Plan Terms Govern Eligibility for Independent Contractors.

Position:BENEFIT LITIGATION
 
FREE EXCERPT

The U.S. District Court for the Northern District of Georgia grants the defendants' motion for summary judgment after finding that the plaintiff distributors are independent contractors and are not entitled to participate in the defendants' 401(k) plan.

The plaintiffs include a group of workers who sell and distribute products made by the defendant bakeries. The defendants sponsor various benefit plans for eligible employees, including a 401(k) plan governed by the Employee Retirement Income Security Act of 1974 (ERISA). The defendants enter into distributor agreements with each of their distributors, and these agreements outline the terms of their relationship. In the applicable distributor agreements, the plaintiffs are labeled as independent contractors.

The plan contains various requirements to be eligible for participation, including that an individual must be an eligible employee as defined under the plan. The plaintiffs have never been eligible to participate due to their status as distributors and, thus, independent contractors.

The plaintiffs filed suit alleging ERISA violations for failure to allow them to participate in the plan due to their status as independent contractors. The defendants move for summary judgment, arguing that the plaintiffs are expressly ineligible for benefits under the terms of the plan, even if they are deemed to be common law employees, and that the plaintiffs failed to exhaust administrative remedies under the plan prior to filing suit.

The court finds that the plaintiffs' ERISA claim fails because they have not shown that they are eligible for benefits under the plan. Therefore, the court will not even address whether the plaintiffs were required to or failed to exhaust their administrative remedies.

In order to assert a claim under ERISA, a plaintiff must be either a participant or beneficiary of an ERISA plan. A participant is defined as any employee or former employee of an employer who is or may become eligible to receive a benefit of any type from the ERISA plan. Therefore, in order to establish participant status, ERISA requires that the plaintiff (1) establish that he or she is a common law employee and (2) be eligible to receive a...

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