The US Supreme Court took up several Employee Retirement Income Security Act (ERISA) cases this term, handing down both a major loss and a substantial win to employees looking to sue their employers over retirement plan mismanagement. In a recent Law360 article, McDermott Partner Chris Nemeth discusses these decisions.
“It’s going to be really interesting to see how this plays out,” said Nemeth.
Several large employers are disputing how much money the New York Times owes a union multiemployer pension fund. Recently, six companies—including US Foods Inc. and United Natural Foods Inc.—filed an amicus brief supporting the New York Times in its case before the US Court of Appeals for the Second Circuit. Ruprecht Co., an Illinois meat processor, also filed its own brief in support of the New York Times.
Under the Employer Retirement Income Security Act of 1974 (ERISA), when determining an employer’s withdrawal liability, the actuarial assumptions and methods must “offer the actuary’s best estimate of the anticipated experience under the plan.” The underlying issue in this case involves an actuarial method called the “Segal Blend,” which often is used to value unfunded vested benefits and calculate withdrawal liability (an exit fee) from a union multiemployer pension plan. Under the Segal Blend, the actuary blends the multiemployer plan’s assumed interest rate on investments with a lower interest rate used by the Pension Benefit Guaranty Corporation for terminating plans. Many multiemployer pension plans commonly use the Segal Blend to calculate an employer’s unfunded liability and payment upon exiting the multiemployer plan (known as “withdrawal liability”). These large employers claim that using the Segal Blend results in an artificially lower interest rate, which in turn results in larger employer withdrawal liability and larger amounts an employer must pay to exit the multiemployer pension plan.
On February 26, 2018, the US Court of Appeals for the Second Circuit (covering Connecticut, New York and Vermont) ruled that workplace discrimination on the basis sexual orientation violates Title VII of the Civil Rights Act of 1964 (Title VII).
The language of Title VII does not expressly prohibit discrimination on the basis of sexual orientation. However, in 2015, the US Equal Employment Opportunity Commission (EEOC) took the position that Title VII prohibits sexual orientation discrimination under the purview of prohibited sex discrimination. In 2016, the EEOC began filing sexual orientation discrimination lawsuits enforcing that position.
Circuit courts are divided on the question of whether claims of sexual orientation discrimination are viable under Title VII. In March of 2017, the Eleventh Circuit held that sexual orientation discrimination does not violate Title VII. The Seventh Circuit held the opposite the following month, and the Supreme Court declined to decide the split in December. With its en banc decision in Melissa Zarda et al. v. Altitude Express, dba Skydive Long Island, et al., the Second Circuit sided with the EEOC and the Seventh Circuit.
As a result of the decision, employers may see increased litigation in the area of sexual orientation discrimination. To protect against potential lawsuits, employers should consider updating their nondiscrimination policies to prohibit discrimination on the basis of sexual orientation and gender identity. In addition, employers should perform sexual orientation harassment training for employees and managers.
The decision also raises potential concerns for employee benefit plans. Although the Employee Retirement Income Security Act of 1974, as amended (ERISA) generally preempts state laws that relate to employee benefit plans, ERISA does not preempt other federal laws, including Title VII. While certain spousal benefits and rights under qualified retirement plans are required by federal law to be extended to same-sex spouses, the same explicit mandates do not apply to welfare plans. Employers should consider whether any of their employee benefit plans discriminate against employees with same-sex spouses (e.g., excluding same-sex spouses from coverage under a self-funded medical plan). Such distinctions may be ripe for legal action as a result of the decision and the EEOC’s ongoing enforcement efforts.
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