Law.com is reporting: “SmithKline to Pay $5.2 Million to Settle ERISA Suit.” According to the article, the employer has agreed “to pay $5.2 million to settle an ERISA class action suit brought by workers who said they were improperly labeled ‘temporary’ and therefore denied pension benefits despite working full time for months or even years.” The lawsuit highlights the problematic issues that can arise with respect to benefits programs when a portion of the workforce is comprised of “temporary” or “leased employees.” (Previous posts on benefits issues pertaining to outsourcing and temporary employees are here, here and here.)
As reported, the class action was initiated by 1,290 workers who began their jobs as temporary workers provided by agencies such as Kelly Services or Olsten Temporary Services, but who were later hired on as regular employees. The employees brought claims for benefits under the employer’s retirement plans and claims for breach of fiduciary duty. The plaintiffs in the suit claimed breaches of fiduciary duty for (1) failure to calculate and award them vesting and eligibility credits under the employer’s retirement plans; (2) failure to keep track of their vesting and eligibility credits; (3) imposing a “burden shifting scheme” on the plaintiffs, requiring them to provide the information supporting their entitlement to vesting and eligibility credits; and (4) failure to notify the plaintiffs of their right to appeal SmithKline’s benefits decisions. (You can access the Memorandum and Order, granting in part and denying in part, Motions for Summary Judgment in the case; and the Memorandum and Order granting the plaintiffs’ motion for class certification.)
The obligation to credit a leased employee’s prior service with the employer once the employee is hired by the employer as a regular employee poses significant problems for employers. Many times employers don’t even know that they are required to credit such service. If they do know it, they may not have the records, nor can they get the records, to substantiate the service. Reish Luftman Reicher & Cohen has published a good article on the subject: “What Difference Does It Make If I Hire a Former “Leased” Employee?” The author states that he believes the case is important “because it highlights an issue often overlooked by plan sponsors, but which is clearly on the radar screen of the IRS.” As indicated above, the issue is on the radar screen of plaintiffs’ attorneys as well.