CELA Bulletin Bulletin

Recent Employment Law Decisions

United States Supreme Court

ERISA Plan Maintained by a Principal-Purpose Organization Qualifies as a Church Plan, and Thus Is Exempt From ERISA, Regardless of Whether a Church Originated the Plan

ADVOCATE HEALTH CARE NETWORK v. STAPLETON

The Court consolidated three cases: Advocate Health Care Network v. Stapleton, St. Peter’s Healthcare System v. Kaplan, and Dignity Health v. Rollins to determine whether these employers’ pension plans were “church plans” and thus were exempt from requirements of Employee Retirement Income Security Act (ERISA).

“The Employee Retirement Income Security Act of 1974 (ERISA) generally obligates private employers offering pension plans to adhere to an array of rules designed to ensure plan solvency and protect plan participants. “[C]hurch plan[s],” however, are exempt from those regulations. 29 U.S.C. § 1003(b)(2). From the beginning, ERISA has defined a “church plan” as “a plan established and maintained … for its employees … by a church.” § 1002(33)(A). Congress then amended the statute to expand that definition, adding the provision whose effect is at issue here: “A plan established and maintained for its employees … by a church … includes a plan maintained by an organization … the principal purpose … of which is the administration or funding of [such] plan … for the employees of a church …, if such organization is controlled by or associated with a church.” § 1002(33)(C)(i). (This opinion refers to the organizations described in that provision as “principal-purpose organizations.”)

Petitioners, who identify themselves as three church-affiliated nonprofits that run hospitals and other healthcare facilities (collectively, hospitals), offer their employees defined-benefit pension plans. Those plans were established by the hospitals themselves, and are managed by internal employee-benefits committees. Respondents, current and former hospital employees, filed class actions alleging that the hospitals’ pension plans do not fall within ERISA’s church-plan exemption because they were not established by a church. The District Courts, agreeing with the employees, held that a plan must be established by a church to qualify as a church plan. The Courts of Appeals affirmed.

Held: A plan maintained by a principal-purpose organization qualifies as a “church plan,” regardless of who established it.”

Lisa S. Blatt, Washington, DC, for Petitioners.
James A. Feldman, Washington, DC, for Respondents.
Lisa S. Blatt, Elisabeth S. Theodore, Sally L. Pei, Arnold & Porter Kaye Scholer LLP, Washington, DC, for Petitioners.

Amy L. Blaisdell, Daniel J. Schwartz, Heather M. Mehta, Greensfelder, Hemker & Gale, P.C., St. Louis, MO, for Petitioners in No. 16-74.
Barry S. Landsberg, Harvey L. Rochman, Joanna S. McCallum, Manatt, Phelps & Phillips, LLP, Los Angeles, CA, David L. Shapiro, Cambridge, MA, for Petitioners in No. 16-258.
Jeffrey J. Greenbaum, James M. Hirschhorn, Katherine M. Lieb, Sills Cummis & Gross P.C., Newark, NJ, for Petitioners in No. 16-86.
Lynn Lincoln Sarko, Matthew Gerend, Laura R. Gerber, Keller Rohrback L.L.P., Seattle, WA, Ron Kilgard, Laurie Ashton, Keller Rohrback L.L.P., Phoenix, AZ, James A. Feldman, Washington, DC, Karen L. Handorf, Michelle C. Yau, Julie G. Reiser, Mary J. Bortscheller, Cohen Milstein Sellers & Toll PLLC, Washington, DC, for Respondents.
USSC 6/5/17 opinion by Kagan, joined by Roberts, Kennedy, Thomas, Ginsberg, Breyer and Alito; Sotomayor concurring; no participation by Gorsuch; 137 S.Ct. 1652, 2017-1 USTC P 50,237, 17 Cal. Daily Op. Serv. 5196, 2017 Daily Journal D.A.R. 5290, 26 Fla. L. Weekly Fed. S 619.

