Bauer v. Summit Bancorp
| Decision Date | 25 March 2003 |
| Docket Number | No. 01-3624.,01-3624. |
| Citation | 325 F.3d 155 |
| Parties | John BAUER, Appellant v. SUMMIT BANCORP. |
| Court | U.S. Court of Appeals — Third Circuit |
Robert A. Vort (Argued), Pearce, Vort & Fleisig, LLC, Hackensack, NJ, for Appellant.
Gary W. Flanagan, (Argued), Edwards & Angell, LLP, Providence, RI, for Appellee.
Before BECKER, Chief Judge, McKEE and HILL* Circuit Judges.
Appellant John Bauer appeals from the district court order granting summary judgment for appellee Summit Bancorp (Summit)1 and denying his cross-motion for summary judgment on his claim (Count One)2 that Summit's Retirement Plan3 (Plan) violates the Employment Retirement Income Security Act of 1974 (ERISA), as amended, 29 U.S.C. § 1001 et seq. because it excludes hourly employees. Based upon the following discussion, we affirm the judgment of the district court.
The material facts are undisputed. Bauer worked as a Summit sales representative for approximately eighteen and one-half years, from May 9, 1977, until November 6, 1995. He was compensated on an hourly basis, apparently to accommodate his schedule as a firefighter. Thereafter, for approximately 3.667 years, from November 7, 1995, until July 15, 1999, Bauer was compensated by Summit on a salaried basis. Neither party disputes that in each of the years that Bauer was employed, he completed at least 1,000 hours of service per year.
In 1999, after twenty-two years of employment with Summit, Bauer retired. He applied for his retirement benefits under the Plan. Summit's benefit administrators advised him that he was eligible to receive retirement benefits based upon only his 3.667 years of service as a salaried employee. Although his eighteen-plus years as an hourly employee were not counted in computing retirement benefits for the years he was ineligible to participate in the Plan as an hourly employee, they were counted in satisfying the Plan's five-year vesting period for the years he was eligible to participate in the Plan as a salaried employee. See Part I.B. infra.
The Plan was first implemented in 1980. It was amended and restated in 1994 and again in 1997. The portions of the Plan pertinent to this appeal remain in substance unchanged over the years. See notes 4, 5 infra. They can be described in terms of the number of credited years of service as an employee in computing benefits, minimum participation/eligibility requirements, and minimum vesting standards.
"Employee" is defined in Section 1.19 of the Plan as "any person who is employed by an Employer who is compensated by a weekly, monthly or annual salary, regardless of the number of hours worked...." (Emphasis added.). Benefits are calculated based upon a participant's years of service. Years of service are defined in Section 1.40 of the Plan to mean "a year or fraction of a year ... during which a Participant is or was an Employee of the Company or a corporation or branch acquired by the Company...." (Emphasis added.).4 A year of service is earned "for each calendar year in which [an Employee] is paid or entitled to payment for 1,000 hours by the Corporation."
An eligibility computation period is used to establish an employee's entitlement to participate in a qualified plan. Section 2.01 of the Plan, regarding minimum participation/eligibility standards,5 states:
2.01 Eligibility Requirements.
An Employee who was a Participant in the Prior Plan on June 30, 1997, shall continue his participation thereafter if he continues to be employed by an Employer. Any other Employee shall commence participation in the Plan on the first day of the month following the latest of:
(a) his 21st birthday;
(b) his completion of one Year of Service; or
(c) the date his Employer adopts the Plan.
Each Employee shall automatically become a Participant immediately upon becoming eligible in accordance with the foregoing requirements, and shall continue as a Participant for as long as he is an Employee ....
The second basic computation period is the vesting computation period. It is used to determine what portion of an employee's benefit is non-forfeitable at a given point in time.6 Section 7.01 of the Plan required that after five years of service, an employee was 100% vested:7
7.01 Vested Percentage of Accrued Benefit.
Upon termination of his employment for any reason other than Retirement, a Participant shall be entitled to the following vested percentage of his accrued benefit:
Years of Service Vested Percentage
Less than 5 0%
5 or more 100%
The Plan in this appeal is what has commonly been referred to over the last thirty years as a "salaried-only plan." Such a plan covers salaried employees of Summit and its subsidiaries, who are age 21 and above, and, who have completed one year of service. By its terms, Summit hourly employees are not eligible to participate in the Plan. As stated, years of service as an hourly employee are counted for vesting purposes, but are not counted for participation purposes.
