ERISA Section 209 Recordkeeping Duties Do Not Give Rise To Fiduciary Claim

. . . our decision does not prevent Henderson from bringing a subsequent action pursuant to ERISA Section 502(a)(1)(B) to recover benefits associated with any unjustly withheld compensation that she receives if she is successful in her state wage lawsuit. Indeed, at oral argument, UPMC agreed that were it to be established in state court that Henderson should have been paid for the additional hours she alleges, UPMC will make the corresponding contributions to these plans.

Henderson v. Upmc, 2011 U.S. App. LEXIS 6820 (3d Cir. 2011)

Henderson v. UPMC involves one of those interesting intersections between wages and compensation on the one hand and employee benefits on the other. The case illustrates the potential ripple effect of wage disputes into the employee benefit arena.

In this case, however, the court held that the plaintiff had more work to do before she had an ERISA case. As the excerpt above indicates, however, the court nonetheless held open the distinct possibility that an ERISA claim could emerge from the wage case.

The facts underlying the wage claim were as follows:

Henderson’s Second Amended Complaint alleges that while employed as a registered nurse for UPMC, she and other nurses were required to work during their thirty-minute unpaid “meal breaks,” but were never compensated for this work. In addition, UPMC began increasing the number of patients assigned to each nurse per shift.

Nurses were allocated thirty minutes of paid time at the beginning of their shifts to review the status reports of the patients they would cover during the upcoming shift. The complaint alleges that as a result of the increased patient load, nurses such as Henderson had to begin arriving at work and reviewing the status reports twenty to forty minutes prior to the official start of their shift.

Even though the nurses clocked in when they arrived, UPMC would not start crediting the nurses with paid work time until the official start of the shift.

Henderson filed a lawsuit in state court alleging that UPMC violated the Pennsylvania Wage Payment and Collection law and the Pennsylvania Minimum Wage Act.  Henderson v. UPMC, No. GD-09-13303 (Court of Common Pleas, Allegheny County, Pa. filed July 23, 2009).  That suit remains pending.

If true, that is not a very fair way to treat your employees. But what would that have to do with ERISA?  First of all, the plaintiff claimed that the defendant failed to properly keep records of her hours:

Henderson contends that these plans and the ERISA statute which controls them require that UPMC, as an employer, keep records of the uncompensated hours she worked and, as a fiduciary, to investigate and ensure that contributions allegedly corresponding to the hours worked were being provided so that the relevant fund can distribute benefits to Henderson when she retires.

Then, she claims that these misconduct affected her benefits as follows:

Specifically, she alleges that “UPMC failed to maintain records . . . sufficient to determine the benefits due,” in violation of Section 209(a)(1) of ERISA. Henderson also claims that UPMC breached its fiduciary duty under Section 404(a), 29 U.S.C. § 1104(a), “to act prudently and solely in the interests of [Henderson and her coworkers] by failing to credit them with all hours worked for which they were entitled to be paid when calculating their pension benefits, or to investigate whether such hours should be credited.”

The plaintiff asked the court for equitable relief pursuant to Section 502(a)(3), 29 U.S.C § 1132(a)(3), and “[a]ll applicable statutory benefits and contributions” pursuant to Section 502(a)(1)(B).  The district court held for the defendant and the plaintiff appealed to the Third Circuit.

The Third Circuit agreed that the employer had the recordkeeping duties alleged by the plaintiff. But the court looked to the plan language of the retirement plans in issue and found that the calculation of benefits turned on compensation paid, not hours worked.

Based on this plain plan language, we conclude that contributions owed by UPMC are calculated based on compensation paid to the employees and not based on uncompensated hours worked. Henderson’s focus on language other than these straightforward definitions is misguided. See Fields v. Thompson Printing Co., 363 F.3d 259, 268 (3d Cir. 2004) (declining to look beyond plain language of employment agreement when determining liability under ERISA).

So, there would be no ERISA case – yet anyway. We have to wait and see since, as the court noted, a successful wage claim would affect compensation paid and then the benefits due would change – again based upon the plain plan language.

In so holding, we are careful to note that our decision does not prevent Henderson from bringing a subsequent action pursuant to ERISA Section 502(a)(1)(B) to recover benefits associated with any unjustly withheld compensation that she receives if she is successful in her state wage lawsuit. Indeed, at oral argument, UPMC agreed that were it to be established in state court that Henderson should have been paid for the additional hours she alleges, UPMC will make the corresponding contributions to these plans.

Were that to eventuate, Henderson would then have been paid reportable W-2 compensation to which contributions are linked. Accordingly, we see no reason to disturb the District Court’s ruling dismissing the complaint with prejudice with respect to Henderson’s claims for violations of Section 209 and any corollary fiduciary responsibility to monitor and ensure that contributions are being accurately provided. However, as just stated, Henderson retains the right to bring a claim for benefits under Section 502(a)(1)(B), if and when she is successful in her state wage lawsuit.

Note: The court did not reach the alternative issue raised – whether plan participants are entitled to bring a separate cause of action for violations of Section 209.

Relationship of Section 209 to Benefit Claim – The court noted that:

. . . in this case, the records “sufficient to determine the benefits due” under Section 209 are the records of the employee’s compensation actually paid. Nowhere is it alleged that UPMC in anyway failed to keep track of the compensation it did, in fact, pay to Henderson or her coworkers.

. . .  because Henderson has failed to state a Section 209 claim against UPMC, any related claim that UPMC failed its fiduciary obligation under Section 404 to investigate and ensure that contributions were being accurately provided to the fund also fails. Ipso facto, to the extent Henderson is attempting “to recover benefits due to [her] under the terms of [her] plan” from UPMC as a fiduciary pursuant to Section 502(a)(1)(B) or seek injunctive relief under Section 502(a)(3), her claim fails because the plan links contributions and benefits due to compensation paid.

Contrary Authority – The plaintiff did cite a case favorable to her position that the Third Circuit rejected:

Henderson urges us to follow Gerlach v. Wells Fargo & Co., No. C05-0585 CW, 2005 U.S. Dist. LEXIS 46788, *6-8 (N.D. Cal. June 13, 2005), where, notwithstanding that the plan linked contributions to compensation paid, the court held that the employer was obligated to keep track of overtime that was never paid. As evidenced by the long list of cases holding to the contrary, Gerlach is an outlier in refusing to follow  the plan language and we decline to follow it.

Majority View On Section 209– The Court cited the following cases in favor of its position:

. . . we join the several other courts that have determined the scope of the Section 209 record-keeping duty, and its fiduciary corollary, by evaluating how contributions are allocated under the pension plan. See Trs. of the Chi. Painters & Decorators Pension v. Royal Int’l Drywall & Decorating, Inc., 493 F.3d 782, 786 (7th Cir. 2007)   (evaluating scope of Section 209 record-keeping duty by looking to plan language); Mich. Laborers’ Health Care Fund v. Grimaldi Concrete, Inc., 30 F.3d 692, 697 (6th Cir. 1994) (same); Combs v. King, 764 F.2d 818, 825 (11th Cir. 1985) (same); Zipp v. World Mortg. Co., 632 F. Supp. 2d 1117, 1125 (M.D. Fla. 2009) (same); see also Mathews v. ALC Partner, Inc., No. 08-cv-10636, 2009 WL 3837249, at *3-7 (E.D. Mich. Nov. 16, 2009) (evaluating scope of fiduciary duty by looking to plan language); Steavens v. Elec. Data Sys. Corp., No. 07-14536, 2008 WL 3540070, at *4 (E.D. Mich. Aug. 12, 2008) (same).