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Legislative Update
By Mariko Yoshihara, CELA Legislative Counsel and Policy Director

Governor Signs State Budget Providing Boost to Equal Access Fund and Strategic Labor Enforcement, Courts Still Underfunded

Mariko Yoshihara

Governor Jerry Brown signed a $183 billion state budget on June 27^th, which included significant increases to legal aid organizations and strategic labor enforcement, but still did not provide adequate funding for our court system. The Chief Justice issued a statement explaining that she was “disappointed that our underfunded court system did not receive more help. Chronic underfunding of the courts unfairly affects members of the public seeking

their day in court. Trial courts receive a little more than a penny for every general fund tax dollar, and in the past, the judicial branch has had funds swept to support the state budget during times of crisis. Now the courts have an ongoing funding crisis, new laws are added annually, there are more complex cases, but there is no stable funding solution for the judicial branch and the people we all serve.”

The Budget Act of 2017, signed into law by Governor Brown, provides a total state operating budget of $3.7 billion for the judicial branch, which includes $70.7 million in new funding. The additional funding will be used to replace the outdated case management system, to implement and administer a statewide electronic filing program, and to improve language access, among other things. Significantly, the Budget also provides an additional $10 million for the Equal Access to provide grants to legal service agencies and programs that offer legal assistance in civil matters to low-income Californians. The Budget also includes $45 million to expand the availability of legal services for people seeking naturalization services, deportation defense, or assistance in securing other immigration services and remedies.

The Division of Labor Standards Enforcement (DLSE) will receive an additional $4.6 million and 31 new positions, increasing to $11.4 million and 82.5 position in 2020-21 ongoing, to implement a strategic enforcement plan to combat wage theft and other labor law violations in specified industries known to have significant non-compliance with the state’s labor laws.

As part of one of the budget trailer bills (these are bills that provide implementing language for the State Budget), the legislature approved language that would require at least 25 percent of cy pres awards to be transmitted to the Equal Access Fund and another 25 percent deposited in the Trial Court Improvement and Modernization Fund, for new or expanded collaborative courts or grants for Sargent Shriver Civil Counsel projects. The remaining 50 percent of the funds would continue to be administered under current law. Some non-profit organizations are opposed to this proposal and therefore if the trailer bill is signed into law, this specific provision may be reconsidered during the summer.

San Francisco Passes Measure to Prohibit Employers from Asking About Previous Pay

On June 27^th, San Francisco supervisors voted unanimously to ban employers from asking job applicants about their prior salary during the hiring process. This bill was modeled after legislation CELA co-sponsored at the state level, but was vetoed by Governor Brown. The new San Francisco ordinance will apply to all employers in San Francisco, including city contractors and subcontractors. By prohibiting employers from asking about prior salary, women will have a better opportunity to close earning gaps during salary negotiations and employers will be compelled to use objective and unbiased measures to evaluate candidates during the hiring process.

This year the California legislature reintroduced a new version of the previously vetoed legislation to ban employers from asking about prior salary, which now has bipartisan support and is a Legislative Women’s Caucus priority. The bill is expected to be back on the Governor’s desk in September for final approval, along with two other pay equity bills that would clarify that the Fair Pay Act covers public employees and that would require very large employers to submit information on the company’s gender wage gaps to the state.

For a complete list of bills that CELA is tracking, please visit www.cela.org/legislation or contact mariko@cela.org.

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FEHA Regulations Update
By Noah Lebowitz, Esq.

Noah Lebowitz

As of July 1, 2017, two new important sets of regulations enforcing the Fair Employment & Housing Act (“FEHA”) will have taken effect: (1) Consideration of Criminal History in Employment Decisions, and (2) Regulations Regarding Transgender Identity and Expression. These two sets of regulations were promulgated by the California Fair Employment & Housing Council (“FEHC”) over the course of 2016 and early 2017. Over the past four years, the FEHC has engaged in a remarkable amount of work updating various sections of the FEHA employment regulations. All stakeholders owe the FEHC a huge amount of gratitude for the arduous work that is required to ensure the adoption of appropriate and useful regulations.

CELA participated in the public review and comment process of these regulations through the work of the organization’s FEHC Regulations Task Force. The Task Force is a group of volunteers which forms, disbands, and re-forms to address each new set of regulations the FEHC