.â€
â€œActive Employmentâ€ is defined in the plan as:
actively at work for [Defendant]
1. on a full time basis and paid regular earnings;
2. for at least the minimum number of hours shown in the Plan Specifications Â·Â·Â·
The plan also provided that:
[a]n [e]mployee will be considered actively at work if he was actually at work on the day immediately proceeding Â·Â·Â·
1. a weekend Â·Â·Â·;
2. holidays Â·Â·Â·;
3. paid vacations;
4. any non-scheduled work day;
5. an excused leave of absence Â·Â·Â·; and
6. an emergency leave of absenceÂ·Â·Â·Â·