Academic journal article Suffolk University Law Review

Labor and Employment Law - a Deferential Standard for Administrators within a Statute Meant to Protect Workers

Academic journal article Suffolk University Law Review

Labor and Employment Law - a Deferential Standard for Administrators within a Statute Meant to Protect Workers

Article excerpt

Labor and Employment Law--A Deferential Standard for Administrators Within a Statute Meant to Protect Workers--Bard v. Boston Shipping Association, 471 F.3d 229 (1st Cir. 2006)

The Employee Retirement Income Security Act (ERISA) was enacted in 1974 to protect the millions of Americans affected by employer-funded pension plans. (1) The denial of pension and disability benefits to employees by plan administrators has provided fertile ground for litigation, and the courts have struggled to protect participant rights while giving deference to decisions made by pension plan administrators. (2) In Bard v. Boston Shipping Association, (3) the First Circuit Court of Appeals considered whether administrators, running a multi-employer pension plan, abused its discretion by denying an employee's benefit application. (4) Although the administrators had discretion to determine participants' eligibility for benefits, the court determined that they violated ERISA's procedural requirements with regard to notice of denial and appeal. (5)

While an employee at the Boston Shipping Association (BSA), Paul Bard participated in the International Longshoremen's Association (ILA) pension plan, which is considered a multi-employer pension plan under ERISA. (6) On July 23, 2001, the BSA terminated Bard after thirty years of service as a crane operator. (7) While employed by the BSA, Bard failed three drug tests, for which he sought treatment post-termination. (8) After being awarded disability benefits under Social Security, Bard applied for disability benefits from the BSA-ILA plan. (9)

Due in part to incorrect interpretations of other recently arbitrated benefit applications, the administrators denied Bard's application on the basis that a terminated employee does not have standing to apply for benefits. (10) The administrators never notified Bard that his application was denied, nor did they provide reasons for the denial. (11) This omission was a direct violation of ERISA regulations, which requires the administrators provide notice to the claimant no later than five days after an adverse determination. (12) Bard eventually learned of the administrators' denial of his benefits application and filed an appeal to challenge the decision. (13) In January 2004, Bard submitted a second application, this time appending medical records and other documentation of his disability. (14) While the board took Bard's appeal under advisement at its February 2004 meeting, it did not act further for approximately four months, again violating ERISA requirements for timely review and notification. (15)

The plan administrators submitted Bard's claim to an arbitrator in August 2004, nearly a year after he first filed a benefits application. (16) Shortly after Bard submitted his claim to the arbitrator, Bard also filed suit in Massachusetts federal district court seeking benefits under the BSA-ILA plan. (17) The district court reasoned that in cases where the plan itself gives deference to the administrator's interpretation, administrator decisions should be reviewed under the "arbitrary and capricious" standard. (18) The district court analyzed the administrator's determination that Bard was not permanently disabled prior to his termination under the arbitrary and capricious standard, and the court determined that the administrator's decision was reasonable and within its own discretion. (19 The First Circuit reversed the district court, holding instead that Bard's interpretation of the plan was reasonable and that the procedural mistakes made by plan administrators created a prejudice against Bard. (20)

A significant portion of pension plans in the United States do not belong to just one employer. (21) Multi-employer pension plans differ from single-employer plans in composition and administration. (22) In multi-employer plans, boards comprised of union and management representatives make benefit determinations regarding participants. …

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