ERISA News
Burbank Attorneys Turn the Tables and File California Labor Lawsuit
According to the Burbank Leader (2/21/14), the Burbank City Attorneys Association (BCAA) alleges that the City of Burbank had agreed some time ago to pay a portion of the employee’s retirement contributions. However, the lawsuit alleges that Burbank failed to live up to that commitment.
The BCAA is comprised of 10 attorneys and a paralegal who are employed by the City of Burbank to perform and undertake various legal functions on behalf of the well-known California city. The association, according to the report, was formed about a year ago.
The California labor lawsuit, however, doesn’t appear to be singularly about the BCAA. Rather, the action could reach farther, philosophically at least, into the various employee groups within the City of Burbank, with an issue that has roots as far back as 1985, long before the BCAA was formed.
According to court documents, the Burbank City Council had previously committed to the payment of the employee contribution on behalf of members of the California Public Employees’ Retirement System (PERS). The lawsuit holds that there was “no sunset provision” in the agreement.
That all apparently changed in 2011 when the city manager, according to the lawsuit, announced that the contractual perk was coming to an end. To that end, since July of 2011 city employees have been required to pay part of their employee contribution, with the city’s goal - or so it is alleged - to have employees pay the full amount, which is eight percent. Presumably, Burbank would pick up the remaining 92 percent as the employer.
The city has defended the change, noting that municipalities across California continue to seek ways to find savings in a state still reeling from debt and economic pressures. Burbank City Manager Mark Scott told the Burbank Leader such a practice is becoming standard in the public sector. “Being able to make these agreements with virtually all our bargaining units has allowed the city to stay solvent to the point where we haven’t had to reduce service levels like so many other cities have,” Scott said.
The City was surprised and unhappy over the lawsuit, and apparently didn’t see it coming. However, the BCAA was formed, according to the report, only after the City suggested to its legal team that they should organize in order to negotiate salary increases. The attorneys complied, and entered into salary negotiations this past summer as an association after their salaries had been frozen for five years. Talks broke down as the two sides were too far apart. An arbitrator appointed by the state in October recommended a pay increase of 1.6 percent for the current fiscal year, while also requiring association members to pay half of the employee pension contribution. Currently, association members pay two percent.
In its lawsuit, the plaintiffs claim that the City’s requirement is illegal and constitutes a breach of contract, among other allegations of circumvention around California labor employment law. “Once the city attorneys performed services in reliance on the city’s contractual promise to provide the PERS benefits on retirement, the city is contractually bound to honor that obligation,” the lawsuit states.
The lawsuit seeks recovery of the “wrongfully deducted monies,” plus interest, along with a declaration that the city’s action is illegal and injunctive relief prohibiting the practice in the future, according to the lawsuit. The lawsuit lists five causes of action, including breach of contract.
It is not known if any agreement or settlement stemming from the BCAA lawsuit would also affect the fortunes of other Burbank city employees who would otherwise also be affected by the city’s policy on employee retirement contributions, which could be a contravention of California labor law.
ERISA Not Just About Protecting Investments
employee stock plans, the truth is that ERISA covers much more than retirement plans. Included in ERISA benefits are insurance provided through an employer, meaning that any claims about employer-provided insurance are covered by ERISA.
Covered by the Employee Retirement Income Security Act of 1974 (ERISA) are retirement, health, life insurance, and disability insurance plans. Covering only private employers, ERISA does not require employers to provide health insurance or other benefits plans; it simply sets out rules for when employers choose to offer such benefits. If employers choose not to offer benefits as covered by ERISA, they are not governed by ERISA rules. Furthermore, ERISA does not cover insurance policies that are purchased privately. It only covers those provided by an employer.
Under ERISA, those in charge of health plans and other benefits must provide information about the plan's funding and features, must abide by their fiduciary responsibilities and must provide an appeals process for people who have a grievance with their plans. Finally, ERISA gives participants the right to sue plan fiduciaries in cases where there is a breach of fiduciary duty.
Before a lawsuit can be filed, however, under ERISA the claimant must exhaust administrative remedies before filing a lawsuit. This means that if the insurance company has an internal appeals process, the claimant must file an appeal before filing a lawsuit, if the insurance policy in question is provided by the employer (private insurance, because it is not covered by ERISA, does not have such a requirement and a lawsuit can be filed once the first denial is received.)
Many insurance companies have rules for filing appeals, including a set time in which to file. Certain medical records and an appeal letter may also be required. If that appeal is then denied, a lawsuit can be filed to enforce the claimant's rights. A plan beneficiary or participant can file the lawsuit, depending on the circumstances, and the lawsuit is typically filed against the plan fiduciary or administrator.
It is important to note that under ERISA a claimant will not be awarded punitive damages; all that can be claimed are costs associated with the insurance policy.
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