Insights

Home > News & Insights > Insights > Firing Your Employees To Keep Them Off Your Health Insurance Plan Is A Bad Idea

Share this on:   a b j c

Firing Your Employees To Keep Them Off Your Health Insurance Plan Is A Bad Idea

Published by on July 20, 2010

In Porter v. Elk Remodeling, Inc., the Eastern District of Virginia denied an employer’s motion for summary judgment on a former employee’s ERISA and Virginia Human Rights Act (“VHRA”) claims based on evidence that the employer had discriminated against the employee with respect to rights under an employee benefit plan as well as gender.  A […]

In Porter v. Elk Remodeling, Inc., the Eastern District of Virginia denied an employer’s motion for summary judgment on a former employee’s ERISA and Virginia Human Rights Act (“VHRA”) claims based on evidence that the employer had discriminated against the employee with respect to rights under an employee benefit plan as well as gender.  A copy of the opinion is here.  More after the break.

Sandra Porter was employed by Elk Remodeling, Inc. (“Elk”) from March 2004 until April 2007, first as an Administrative Assistant and then as General Manager.  Porter had been receiving premium reimbursements from Elk for her individual health insurance policy since 2005.  Porter had been the only employee receiving this benefit.  In March 2007, Elk distributed health insurance applications to its employees, with the exception of Porter, in connection with a group healthcare plan it was planning on implementing.  Around this time, Porter overheard Elk’s principal, Timothy Shellnutt, make a reference to a “breeder” during a telephone conversation.  Porter believed this comment was in reference to her. 

In April 2007, Elk submitted an application for group healthcare coverage to CareFirst BlueCross BlueShield (“CareFirst”).  The coverage was for Shellnutt and his family, plus two full-time male employees.  Elk represented to CareFirst that it had three full-time employees and that Porter had been terminated.  A week later, Porter confronted Shellnutt about the group plan, secretly recording their conversation on a microcassette tape recorder.  During the conversation, Shellnutt told her that it would be much more expensive to insure Porter on the group plan initially, but that if she signed a waiver of enrollment she could be added to plan later on.  Shellnutt advised Porter that in the meantime she would still be reimbursed for her individual plan premiums.  Porter asked Shellnutt why it would cost more to add her to the group plan, to which Shellnutt replied that he thought it was because Porter was female, already had a child, and could get pregnant again, while the other employees on the plan were both single and childless.  After Porter refused to sign the waiver, Shellnutt stated that he would not get the group plan for anyone, and that he would no longer reimburse Porter for her premiums.  Porter’s employment with Elk was then terminated.

Porter filed suit against Elk alleging gender discrimination and retaliation claims under both Title VII and the VHRA, interference with attaining rights provided by an ERISA-defined plan in violation of ERISA, and wrongful discharge.  Porter ultimately dismissed the Title VII claims. 

In its pretrial motion for summary judgment, Elk argued that there was no employee benefit plan in place at the time of Porter’s termination, and thus it cannot be liable for interfering with Porter’s attainment of the plan.  ERISA defines “employee benefit plan” as “any plan, fund, or program . . . established or maintained by an employer . . . for the purpose of providing for its participants or their beneficiaries . . . medical, surgical, or hospital care or benefits.”  Citing Fourth Circuit precedent, the court held that an employer’s payment of premiums on behalf of its employees constitutes substantial evidence that a plan was “established.”  Here, the fact that Shellnutt submitted an application to CareFirst and began paying the premiums was sufficient to show that the plan had been established within the meaning of ERISA.  The court also found that Porter was a participant under the statute.  ERISA defines “participant” as “any employee or former employee of an employer . . . who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer.”  The court stated that since all full-time employees of Elk were eligible for the plan, and Porter was a full-time employee, she would have become eligible for the plan if she had not been terminated, and therefore was a “participant” within the meaning of the statute.

The court went on to analyze whether Elk was motivated at least in part by a “specific intent to interfere” with Porter’s attainment of rights under the plan.  Applying the McDonnell-Douglas burden shifting framework, the court determined that there was a genuine issue of fact with respect to pretext.  Based on the evidence of the conversation between Porter and Shellnutt regarding her enrollment in the group plan, the court held that there was a question of fact about whether Porter’s termination was due to her “bad attitude” as Elk had asserted, or because of her refusal to sign the waiver of enrollment.

With respect to Porter’s state law claims, Elk argued that the claims were preempted by ERISA.  The court evaluated whether the claims were subject to ERISA’s preemption provision, which preempts all state laws that “relate to” an ERISA plan.  The court’s inquiry focused on whether the VHRA or wrongful discharge claims sought “relief under state laws that provide alternative enforcement mechanisms for claims that are actually ERISA claims.”  A state claim is considered an “alternative enforcement mechanism” if it could be brought as an enforcement action under section 502, ERISA’s enforcement provision.

As to the VHRA claim, the court stated that the VHRA does not provide an alternative enforcement mechanism because there is no cause of action for gender discrimination under ERISA, and therefore the claim does not “relate to” an ERISA plan under the preemption provision.  The court then held that Porter had presented sufficient evidence from which a reasonable jury could conclude that she was terminated because of her gender, and denied Elk’s motion for summary judgment on the VHRA claim.  The court granted Elk’s motion as to the wrongful discharge claim, stating that the claim was based on the public policy limiting discrimination in the allotment, price, and benefits of insurance policies based on unfair criteria, and was thus preempted by ERISA as “relating to” an ERISA plan.

Topics: ,

Share:   a b j c