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Benefit Continuation During Workers’ Compensation Leave: En Banc Decision

February 22, 2002

Section 132a discrimination claim for terminating industrially injured employee’s group medical coverage while employee is temporarily disabled is preempted by ERISA. This recent case is significant because it precludes one type of 132a claim. Many employers provide group health benefits under the Employee Retirement Income Security Act (“ERISA”) of 1974. If an employer terminates an industrially injured employee’s group health benefits under the terms of an ERISA plan, any 132a claim based on such a termination is preempted by ERISA.

On February 13, 2001, the Workers’ Compensation Appeals Board issued an en banc decision in Alonso Navarro v. A&A Farming and Western Growers Insurance Co. [WCAB Nos. GOL 0087934, GOL 087935 & GOL 0087936], which involved a 132a discrimination claim based on the employer’s termination of group medical coverage while the injured employee was temporarily disabled.

The employer A&A Farming is a farming corporation that was a participating member employer of the Western Growers Assurance Trust, a multi-employer trust that provides medical, dental, vision and other benefits to the employees of participating employees. The Trust, which is funded in part by employer contributions, is an “employee welfare benefit plan within the meaning of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq.

Under the terms of the Trust, at the time the employer became a participating member, the employer could establish a general policy to continue contributions to the Trust on behalf of a disabled employee for up to 180 days after the employee became disabled and ceased active work. At the time A&A Farming joined the Trust it adopted a policy providing that it would continue to make contributions to the Trust for is disabled employees for a period of 90 days, whether or not the disability was work-related.

Applicant was employed as a working foreman/irrigator for nine years. He sustained several industrial injuries to his back, and as a result of those injuries stopped working on April 5, 2002 and had back surgery. He never returned to work at A&A after April 5, 2000 although he would have done so if he were physically able.

While actively working he contributed $20 per month to the Trust. After he stopped working, A&A made contributions on his behalf for the months of May, June and July in accordance with the continuation policy. Applicant sent his check for $20 for each of these months plus the month of August 2000.

By letter dated August 15, 2000, A&A returned applicant’s check for August stating that it would provide medical coverage for disabled employees only for a period of 90 days after the commencement of leave die to disability. Continuation of health coverage was offered under COBRA.

Applicant filed a 132a discrimination claim, contending that the failure to continue contributing to the TRUST on his behalf while he was temporarily disabled on an industrial basis constituted unlawful discrimination in violation of section 132a.

The Appeals Board examined a number of Supreme Court cases that establish that ERISA preempts any state law discrimination claim “where the existence of, the implementation of, or the specific terms of an employer’s ERISA plan are central to (indeed, critical to) that claim.”

The Appeals Board noted:

“The clear import of the foregoing Supreme Court cases leaves little doubt that applicant’s section 132a claim is preempted by ERISA.

ERISA does not itself proscribe discrimination in the provision of employee benefits and, like the state anti-discrimination statue in Shaw, section 132a cannot make unlawful a failure or refusal to provided ERISA-regulated benefits where such failure or refusal is not prohibited by federal law. Moreover, to conclude section 132a was not preempted would be inconsistent with the reservation to Federal authority the sole power to regulate employee benefits plans and inconsistent with Congress’s intention to ‘eliminate the threat of conflicting state and local regulation.’”

The primary inquiry concerning preemption was whether the 132a claim was premised upon and dependent upon the existence of an ERISA plan and the benefits provided or not provided by the plan. In Pacific Bell v. Workers’ Com. Appeals Bd. (Grisby)(1987) 186 Cal. App.3d 1603, the issue was deducting from total years of service for the period during which the injured worker received a disability pension. [The employer’s ERISA plan provided that no service credits were to be given to anyone on a disability pension because that person was not considered an employee.] The Court concluded that “ERISA preempted applicant’s 132a claim since ERISA expressly preempts state action regulating ERISA-controlled employees benefits plans, including state action that “purports to regulate, directly or indirectly, the terms and conditions of employment benefit plans.”

One of the arguments Navarro made against preemption was that A&A could have continued benefit contributions up to 180 days under the trust terms and, therefore, A&A’s failure to provide the maximum continued coverage violated 132a. In response, the WCAB noted that the trust did not require 180 days of continued coverage and federal law only requires continuing coverage for 84 days. Moreover, once A&A adopted a 90-day continuing coverage period and that period was approved by the trust, neither the trust nor A&A had discretion to extend the period to 180 days without amending the participation agreement between them.

The Appeals Board also pointed out that in a recent federal court case, Scotti v. Los Robles Regional Center (C.D.Cal, 2000) 117 F.Supp.2d 982, the court dismissed a 132a claim as preempted by ERISA involving the discontinuing funding of an employee’s group health benefits when the employee was on leave of absence greater that six months. The court in Scotti pointed out that “even indirect state action affecting private [ERISA plans] may impermissibly encroach on an exclusively federal area, “and that” a direct relationship to a plan need not be established because an indirect relation to a plan is sufficient to establish preemption.”

Based on its analysis of the cases, the Appeals Board concluded:

“… that applicant’s section 132a claim ‘relates to’ his employer’s ERISA plan and is preempted by ERISA. In essence, he is asserting that his employer’s action in setting up, executing, and administering the terms of its ERISA plan discriminated against as an industrially-injured worker because, but for his injury, he would have continued working and he would have continued receiving health benefits under the ERISA plan. Thus, applicant’s section 132a claim is directly premised upon the existence of his employer’s ERISA plan and upon his employer’s refusal (pursuant to the terms of the ERISA plan) to continue its plan contributions on his behalf.”

Copyright 2002 Providence Publications, LLC

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