223 Cal. App. 4th 706
Cal. Ct. App.2014Background
- ERISA preemption question arises from United's sick leave Plan funded by a Trust; Kin Care Law requires leave for family illness unless ERISA preempts.
- Plan and Trust exist in original form (1989) and revised form (2009); revised Trust requires monthly contributions and permits employer to stop contributions, with Trust as funding source.
- Trust is a grantor trust; assets are still treated as United's general assets for creditor purposes, affecting ERISA status.
- Payroll practices exemption (ERISA) may apply because sick-leave payments are funded from employer assets, though funded through a separate Trust.
- Ninth Circuit guidance (DOL tests) and state court interpretations guide whether the Trust is a bona fide ERISA fund or a payroll practice; standing issue for ALPA addressed.
- Trial court held ERISA does not preempt Kin Care claim; on appeal, court affirms, finding ERISA does not preempt and ALPA has associational standing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| ERISA preemption of Kin Care claim | ALPA argued Plan not ERISA; Trust not bona fide; thus Kin Care not preempted | United argued plan is an ERISA welfare benefit plan and preempts Kin Care | ERISA does not preempt the Kin Care claim |
| Whether Trusts are bona fide separate ERISA funds | Trusts are grantor trusts, not bona fide separate funds | Trusts function as separate funds under ERISA preemption analysis | Not bona fide separate trusts; ERISA not applicable |
| Funding of the original Trust actuarially determined | Funding was not actuarially determined; lacks relationship to accruing liability | Funding policy used forecasts; expert testimony showed relationship | Original funding not actuarially determined; supports non-preemption |
| Grantor vs rabbi (secular) trust characterization | Trusts should be treated as grantor trusts subject to ERISA | IRS treats grantor trusts with rabbi-like creditor exposure; not exempt | Grantor trusts with creditor exposure do not escape ERISA preemption; assets subject to creditors |
| ALPA's standing to sue under Kin Care | ALPA represents members withKin Care rights; has associational standing | Amalgamated Transit restricts ALPA standing under UCL/PAGA contexts | ALPA has associational standing to seek declaratory and injunctive relief |
Key Cases Cited
- Massachusetts v. Morash, 490 U.S. 107 (U.S. 1989) (ERISA preemption scope and sickness benefits; definition of employee welfare benefit plan)
- Alaska Airlines v. Oregon Bureau of Labor, 122 F.3d 812 (9th Cir. 1997) (payroll practices exemption; separateness vs unfunded plans)
- Bassiri v. Xerox Corp., 463 F.3d 927 (9th Cir. 2006) (precedential role of DOL opinions in ERISA determination)
- Amalgamated Transit Union, Local 1309 v. Superior Court, 46 Cal.4th 993 (Cal. 2009) (associational standing for unions in Kin Care-like actions)
- Arias v. Superior Court, 46 Cal.4th 969 (Cal. 2009) (legislative intent of private enforcement; standing context)