Circuit Court Deems Bonus Program a Non-ERISA Plan

The U.S. Court of Appeals for the Fifth Circuit has ruled that a lawsuit involving a construction company’s bonus program belongs in state court because it is not a benefit program that is governed by ERISA.

The case — Atkins et al. v. CB&I, LLC — was filed by five construction workers in Louisiana after the company they worked for refused to pay them a bonus because they quit their jobs before the project they were working on was completed. The company’s Project Completion Incentive Plan (PCIP) stipulated that employees would earn a bonus of 5% of their earnings while they worked on a project if they stayed until the project was completed. 

While acknowledging that they were not eligible for PCIP bonuses because they left the company before the project was finished, the plaintiffs filed suit in state court, alleging that the PCIP was essentially a wage forfeiture agreement prohibited by the Louisiana Wage Payment Act. The company removed the case to federal court, claiming that ERISA governed the PCIP and the district court agreed. 

The Fifth Circuit’s three-judge panel reversed the district court’s ruling, determining that:

“Consistent with the lack of complexity needed to answer the ‘who’ and ‘how much’ questions about the bonus, we do not see any special administrative apparatus dedicated to overseeing the Plan. A plan is more likely to be governed by ERISA when it includes administrative procedures, such as procedures for handling claims and appeals, is administered on a large-scale to many employees, requires continuous monitoring of payees, or requires additional oversight once the benefit has been paid, either because of continuing insurance benefits or the possibility of clawing back severance payments if the employee returns to work, The record shows none of that here.

“In sum, the Project Completion Incentive Plan involves a single and simple payment. Determining eligibility might require the exercise of some discretion, but not much. An administrative structure is not devoted to overseeing the Plan. The Plan thus lacks the complexity and longevity that result in the type of ‘ongoing administrative scheme’ ERISA covers.”

The Fifth Circuit then remanded the case to state court for further litigation of the plaintiffs’ state wage-forfeiture claim.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment legal compliance 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 678-439-6236.

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HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.
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