Court Clarifies Third-Party Staffing Employee Pension, Benefits Eligibility
On the heels of the widely reported Microsoft case, in which part-time and third party staffing agency employees won benefits and pension rights, a recent decision involving McGraw-Hill is allowing companies to breath a little easier in this area.
Companies with both regular employees and those provided by third-party staffing agencies dodged a major bullet when a Federal District court ruled for McGraw Hill that the latter were not eligible for pension and other benefits.
The full-time workers who were paid through a third-party staffing agency sued a McGraw Hill subsidiary claiming they were wrongfully denied participation in an array of employee benefits.
In this case, the workers had been told that they were employees of the staffing agency and that they were not eligible for any company benefits.
Seeking benefits and pension eligibility, they sued, claiming they were in fact common-law employees of the company.
In the its decision, the court rejected their claims, finding that even if they were common-law employees, they were not eligible employees under any of the plans in question.
Plans Had Specific Requirements
The court cited the company’s retirement plan requirement that in order to be classified as eligible the plans required eligible employees to be on the payroll of the company and subject to federal withholding tax regulations.
Each plan also specifically excluded certain classifications of individuals, including leased employees, contract workers, and independent contractors.
Noting that the workers were not on the company's payroll nor treated as subject to wage withholding by the company, the court held that the eligibility claims failed in light of the plain language of the plans.
In addition, the court’s decision noted that the workers were not eligible for benefits because they fell into at least one of the excluded classes.
The court rejected the workers' contention that the plans required the company to classify them in writing as ineligible, holding instead that the plans did not require written classification and that all the evidence showed that the company had, in practice, classified the workers as ineligible.
Distinguished From Microsoft Case
The court distinguished two earlier cases on which the workers relied. The plans in the first case, commonly known as the Microsoft decision, were written so that workers were eligible for benefits once they were determined to be common-law employees (i.e., there were no additional eligibility requirements, as in this case).
The language in the second case (Burrey) excluded only leased employees as defined under Code Section 414(n) (whereas the plan language in this case was broader, excluding any person classified by the company as leased, including those described in Code Section 414(n)).
The Vizcaino case (against Microsoft) attracted widespread publicity when it was litigated several years ago and spawned later litigation. It also undoubtedly led employers to revise plan language and practices regarding benefits ineligibility for specific workers. Because of the clearly worded exclusions in this case, the court did not have to address whether the workers were in fact common-law employees of the company.
For more information, refer to [Curry v. CTB McGraw-Hill LLC, No. C 05-04003 JW (N.D. Cal. Jan. 30, 2006)]
