Month: November 2004

Recently, the DOL posted on its website here a number of opinion letters pertaining to issues connected with the Family and Medical Leave Act (FMLA). With the rising popularity of temps in the workforce, employers will want to take notice of the opinion letter issued April 4, 2004 here which addresses the issue of which individuals are counted toward the FMLA’s “50 or more employees” coverage test. The opinion letter states that it is the DOL’s belief that “a joint employment relationship ordinarily exists, for purposes of the FMLA, where a temporary agency supplies employees to a client employer,” holding that “[e]mployees who are jointly employed by two employers must be counted by both employers, whether or not maintained on only one of the employer’s payroll in a record-keeping sense, in determining employer coverage and employee eligibility under the FMLA.” (Another “outsourcing peril” that could be added to the list.)

See also this recent 11th Circuit court case of Morrison v. Magic Carpet Aviation, RDV Sports, Inc., Harry Mitchel, Alticor, Inc., f.n.a. Amway Corporation (decided September 8, 2004) which held that a “joint employment” relationship did not exist under the FMLA with respect to a contractor/pilot who was an employee of Company A but flew a plane in which Company B had a leasehold interest. Even though the pilot wore a Company B identification badge, Company B neckties, and a Company B parka, the court held that Company B did not have “direct control” over the pilot so as to create a “joint employment” relationship. (Company B in the case was RDV Sports which is the holding company which owns the Orlando Magic professional basketball team.)

A very interesting article from the New York Times: “For Pension Plans Like United’s, a Healthy Glow That’s Paper Thin.”

Thanks to Workforce Insights for the pointer to this article from CNNMoney.com, “Outsourcing the lawyers: Add attorney to the growing list of white-collar jobs being shipped overseas. How far will it go?” According to the article, “[t]his year 12,000 legal jobs moved offshore — less than one percent of the total — according to Forrester Research, a Cambridge, Mass.-based market research firm.” By 2015, Forrester predicts the job losses in the legal field will increase to 79,000, with just over half being attorney positions.

A good article from Workforce magazine on “New Tactics to Boost 401(k) Interest.” The article mentions a new site devised by Starbucks called “Futureroast.com” which features interactive computer games to educate employees about investing and saving for retirement. (Unfortunately, you can’t play unless you are an employee of Starbucks.) The article describes the site as follows:

To encourage employees to sign up for its 401(k) plan, the Seattle-based Starbucks Coffee Co., which has more than 75,000 employees, at an average age of 28, started a program called Futureroast.com. The Web site features four interactive computer games that demonstrate key investment concepts, says Jo Clark, manager of the savings program. In the Voyager game, employees learn about the concept of a company match. Players maneuver a ship and try to bring on as much cargo as possible. Along the way, players encounter enticing purchases like CDs and movie tickets, and they have to choose between buying them or saving their cargo. The longer they stay in the game, the greater the match. Since Futureroast.com started last June, participation in the 401(k) plan has grown from 18 percent to 22 percent–a 23 percent increase.

CBS MarketWatch is reporting: “California starts probing insurers: Spitzer suit spawns other investigations across U.S.” Excerpt:

California Attorney General Bill Lockyer has started an investigation into alleged bid rigging by insurance firms and brokers, the latest sign that Eliot Spitzer’s probe of the industry is spreading from New York to other states. Lockyer’s investigation, announced late Friday, will focus on possible violations of California’s antitrust law, known as the Cartwright Act, as well as potential fraud by companies.

According to the article, Lockyer said in a statement that “[a]ny insurance company or broker violating these laws will be held accountable.” (Previous post here on the benefits implications of the probes.)

Also, in October of this year, California issued proposed regulations setting forth the fiduciary duties owed to a client by brokers. For more information, read the Public Notice, the Initial Statement of Reasons for the regulations, and the text of the proposed regulations. A portion of the regulations provide as follows:

2184.4 Fiduciary duty

(a) A broker who places his or her own financial or other interest above that of his or her client violates Insurance Code section 790.02.
(b) A broker violates Insurance Code section 790.02 if, with either new or renewal business, he or she: (1) Fails to provide the client with the proposal of a best available insurer; (2) Advises a client to select an insurer other than a best available insurer; (3) Advises a client not to select a best available insurer from among multiple insurers suggested to the client; (4) Fails to take reasonable measures to obtain a quote from an insurer that might be a best available insurer.

