Engfer v. General Dynamics Advanced Information System, Inc.
Docket: No. A13-0872
Court: Court of Appeals of Minnesota; March 17, 2014; Minnesota; State Appellate Court
Relator Thomas V. Engfer appeals a decision by an unemployment-law judge (ULJ) asserting that the supplemental benefits he received under an ERISA-governed Employee Transition Benefit (ETB) plan constituted 'wages,' leading to his ineligibility for state unemployment benefits during weeks when his ETB payments equaled or exceeded those benefits. As a result, he was found to have been overpaid $10,746 in unemployment benefits. Engfer contends that ERISA preempts Minnesota law regarding such benefits and claims the ULJ erred in applying state law to reduce his supplemental benefits. The facts reveal that Engfer participated in the ETB plan after being laid off, receiving $597 weekly in state unemployment benefits and $2,369.26 bi-monthly in ETB benefits for about 26 weeks. The Minnesota Department of Employment and Economic Development (DEED) concluded that Engfer's ETB payments were not exempt from the definition of wages under Minnesota law, based on statutory provisions that disallow unemployment benefits if wages received equal or exceed the unemployment amount. The ULJ affirmed DEED's finding, stating that the ETB plan's structure, which provided full wage payments during non-payable weeks, classified the benefits as wages. The ULJ's ruling is reversed, agreeing with Engfer's assertion of ERISA preemption over state law in this context.
Engfer sought reconsideration of a ruling regarding his unemployment benefits, questioning the ETB plan's validity under ERISA, despite not disputing its disqualification under Minnesota law. He argued that the ETB plan did not require repayment of benefits and that the ULJ's ruling significantly reduced his benefits. The ULJ upheld the ineligibility and overpayment ruling, stating that the ETB plan's validity under ERISA was irrelevant to Engfer's state unemployment benefits eligibility. The appeal raised the issue of whether ERISA's preemption provision (29 U.S.C. 1144(a)) overrides Minnesota law (Minn. Stat. 268.035, subd. 29(a)(12)), which requires supplemental unemployment benefit plans to provide payments only for weeks the applicant has received unemployment benefits. The court noted that federal law preempts state law based on congressional intent, with an assumption against preemption in areas of state regulation unless explicitly indicated. DEED acknowledged Engfer's ETB plan as an ERISA-governed employee benefit plan but contended that the Minnesota statute does not "relate to" an employee benefit plan. The court disagreed, citing precedent that established a two-part test for determining if a law has a connection with or reference to a covered employee benefit plan.
A law that does not explicitly mention ERISA plans may still be preempted if it has a "connection with" or "relates to" such plans. The United States Supreme Court has emphasized Congress’s intent in passing ERISA was to establish a uniform body of benefits law to reduce the administrative burdens of conflicting state regulations and prevent substantive law conflicts affecting employee benefit plans. DEED argues that Minnesota Statute 268.035, subd. 29(a)(12), which outlines eligibility for state unemployment benefits, does not impose binding requirements on ERISA plan administrators and thus should not be considered preempted by ERISA. This position is supported by the case of Hewlett-Packard, Co. v. Diringer, where a Colorado law concerning wage definitions for workers’ compensation was found not to be preempted, as it did not dictate the structure of employee benefits. However, the same case also stated that state laws mandating specific employee-benefit structures are preempted. The Minnesota Supreme Court similarly ruled that state provisions affecting how benefits are treated, without mandating features for ERISA plans, are not preempted. The Supreme Court's decision in Travelers Ins. Co. indicates that laws may be preempted if they indirectly compel ERISA plans to adopt certain coverage schemes. Specifically, Minn. Stat. 268.035, subd. 29(a)(12), references plans established by employers, which includes the ERISA-governed ETB plan at issue.
Minn. Stat. 268.035, subd. 29(a)(12) mandates that supplemental benefits from certain plans are classified as 'wages' if provided during weeks when unemployment benefits are not paid. This requirement pressures Employer-Tailored Benefit (ETB) plans to conform to specific coverage standards to avoid wage deductions, undermining the intended benefits of the plans. This creates a conflict with ERISA's preemption goals, as state law alters the terms of national plans. The provision in question, which requires supplemental payments only when unemployment benefits are received to avoid being classified as 'wages,' is therefore preempted by ERISA under 29 U.S.C. 1144(a). The ruling reverses the earlier decision, emphasizing that the plan's requirement for eligibility based on state unemployment benefits could render the plan ineffective, particularly if eligibility determinations were made post-benefit disbursement. Additionally, the issue of benefit disqualification for employees without sufficient earnings is irrelevant to this appeal, as the individual in question had sufficient earnings to qualify for unemployment benefits. No legislative history was found to clarify the 2011 addition of this provision to the unemployment law.
