The U.S. Court of Appeals for the Fifth Circuit affirmed the decision of a Texas federal court, finding that the U.S. Department of Labor (DOL) had acted arbitrarily in finding a company’s health insurance plan to be exempt from ERISA. The case is Data Marketing Partnership v. LABR, case number 20-11179 (August 17, 2022).
Data Marketing Partnership (“Data Marketing”) had challenged a DOL advisory opinion that its health insurance plan was not subject to ERISA because the participants did not qualify as employees. The company offered health insurance to individuals in exchange for user data. Data Marketing sells the data that it gathers to third parties. The DOL did not consider those individuals to be employees, so it ruled that stricter state regulators, not ERISA, governed the plan.
A three-judge panel of the Fifth Circuit agreed with the federal district court that the DOL failed to consider relevant issues and adequately explain its position in reaching its conclusion. The Fifth Circuit panel concluded that the DOL ignored its advisory opinions defining the term “working owner” and its regulation defining the term in a related context.
The panel remanded the interpretation of the “working owner” definition and related terms to the district court. The panel also vacated the lower court’s injunction that barred the DOL from refusing to acknowledge the ERISA status of the plan or recognize the limited partners as working owners.
This dispute originated in 2018, when Data Marketing’s partner company, LP Management Services, LLC, asked DOL for a determination that the company’s health insurance plan was subject to ERISA. In 2019, the DOL responded negatively, finding that the plan’s participants were not employees due to the lack of substantive relationship between the participants and the company. The company filed suit, and the district court ruled that ERISA governed the Data Marketing health plan because its limited partners had a sufficient employment relationship with the company to merit participation in an employer-provided health plan. The district court also found that the plan’s roughly 50,000 participants constituted “working owners.”
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
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