According to this press release, “failure to comply could result in fines of up to $10,000 per incident, issuance of a cease and desist order by the Commissioner, and/or the revocation or suspension of a company or broker’s license.”

(How this law would interact with ERISA with respect to brokers who are fiduciaries under ERISA is a good topic for future discussion.)

In addition, on Tuesday California voters rejected the proposed law requiring businesses to provide health insurance for their workers or to pay into a state health coverage fund: “Mandatory health insurance loses narrowly.” (Previous posts on SB2 here.) If voters had not rejected it, many had predicted that there would have been legal challenges to the legislation under ERISA.

Finally, here’s a good article from Trucker Huss on another interesting development in California: “Discretionary Clauses in Disability Insurance Policies Ruled Illegal in California.” (From Benefitslink.com) According to the article, “[t]he California Department of Insurance and a federal district court have both recently held that the use of so called “discretionary clauses” in disability insurance policies, including those issued to plans governed by ERISA, violates California law and that the state law in this regard is not preempted by ERISA.”

(There’s never a dull moment in California!)

Suppose certain taxpayers are accused of tax evasion. However, during the trial, a large number of IRS and government agents sit directly behind the prosecution table throughout the trial and glare at the jurors, intimidating them, and causing some of the jurors to fear that if they acquit the taxpayers, the IRS might retaliate against them. New trial required on the basis of jury intimidation and tampering? Is glaring enough to intimidate jurors? Possibly. The TaxProf Blog notes an interesting case which addresses those very facts, U.S. v. Rutherford, 371 F.3d 634 (9th Cir. 2004).

A good article from Mellon: “New Definition of Dependent in Working Families Tax Relief Act of 2004 Affects Employee Benefits.” (From Benefitslink.com)

Sometimes benefits and ERISA gets a little dry, and I have to turn to other areas of the law for humor. Thanks to Ernie the Attorney for the pointer to this case: Mayor v. Wedding. According to the court, the burning issue in the case was as follows:

In this case we are called on to determine whether a cow is an uninsured motor vehicle under appellants’ insurance policy. We hold that it is not. On the night of September 5, 2001, appellants William R. Mayor, Jr., and Wendy M. Mayor were traveling on Interstate 76 west near milepost 41 when their vehicle struck a cow owned by Thomas Wedding. Apparently several of Mr. Wedding’s cows had wandered onto the highway. . .

There appears to be no dispute that there was a collision; the cow was not insured at the time of the collision; and that the cow caused the collision. The dispute in this case is whether the cow was a “land motor vehicle” as defined in the policy. While a cow is designed for operation on land, we do not believe a cow is a “motor vehicle.” The policy at issue does not separately define “motor vehicle;” therefore we must look to the common, ordinary meaning of this term. The American Heritage Dictionary defines “motor vehicle” as, “a self-propelled, wheeled conveyance that does not run on rails.” Id. at 817, 374 N.E.2d 146. A cow is self-propelled, does not run on rails, and could be used as a conveyance; however, there is no indication in the record that this particular cow had wheels. Therefore, it was not a motor vehicle and thus was not a “land motor vehicle” as defined in the policy. The trial court properly found that appellants were not entitled to uninsured motorist coverage. See State Auto. Mut. Ins. Co. v. Cleveland Carriage Co. (1984), 98 Ohio App.3d 361, 648 N.E.2d 590 (finding that a horse was not a motor vehicle for purposes of uninsured motorist coverage;) Wilbur v. Allstate Ins. Co. (Nov. 29, 1991), 11th Dist. No. 90-G-1600, 1991 WL 252851 (finding that a horse and buggy was not a motor vehicle for purposes of uninsured motorist coverage.) To hold otherwise would be a manifestly absurd result. King, supra at 213, 519 N.E.2d 1380.

Please note that the reasoning in the case has nothing to do with the fact that a cow is a living creature and doesn’t have a motor, but that a cow doesn’t have wheels. Justice Bedsworth in an article here pokes fun at the opinion for doing so. He writes:

So how, you might ask, did the courts in Ohio come to the conclusion that neither a horse nor a cow is a MOTOR vehicle? How, you might wonder, did they sift through all the legal chaff to find the kernel of logic that separates warm-blooded barnyard animals from lifeless, steel MOTOR vehicles.

Go ahead, ask. Wonder.

Was it by taking judicial notice of the conspicuous absence of MOTORS in cows and horses? No, no. That would be way too easy. Nobody remembers opinions like that. No one writes odes to such prosaic analysis. . .