>Reversing a lower court’s ruling, the US 10th Circuit Court of Appeals determined that even though the employee had not worked a single day for the plan’s sponsor after the merger with their former employer, they were still entitled to participate in the LTD because of the employer’s failure to deliver the “actively at work” notice, according to Washington-based legal publisher BNA.
Further, the court found that the former employer failed to make the plan or a summary plan description available to the employee. Instead, they only received a letter indicating eligibility for benefits on the date of the merger.
>Thus the court determined the employee “cannot be bound by policy terms for which she had no notice,” finding the employer “misled” the employee by failing to disclose the requirement. The case was sent back to the district court.
>The case stems from Avis Rent-A-Car Systems Inc’s merger with Cendant Operations Inc. on January 1, 1999. Avis employee Cathy Horn was on vacation at the time of the merger, during which time she was diagnosed with rheumatoid arthritis and hepatitis C.
>After receiving the diagnosis, Horn contacted Avis’s human resources department to inquire into her eligibility for LTD benefits. Human resources officials initially told Horn she would be eligible for benefits under Cendant’s plan.
>However, it was later discovered by the department that Cendant’s plan contained a requirement that an employee be “actively at work” with Cendant for at least one day to be eligible to participate in the plan. Based on this requirement, the human resources representatives told Horn she was ineligible to participate in and receive benefits from the Cendant plan.
Horn sued Cendant, arguing a breach of fiduciary duties occurred when the company failed to inform her of the “actively at work” requirement. A judge in the US District Court for the Northern District of Oklahoma disagreed and ruled for Cendant.
>Reversing, the appeals court first found that Cendant, by speaking through the Avis human resources department representatives, acted as a fiduciary in delivering information about the plan to Horn. “If Ms. Horn had been aware of the ‘actively at work’ requirement, she could have made an informed decision about returning to work for one day,” the appeals court said.
The case is Horn v. Cendant Operations Inc., 10th Cir., No. 01-5205, 7/3/03.