Employee’s State Claim over Health Plan not ERISA Preempted

April 22, 2011 (PLANSPONSOR.com) – The 10th U.S. Circuit of Appeals has determined that a former employee who won damages in a previous Employee Retirement Income Security Act lawsuit no longer has standing to sue under ERISA.

The court noted in its opinion, that in order to have standing, the ERISA claimant must fall within one of the following categories: (1) an employee currently in covered employment, Firestone, 489 U.S. at 117; (2) an employee reasonably expected to be in covered employment, id.; (3) a former employee with a reasonable expectation of returning to covered employment, id.; or (4) a former employee with a colorable claim to vested benefits, which is to say a colorable claim that (a) he or she will prevail in a suit for benefits, or (b) his or her eligibility requirements will be fulfilled in the future. 

Since Jeffrey Hansen was no longer employed by Harper Excavating when he filed his complaint, the first two categories cannot apply to him. In addition, the court found that on the third condition, it cannot say that Hansen had any expectation, reasonable or otherwise, of returning to covered employment since nothing in the record, nor in the submissions of the parties, gives any hint that either Hansen or Harper ever expected to resume their employment relationship.  

However, the court concluded that since Hansen had already prevailed in a suit for benefits, he thus no longer has a “colorable claim” that he will do so in the future; therefore, under condition four, he no longer has standing to sue under ERISA. The 10th Circuit remanded the case to state court.  

During the time Hansen worked for Harper, the company deducted plan “payments” from his paycheck, but never effectively enrolled him into the plan. Shortly after he left the company, Hansen fell ill, and incurred thousands of dollars in medical expenses when he discovered that he did not actually have insurance through Harper.  

Hansen sued in federal court under ERISA and won a substantial damages award. During discovery related to that suit, Hansen learned of other alleged behavior on the part of Harper that led him to file a lawsuit based entirely on state law against his former employer in state court in Utah. Harper removed that case to federal court. The district court denied remand, then dismissed the case.  

The 10th Circuit’s opinion is here.