Academic journal article Monthly Labor Review

The Law at Work

Academic journal article Monthly Labor Review

The Law at Work

Article excerpt

1999 Supreme Court labor docket

The Supreme Court has nine cases pending before it in 1999 related to labor and employment law. Four of the cases deal with employee benefits, three with public employees, and two with civil rights and discrimination. Decisions in these cases will be reported at a later time in this column.

Employee benefits. Cases relating to employee benefits range from questions concerning violations of the Employee Retirement Income Security Act (ERISA) to whether the Racketeer Influenced and Corrupt Organizations Act (RICO) permits claims against a health insurer that allegedly defrauded the beneficiaries of group health policies.

In American Manufacturers Mutual Insurance Co. v. Sullivan,(1) the Court will hear arguments on whether a person receiving workers' compensation benefits has a constitutional right to notice and a hearing prior to the suspension of payments for medical benefits by an employer or insurer while a "utilization review" is conducted. Such a review, conducted by a private organization appointed by the State, determines whether the medical treatment is reasonable. The U.S. Court of Appeals for the Third Circuit ruled that a suspension without notice or a hearing is a violation of the procedural due-process guarantees of the Constitution.

Recent ninth-circuit rulings on ERISA will be reviewed by the Court as well. In UNUM Life Insurance Co. of America v. Ward,(2) the Justices will decide whether California's common-law "notice-prejudice" rule is permitted under ERISA when a person submits a claim for long-term disability benefits. Under the rule, the insurer of an ERISA benefit plan may not deny benefits because of untimely notice or submission of a proof of claim, unless the insurer proves that it has suffered actual prejudice because of the delay. Appellee John Ward did not notify UNUM Life Insurance Co. of his long-term disability claim within 30 days of the onset of his disability, nor did he submit written proof of the claim within 180 days of the onset; the company denied his claim on the grounds that it was untimely. The main question posed to the Court is whether such a requirement "relates to" employee benefit plans, in which case ERISA would preempt any State conditions, such as the notice conditions relied on by UNUM to deny the claim. The corporation's argument is that the California rule is an insurance regulation, which ERISA does not preempt. The ninth circuit upheld the notice-prejudice rule.

In Hughes Aircraft Co. v. Jacobson,(3) the Supreme Court will clarify the distinction between terminating and amending a company's pension plan. Hughes Aircraft maintained a defined-benefit plan funded in part by employee contributions. The company decided to use a surplus of more than $1 billion for a new group of participants in the plan, except that the new participants were not required to make contributions to the plan. The appellees claim that the surplus should have been distributed only to those employees who made contributions. The ninth circuit ruled that the current and former Hughes employees had an actionable claim under ERISA, because, assuming that Hughes' action qualified as a termination of the plan, ERISA would require that the plan's assets be distributed to contributing members and a new plan be established for new participants.

Finally, in Humana, Inc. v. Forsyth(4) the High Court will address whether Humana, a managed health care provider, can be sued under RICO for allegedly overcharging millions of dollars in copayments to beneficiaries. The suit claims that Humana sold group health care policies to employers, but did not pass on negotiated discounts. The ninth circuit permitted the RICO claims, ruling that the McCarran-Ferguson Act did not preempt them. That act prohibits Federal law from invalidating, impairing, or superseding State laws regulating the insurance industry. Winning RICO claims can provide plaintiffs with triple damages. …

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