Compliance April 24, 2006

Wrongful Termination Claim not Preempted by ERISA

April 24, 2006 (PLANSPONSOR.com) - The US District Court for the Northern District of California rejected an employer's argument that a case against it should be heard in federal court since the employee's reason for termination was that he unlawfully included his girlfriend on his health plan coverage.
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The employer, Kiewit Pacific Company had the case moved from California Superior Court, saying that Michel Merrill’s state law claims were preempted by the Employee Retirement Income Security Act (ERISA) since his termination was related to his ERISA governed benefit plan.

The court pointed out in its opinion that for an ERISA preemption to exist there must be a “benefit depriving motive,” and that Merrill was not claiming that Kiewit terminated him to interfere with benefits owed to him.   Merrill was claiming that Kiewit wrongfully terminated him in breach of his employment contract.

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Merrill had claimed his girlfriend as a dependent for his medical and dental benefits in 1990 and 1996, according to the court document.   The plan included a lawful spouse as an eligible dependent.   His girlfriend was removed from his benefit plans in 1999.   In 2004, Kiewit terminated Merrill citing fraud related to benefit plan documents and coverage.

Merrill sued the company and his supervisor for breach of implied contract for termination of employment.   Merrill claimed that he was fired due to personal animus on the part of his supervisor and that the company used his coverage of his girlfriend as a pretext for his termination.

Kiewit had the claims moved to federal court, saying they were preempted by ERISA.   Merrill argued that he was not suing for benefits for his girlfriend, and his breach of contract claim had nothing to do with ERISA.   The district court agreed.

The case is Michel Merrill v. Kiewit Pacific Company, Inc., et al.

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