McMahon v. Digital Equipment Corp.
| Decision Date | 09 October 1998 |
| Docket Number | No. 98-1459,98-1459 |
| Parties | 22 Employee Benefits Cas. 2563 Carolyn E. McMAHON, Plaintiff, Appellant, v. DIGITAL EQUIPMENT CORPORATION, Core, Inc., and Plan Administrator of Digital Equipment Corporation Accident and Sickness Plan, Defendants, Appellees. . Heard |
| Court | U.S. Court of Appeals — First Circuit |
Marie Cheung-Truslow with whom Lecomte, Emanuelson, Motejunas & Doyle was on brief, for appellant.
David C. Casey with whom Laurie F. Rubin and Peckham, Lobel, Casey, Prince & Tye were on brief, for appellees Digital Equipment Corporation and Plan Administrator of Digital Equipment Corporation Accident and Sickness Plan.
Brian C. Duffey with whom Mark E. Cohen and McCormack & Epstein were on brief, for appellee Core, Inc.
Before BOUDIN, Circuit Judge, BOWNES, Senior Circuit Judge, and LYNCH, Circuit Judge.
Carolyn McMahon, a five-year employee of the Digital Equipment Corporation ("Digital"), accepted a new job with Digital in a town one hundred miles from her home. After McMahon's back condition worsened as a result of her new, more demanding commute, Digital declined to offer relocation benefits, but did place McMahon on short-term disability leave for several months. Once it determined that McMahon was no longer disabled under the terms of its disability policy, Digital required her to return to work, and then terminated her four days later as part of a general reduction in workforce.
McMahon believed that Digital was obligated to relocate her, and further, that she was still disabled, and therefore both eligible for additional disability benefits and protected from lay-off. She sued Digital, the Plan Administrator of Digital's short-term and long-term disability plans, and CORE, Inc. ("CORE"), the manager of Digital's short-term disability program, alleging breach of contract, negligence, interference with an advantageous relationship, and unfair trade practices, as well as violations of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. After removal, the federal district court 1 granted the defendants' motions for summary judgment, finding McMahon's state law claims preempted by ERISA and her federal claim for long-term disability benefits under ERISA barred for failure to exhaust administrative remedies.
We address the following central question on appeal: Did McMahon's short-term disability benefits derive from an ERISA plan or merely a "payroll practice"? If McMahon's benefits stemmed from a "payroll practice" as that term is defined by Department of Labor regulations, then McMahon's core state law claims are not preempted by federal law. McMahon argues that Digital had several distinct short-term disability plans and that the particular plan that provided her benefits was a payroll practice because it was funded solely from Digital's general assets.
After a careful review of the undisputed facts, we affirm. We find that McMahon's short-term disability benefits did derive from an ERISA plan rather than a payroll practice and that all but one of her state law claims are therefore preempted. The one non-preempted state law claim, which is based on Digital's alleged promise to relocate McMahon, fails on the merits. Finally, we find none of McMahon's federal claims under ERISA to be viable: she no longer pursues a claim for long-term disability benefits, her claim for short-term disability benefits fails on the merits, and her claim for wrongful discharge has been waived.
We review the district court's grant of summary judgment de novo, and view all facts in the light most favorable to McMahon, drawing all reasonable inferences in her favor. See Aponte Matos v. Toledo Davila, 135 F.3d 182, 186 (1st Cir.1998). Given the variety of McMahon's arguments, it is necessary to describe the facts at some length.
Digital hired McMahon as a principal marketing specialist for its Tewksbury, Massachusetts office in April of 1985. In November of 1990, Digital offered McMahon a new position as a marketing consultant at its Marlboro, Massachusetts facility. McMahon was concerned that the one hundred mile one-way commute to Marlboro from her home in Nashua, New Hampshire might aggravate a preexisting back problem. When she mentioned this concern to the hiring manager, Thomas Dimieri, he brought up the possibility of relocation and showed McMahon Digital's written policy on relocation.
This policy, contained in Section 5.05 of Digital's policy manual, stated that "Digital reimburses certain costs for regular employees when they are offered and accept a position which meets relocation criteria and when the employee's circumstances qualify under the relocation policy eligibility criteria." Section 5.05 listed the following four points under the heading "Eligibility":
Requisition for Personnel--For Relocation expenses to be paid the Requisition for Personnel must be approved and budgeted for Relocation by the appropriate management levels.
