Texas Court Enjoins DOL Ruling, Prescribes Expansive View of ERISA Welfare Plan Status

January 8, 2021
Hall Benefits Law, LLC

The U.S. District Court for the Northern District of Texas recently overruled a Department of Labor (DOL) advisory opinion in which the DOL found that a group health plan comprised of independent marketers for a data mining company was not a single employer welfare plan under ERISA.

Background

The case — Data Marketing Partnership, LP v. U.S. Dep’t of Labor — involved a single health plan that the plaintiffs sought to create as a single-employer group health plan under ERISA by grouping together thousands of independent, unrelated Internet marketers as “working owners” of Data Marketing Partnership (DMP), and its general partner, LP Management Services. 

The marketers shared data that was collected from their web browsers with DMP, which was then packaged and sold by the plaintiff. In doing business with DMP, the marketers signed partnership agreements, decided how their computer data could be sold, and were given the opportunity to participate in DMP’s group health plan.

In an advisory opinion, the DOL said that the marketers’ relationship with DMP was insufficient to categorize the marketers as “working owners” or “bona fide partners” of DMP for purposes of ERISA. The DOL concluded that the plaintiff’s group health plan did not align with the intent of a single employer welfare plan under ERISA.

The Ruling

On September 28, 2020, the Texas district court set aside the DOL’s advisory opinion as “arbitrary and capricious” and “contrary to the law under ERISA.” The court found that the independent marketers were “working owners” and “bona fide partners” of DMP and could participate in the DMP-sponsored single employer plan as long as at least one common-law employee is involved in the plan. The court held:

  • The fact that the independent marketers conferred a service to DMP and were involved in the company’s management is sufficient for them to be classified as “working owners.” Therefore, they are not required to satisfy the DOL’s requirement to be common-law employees of DMP.
  • DMP is a bona fide business and the marketers are bona fide partners in the business.
  • Under ERISA, a single employer group health plan consists of “one or more” employees. There is no limitation under ERISA on how many working owners may participate in that plan.

The ERISA attorneys at Hall Benefits Law help our clients manage legislative and regulatory changes to employee benefit plans. To get help with benefit plan legal compliance, call 678-439-6236.

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Hall Benefits Law, LLC

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.