By Mark Casciari and Meredith-Anne Berger

Seyfarth Synopsis:  The 2016 elections had the effect of hardening the Red-Blue divide in the country.  A number of Blue cities in Red States are enacting ordinances that implement the progressive political agenda, which of course includes pay equity.  Be prepared to see that the Red states in which they lie may attempt to preempt local ordinances.  Red State preemption of Blue city ordinances is yet another battle that is likely to be resolved in court.

The 2016 Presidential, state and local elections across the country reinforced the Red-Blue divide simmering for years.  As a consequence, many Red State legislatures have rushed to enact their agendas before Republican dominance wanes.  In reaction, Blue cities and counties in Red States have enacted their own progressive ordinances or rules.  One area of progressive activism is pay equity — the broad idea that employers need to do more to ensure equal pay for equal work.

Examples of Blue city/Red State progressive activism are plenty. For example, a Philadelphia ordinance bans inquiries into prospective employee salary histories.  Austin, Texas has enacted protections for prospective employees with criminal histories, in an effort to augment job earnings by enhancing equality among applicants.  St. Paul, MN, and Minneapolis, MN have recently passed employee-friendly paid sick leave laws.  It is reasonable to expect more Blue city/Red State activism in the pay equity and broader discrimination context in the Trump era.

There is, however, a movement afoot to counter Blue city and county legislation enacted to further progressive goals that conflict with the political agendas of the Red States in which the Blue cities lie. For example, Arkansas’s Act 137 prohibits a county, municipality, or any other political subdivision from adopting or enforcing any ordinance or rule that creates a “protected classification or prohibits discrimination on a basis not contained in state law.”  On February 23, 2017, the state’s highest court struck down a Fayetteville anti-discrimination ordinance that sought to extend Arkansas’s anti-bullying statute to prohibit discrimination in the workplace on the basis of sexual orientation and gender identity.  The court, however, did not address whether Act 137 is constitutional.  In North Carolina, the Public Facilities Privacy and Security Act (“HB2”) prohibits any city or municipality in the state from enacting a law that would prohibit discrimination in employment or in public accommodations on the basis of gender identity or sexual orientation.

Not to be outdone, on February 8, 2017, the Pennsylvania Senate passed S.B. 241, which seeks to preempt Philadelphia’s law prohibiting salary inquiries and further prohibitions on discrimination in pay on the basis of gender.  Proposed legislation in Minnesota, H.F. 600, seeks to preempt local laws which provide employees with paid or unpaid leave time and other employment protections.  Proposed HB 577 in Texas would preclude a city or county from adopting or enforcing ban the box legislation applicable to private employers.  Proposed legislation in Arizona would permit the State Legislature to rescind funding to local governments that passed legislation which, in the Attorney General’s view, violated state law or the state constitution.

This article does not address whether state preemption laws will be upheld after court challenge, but simply exposes that a Blue city/Red State preemption issue might arise in future pay equity litigation. Readers should be aware that a Blue city or county law mandating pay equity could be preempted by Red State law, and that such a State preemption statute may itself be subject to challenge in court.  This issue might be rendered moot, of course, if the Congress of the United States enacts further national pay equity standards, and in the course of doing so preempts all related state and local law.  ERISA includes a similar preemption provision in the private sector employee benefit plan context. See 29 U.S.C. § 1144 (a) (absent specified exceptions, ERISA preempts all state law, defined to include the law of its political subdivisions, merely “relating to” an employee benefit plan covered by ERISA).  But don’t expect the current administration in Washington to be in the mood to broaden existing preemption of the authority of the States.  A more sound expectation is further litigation in the Blue city/Red State context over Blue city ordinances addressing such progressive concerns as pay equity.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Labor & Employment or Workplace Policies and Handbooks Teams.

 

In the fourth installment of articles looking at the employment law cases being heard by the US Supreme Court this fall term, Montanile addresses issues near and dear to every employer’s heart – ERISA plans and the reimbursement/recoupment of plan funds.  For those readers who manage and worry about these plans and issues, read on!

Supreme Court To Decide What is Required for Equitable Tracing

By James Goodfellow

On November 9, the Supreme Court will hear arguments in the Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan matter, which is up on appeal from the Eleventh Circuit. Montanile involves equitable tracing, and the question before the Court is limited solely to whether an ERISA fiduciary must identify a particular fund that is in a participant’s possession and control at the time that a fiduciary seeks to recover an alleged overpayment of benefits.

For something that seems complicated, the facts of Montanile are quite common.  The dispute arose when the ERISA plan paid the plaintiff’s medical expenses after the plaintiff was injured in a car accident. As the result of a separate personal injury lawsuit, the plaintiff received a settlement from the other driver, and the plan sought from the settlement funds reimbursement of plan medical expenses.  For the uninitiated, many ERISA plans enable the plans to recover reimbursement as the plan did here.

Practical problems arise, however, because often times, participants are not in possession of the money paid by the plan, and overpaid benefits can be significant. As such, the plaintiff in Montanile argued that in order to assert an overpayment claim, the plan needed to assert the claim against the very money that it paid to him.  The plan disagreed, stating that all it needed to do is identify that it paid the participant money, and the amount of that money that it paid. Put another way, the parties’ dispute is akin to one person loaning another person $20 by way of giving that person a $20 bill. The participant’s contention is that the plan can only seeks recover of the specific $20 bill loaned. The plan’s contention is that $20 is $20, and so long as it can show that it paid $20, it is entitled to recover $20. The Eleventh Circuit agreed with the plan.

Affirmance of the Eleventh Circuit’s decision would represent a practical solution to a common problem faced by fiduciaries and plans who attempt to recover from non-fiduciary plan participants or service providers asserting a right to plan benefits based on assignment. Often times, overpaid funds have been spent by the recipients.  And, query how a plan could equitably trace money paid by check or by wire, as so often is the case in this day and age. Additionally, should the Supreme Court reverse, non-fiduciary recipients of plan funds would be provided with a perverse incentive to spend plan money immediately upon receipt so as to avoid any repayment obligations set forth by plan terms.

Left for another day is whether the summary plan description is a plan document. The Supreme Court’s decision in Cigna Corp. v. Amara has left this open, and in Montanile, the plan’s authority to recover overpayments was found solely in the SPD.  This often is a critical question in benefits litigation that could have been addressed in Montanile.