Mileage Qualification--In order to qualify for relocation benefits, ... an employee[']s one way commute from current residence to new work location must increase by 35 miles ... [or] an employee's one way commute ... [must] exceed[ ] 60 miles....
Timing of Relocation--Employees are expected to complete relocation activity within six months of their date of transfer.
Authorization--In order to start the relocation process a Relocation Authorization Form must be completed and signed by the appropriate level of management.
Dimieri noted that McMahon would meet the mileage qualification if she accepted the position in Marlboro, and promised to help her apply for relocation benefits if her back condition made relocation necessary.
Dimieri himself had no authority to determine whether McMahon would receive relocation benefits. However, McMahon interpreted their conversation to mean that relocation benefits were essentially "a given" under Section 5.05 if the mileage criteria were met.
McMahon's written offer for the Marlboro job included an "Offer Information" sheet on which the "relocation" box was marked "no." If Digital had budgeted the position for payment of relocation costs, the "relocation" box would normally be checked "yes." McMahon accepted the offer despite the "no," apparently assuming that it referred only to whether benefits were to be granted initially and not to whether they would be available if she applied for them later.
After commuting to Marlboro for several months and experiencing increasing back pain, McMahon applied for relocation in the spring of 1991. As promised, Dimieri helped her with the application, and in McMahon's estimation, "he did try his best." Benefits were nonetheless denied. Stephen Yachimski, McMahon's supervisor at the time, explained the denial in a March 1992 memorandum:
[Y]our request was reviewed and denied due to the unavailability of relocation funds during Q4 FY91 and Q1/Q2 of FY92 in U.S. Digital Services.
The Policy does not allow one to automatically get a retroactive relocation based on eligibility alone. While you were eligible under the relocation criteria[,] ... relocation expenses were not approved or budgeted in the original personnel requisition per U.S. policy 5.05.... Since the position was originally posted and accepted without relocation, we could only request relocation pending available funding.
Although she was dissatisfied with this response, McMahon did not pursue her request further. Several months later, on June 1, 1992, she went on disability leave.
In June of 1992, when McMahon went on leave, Digital had several different disability plans in effect. 2 These plans were outlined for employees in a booklet entitled Your Benefits Book ("Benefits Book ") and also summarized in Section 4.09 of Digital's policy manual.
The plans were divided into two general categories: short-term disability plans and a long-term disability plan. The long-term disability plan provided optional income protection insurance, which McMahon elected and paid for through monthly payroll deductions. 3 Digital's short-term disability benefits program included three plans: (1) a "Sick Pay Plan," which paid full salary for twelve days; (2) an "Accident and Sickness Plan," which paid 80% of salary for a variable period depending on the wage class of the employee; and (3) a "Salary Continuation Plan," which paid full salary for a variable period depending on the wage class of the employee. 4 As a Wage Class 4 employee, McMahon was subject to the Salary Continuation Plan, and therefore eligible for up to six months of short-term disability leave with full salary.
The Benefits Book informed employees that they were "guaranteed certain information about the administration of [their] employee benefit plans and certain rights with regard to these plans under the Employee Retirement Income Security Act (ERISA)." A later section explained that, pursuant to ERISA, the "Digital benefit plans [were] on file with the Department of Labor," and listed the "plan numbers" that Digital had assigned:
[Digital Plan Name:] [Number:]
Accident and Sickness/Salary Continuation Plans 502
Long"Term Disability Plan 505
Thus, for ERISA purposes, Digital considered two of the three short-term disability plans described in the Benefits Book (the Accident and Sickness Plan and the Salary Continuation Plan) to be components of a single short-term disability plan, labeled "Plan 502." 5
Plans 502 and 505 were filed with the Department of Labor pursuant to ERISA § 104(a)(1)(B), 29 U.S.C. § 1024(a)(1)(B), in the form of a "Plan Instrument." Digital also filed 5500 Forms (Annual Reports) with the Internal Revenue Service for Plan 502 and Plan 505 pursuant to §§ 104 and 4065 of ERISA, 29 U.S.C. §§ 1024 and 1365....
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