Fort Halifax Packing Co. v. Coyne - 482 U.S. 1, 107 S. Ct. 2211 (1987)

Rule:

An employer that makes a commitment systematically to pay certain benefits undertakes a host of obligations, such as determining the eligibility of claimants, calculating benefit levels, making disbursements, monitoring the availability of funds for benefit payments, and keeping appropriate records in order to comply with applicable reporting requirements. The most efficient way to meet these responsibilities is to establish a uniform administrative scheme, which provides a set of standard procedures to guide processing of claims and disbursement of benefits. Such a system is difficult to achieve, however, if a benefit plan is subject to differing regulatory requirements in differing states. A plan would be required to keep certain records in some states but not in others; to make certain benefits available in some states but not in others; to process claims in a certain way in some states but not in others; and to comply with certain fiduciary standards in some states but not in others. The court has not hesitated to enforce the pre-emption provision in the Employee Retirement Income Security Act of 1974, 29 U.S.C.S. §§ 1001-1381, where state law created the prospect that an employer's administrative scheme would be subject to conflicting requirements.

Facts:

In 1972, Fort Halifax Packing Company (Fort Halifax or Company) purchased a poultry packaging and processing plant that had operated in Winslow, Maine, for almost two decades. The Company continued to operate the plant for almost another decade, until, on May 23, 1981, it discontinued operations at the plant and laid off all its employees except several maintenance and clerical workers. At the time of closing, over 100 employees were on the payroll. Forty-five had worked in the plant for over 10 years, 19 for over 20 years, and 2 for 29 years. Following the closing, the Company met with state officials and with representatives of Local 385 of the Amalgamated Meat Cutters & Butcher Workmen of North America, which represented many of the employees who had worked in the plant. While Fort Halifax initially suggested that reopening the plant might be feasible if the union agreed to certain concessions in the form of amendments to the collective-bargaining agreement, ultimately the Company decided against resuming operations and to close the plant. On October 30, 1981, 11 employees filed suit in Superior Court seeking severance pay pursuant to Me. Rev. Stat. Ann., Tit. 26, § 625-B. The Superior Court, ruling on cross-motions for summary judgment, granted the Director's motion, holding that Fort Halifax is liable for severance pay under the statute. The Maine Supreme Judicial Court affirmed. The court rejected the Company's contention that the plant-closing statute was pre-empted by ERISA, holding that ERISA pre-empted only benefit plans created by employers or employee organizations. It observed that the severance pay liability in this case results from the operation of the state statute, rather than from the operation of an employer-created benefit plan. Therefore, reasoned the court, "inasmuch as § 625-B does not implicate a plan created by an employer or employee organization, it cannot be said to be preempted by ERISA." The court also rejected the argument that the state provision was pre-empted by the NLRA because it regulated conduct covered by either § 7 or § 8 of that statute. It found that the Maine statute applies equally to union and nonunion employees, and reflects "the state's substantial interest in protecting Maine citizens from the economic dislocation that accompanies large-scale plant closings." As a result, the court found that eligible employees were entitled to severance pay due to the closure of the plant at Winslow.

Issue:

Is the Maine statute pre-empted by ERISA?

Answer:

No.

Conclusion:

It is clear that ERISA's pre-emption provision was prompted by recognition that employers establishing and maintaining employee benefit plans are faced with the task of coordinating complex administrative activities. A patchwork scheme of regulation would introduce considerable inefficiencies in benefit program operation, which might lead those employers with existing plans to reduce benefits, and those without such plans to refrain from adopting them. Pre-emption ensures that the administrative practices of a benefit plan will be governed by only a single set of regulations. The purposes of ERISA's pre-emption provision make clear that the Maine statute in no way raises the types of concerns that prompted pre-emption. Congress intended pre-emption to afford employers the advantages of a uniform set of administrative procedures governed by a single set of regulations. This concern only arises, however, with respect to benefits whose provision by nature requires an ongoing administrative program to meet the employer's obligation. It is for this reason that Congress pre-empted state laws relating to plans, rather than simply to benefits. Only a plan embodies a set of administrative practices vulnerable to the burden that would be imposed by a patchwork scheme of regulation.

The Maine statute neither establishes, nor requires an employer to maintain, an employee benefit plan. The requirement of a one-time, lump-sum payment triggered by a single event requires no administrative scheme whatsoever to meet the employer's obligation. The employer assumes no responsibility to pay benefits on a regular basis, and thus faces no periodic demands on its assets that create a need for financial coordination and control. Rather, the employer's obligation is predicated on the occurrence of a single contingency that may never materialize. The employer may well never have to pay the severance benefits. To the extent that the obligation to do so arises, satisfaction of that duty involves only making a single set of payments to employees at the time the plant closes. To do little more than write a check hardly constitutes the operation of a benefit plan. Once this single event is over, the employer has no further responsibility. The theoretical possibility of a one-time obligation in the future simply creates no need for an ongoing administrative program for processing claims and paying benefits.

Compared to other jurisdictions, the Maine law does not put the employer to the choice of either: (1) integrating a state-mandated ongoing benefit plan with an existing plan or (2) establishing a separate plan to process and pay benefits under the plan required by the State. This is because there is no state-mandated benefit plan to administer. In this case, for instance, Fort Halifax found no need to respond to passage of the Maine statute by setting up an administrative scheme to meet its contingent statutory obligation, any more than it would find it necessary to set up an ongoing scheme to deal with the obligations it might face in the event that some day it might go bankrupt. The Company makes no contention that its statutory duty has in any way hindered its ability to operate its retirement plan in uniform fashion, a plan that pays retirement, death, and permanent and total disability benefits on an ongoing basis. The obligation imposed by the Maine statute thus differs radically in impact from a requirement that an employer pay ongoing benefits on a continuous basis. The Maine statute therefore creates no impediment to an employer's adoption of a uniform benefit administration scheme. Neither the possibility of a one-time payment in the future, nor the act of making such a payment, in any way creates the potential for the type of conflicting regulation of benefit plans that ERISA pre-emption was intended to prevent. As a result, pre-emption of the Maine law would not serve the purpose for which ERISA's pre-emption provision was enacted.