When Bauer was advised by Summit's benefit administrators that he was eligible to receive retirement benefits based upon only his 3.667 years of salaried service, he exercised his administrative rights under the Plan and appealed to its benefits committee. He requested benefits under the Plan retroactive to his original date of hire in 1977. The benefits committee denied his request and affirmed the initial denial of claimed benefits.8
Bauer then filed a complaint in federal district court against Summit alleging that its Plan violated ERISA as it excluded hourly employees from participating. The district court disagreed. It granted Summit's motion for summary judgment and denied Bauer's cross-motion for summary judgment. This appeal follows.
Bauer raises only one issue on appeal: whether the district court erred in granting Summit's motion for summary judgment on the basis that the Plan did not violate ERISA when it included salaried employees, and excluded hourly employees, as eligible plan participants.
We exercise a plenary review of the grant by the district court of Summit's motion for summary judgment, using the same standards as employed by the district court initially. See Jordan v. Federal Express Corp., 116 F.3d 1005, 1009 (3d Cir.1997), citing Sempier v. Johnson & Higgins, 45 F.3d 724, 727 (3d Cir.1995).
Nothing in ERISA requires employers to establish employee benefits plans. Lockheed Corp. v. Spink, 517 U.S. 882, 887, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996). Neither does it require that every employee is entitled to participate in a plan that it does decide to offer, for, as the Supreme Court, in Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983), stated: "ERISA does not mandate that employers provide any particular benefits, and does not itself proscribe discrimination in the provision of employee benefits." Id. at 91, 103 S.Ct. 2890. What ERISA does require, however, is that if an employer decides to provide a plan, that plan is subject to certain minimum requirements regarding participation, funding and vesting standards. Id. citing 29 U.S.C. 1051-1086; see also Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981).9
The present ERISA litigation has arisen because Summit has excluded Bauer from participating in its Plan for the years he was employed on an hourly basis, affording him benefits for only the 3.667 years he was employed on a salaried basis. Bauer claims that he is also entitled to participate in the Plan for each of his twenty-two years of employment. Bauer, in essence, asserts that he is entitled to benefit coverage although he is explicitly excluded by the terms of the plan itself. His cause of action arises under 29 U.S.C. § 1132.
An action for benefits under an ERISA plan may be brought only by a participant in or beneficiary of an ERISA plan. 29 U.S.C. § 1102(a)(2); 29 U.S.C. § 1104(a)(1). Under ERISA, 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 an employee benefit plan ... or whose beneficiaries may be eligible to receive any such benefit." 29 U.S.C. § 1002(7). An employee is defined by ERISA as "any individual employed by an employer." 29 U.S.C. § 1002(6).
ERISA provides Bauer with a specific cause of action with which to challenge his denial of benefits. 29 U.S.C. § 1132. It authorizes a suit by a participant to recover benefits due under the terms of an ERISA plan or to enforce or clarify rights under the ERISA plan. 29 U.S.C. § 1132(a)(1)(B).10
A plaintiff must satisfy two requirements to establish participant status. See Wolf v. Coca-Cola Co., 200 F.3d 1337, 1340 (11th Cir.2000). First, the plaintiff must be a common law employee. See Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323-24, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992).11 Second, the plaintiff must be, Id. citing Clark v. E.I. Dupont De Nemours & Co., Inc., No. 95-2845, 105 F.3d 646, 1997 WL 6958 (4th Cir. Jan. 9, 1997) (table).
We are required to enforce the Plan as written unless we find a provision of ERISA that contains a "contrary directive." See Bellas v. CBS, Inc., 221 F.3d 517, 522 (3d Cir.2000), cert. denied, 531 U.S. 1104, 121 S.Ct. 843, 148 L.Ed.2d 723 (2001); Dade v. North Am. Philips Corp., 68 F.3d 1558, 1562 (3d Cir.1995). The ERISA provision identified by Bauer in this appeal as a contrary directive is 29 U.S.C. § 1052(a).
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