869 N.W.2d 295
Minn.2015Background
- Thomas Engfer was laid off from General Dynamics and enrolled in the employer’s SUB (supplemental unemployment benefit) plan that paid supplemental amounts designed to make total payments equal his pre-termination weekly pay.
- The SUB plan required recipients to apply for state unemployment benefits and to confirm ongoing eligibility; it also paid in some weeks when state benefits were not yet payable (e.g., the 1-week waiting period).
- Engfer received state benefits and $31,398 in SUB payments; DEED later concluded the SUB payments were "wages" under Minn. Stat. § 268.035, subd. 29(a)(13) because the plan paid in weeks when state benefits were not paid, and DEED sought recoupment of overpaid state benefits.
- A ULJ and DEED held Engfer had been overpaid; the court of appeals reversed, holding ERISA preempted Minnesota’s timing requirement that SUB plans pay only in weeks the employee received state unemployment benefits.
- The Minnesota Supreme Court granted review to decide whether ERISA preempts the state timing provision and whether the General Dynamics SUB plan is exempt from ERISA under 29 U.S.C. § 1003(b)(3).
Issues
| Issue | Engfer’s Argument | DEED’s Argument | Held |
|---|---|---|---|
| Whether Minn. Stat. § 268.035, subd. 29(a)(13) (timing provision) is preempted by ERISA § 514 (29 U.S.C. § 1144(a)) | The timing provision “relates to” an ERISA plan and is therefore preempted, so SUB payments are not wages | The timing provision simply defines what counts as “wages” for state unemployment and does not relate to plan administration, so it is not preempted | Held preempted: the timing provision has a connection with ERISA plans because it affects substantive coverage and administration and would force plan choices/uniformity burdens on administrators |
| Whether the General Dynamics SUB plan is an ERISA-covered “employee benefit plan” | Plan is covered by ERISA as an employee welfare benefit plan providing supplemental unemployment benefits | DEED conceded plan is an ERISA plan but alternatively argued the plan is exempt under §1003(b)(3) | Held covered: plan qualifies as an ERISA employee benefit plan under §1003(a) |
| Whether the SUB plan is exempt from ERISA under 29 U.S.C. § 1003(b)(3) (maintained solely to comply with unemployment laws) | Engfer argued plan or exemption issues were not properly before court; otherwise argued plan not exempt | DEED argued plan is maintained solely to comply with unemployment laws (thus exempt) | Held not exempt: §1003(b)(3) requires a plan to be maintained solely to provide only statutorily required benefits; General Dynamics’ SUB plan provides additional supplemental benefits and thus is not exempt |
| Net result for Engfer’s overpayment claim | ERISA preemption means SUB payments are not state “wages,” so Engfer was not overpaid | DEED maintained state law controls and recoupment valid | Held for Engfer: ERISA preempts the timing requirement, SUB payments are not wages for state eligibility purposes, so no overpayment recovery by DEED |
Key Cases Cited
- Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) (explains §1003(b)(3) exemption and that a plan must provide only statutorily required benefits to be exempt)
- Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990) (describes ERISA preemption clause as deliberately broad)
- Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504 (1981) (discusses survival of state laws that do not relate to ERISA plans and §1144 preemption framework)
- N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995) (ERISA preemption inquiry: state law that has a connection with or reference to an ERISA plan is preempted)
- Egelhoff v. Egelhoff, 532 U.S. 141 (2001) (state law preempted where it bound plan administrators to particular rules for benefit payments; core ERISA concern)
- Cal. Div. of Labor Standards Enforcement v. Dillingham Constr., 519 U.S. 316 (1997) (useful for assessing whether a state law merely alters incentives or actually dictates choices of ERISA plans)