Lawsuit Charges Wal-Mart Plan Language Violates ERISA

June 11, 2003 ( - Giant retailer Wal-Mart has been hit with a federal court lawsuit alleging that the company violated ERISA by saying in its employee handbook that unionized workers wouldn't get benefits.

>The suit, filed in US District Court for the Northern District of California, seeks an order requiring Wal-Mart to change the language in its benefit book to notify employees of their rights to form a union without losing their benefits, according to Washington-based legal publisher BNA. The suit was filed on behalf of participants and beneficiaries of various Wal-Mart employee benefit plans and employee pension plans.

>The plaintiffs are seeking a court order rescinding the amendments to the plans, ordering Wal-Mart to provide correct summary plan descriptions to all current and past beneficiaries with an appropriate explanation of the change and the reason for the change, an order removing the fiduciaries from the plans and requiring appointment of new fiduciaries, as well as an order barring the fiduciaries from serving in any capacity on any employee benefit plan for a period of less than 10 years.

Wal-Mart’s labor issues are closely watched because the Bentonville, Arkansas company is the world’s largest private employer with 3,200 US stores and 1,100 other locations worldwide.

>According to the lawsuit, since 2001, the plan documents for both Wal-Mart’s profit-sharing plan and its 401(k) plan have defined an eligible employee as any employee other than one “whose employment is governed by the terms of a collective bargaining agreement between employee representatives … and the company under which retirement benefits were the subject of good faith bargaining,” or any employee represented by a union representative after the company has negotiated in good faith to impasse with the representative on the question of the discontinuance of the coverage.

>At the same time, Wal-Mart’s health and welfare plan contained no such limitation and defined the term “associate” as any employee of the company.

>About January 1, 2001, according to the lawsuit, Wal-Mart, the plan administrators of the profit-sharing plan and the 401(k) plan, and the health and welfare committee changed the summary plan description of all those plans contained in the Wal-Mart Associate Benefit Book, to exclude union-represented associates, although the change was not made in the plan documents themselves. The change occurred during organizing drives conducted by United Food and Commercial Workers (UFCW) at various locations of the company, the lawsuit said.

>The lawsuit charged that the changes in the summary plan descriptions in the benefit book were made “for the purpose of misleading participants and beneficiaries and to discourage and interfere with legitimate union activity. The changes were implemented to discourage unionization, that is, to force the employees to choose between receiving health and pension benefits and legitimate activities protected by the National Labor Relations Act (NLRA).” The lawsuit also alleged that the company and the fiduciaries of the plan were aware that the provisions added to the summary plan description were unlawful under the NLRA.

>The lawsuit alleged that the defendant used assets of each of the plans to discourage union organizing as well as to discourage participation in the plans. The case is Lupiani v. Wal-Mart Stores, N.D. Cal., CO32614, filed 6/4/03.

Proposed NLRB Settlement

>The employee handbook language is also the subject of a proposed agreement between Wal-Mart and the general counsel’s office of the National Labor Relations Board (NLRB) that would settle an unfair labor practice complaint issued after the UFCW filed charges against Wal-Mart.

>The UFCW, which is supporting the lawsuit, plans to object to the proposed NLRB settlement agreement because the union does not agree with the proposed outcome. At issue is a remedy for violations an administrative law judge found that Wal-Mart committed during an organizing drive by a UFCW local at the company’s Tire and Lube Express department in a Kingman, Arizona store.

>In a February 2003, decision, Administrative Law Judge Gregory Meyerson found that by inserting new language in its employee benefits book stating that union-represented employees are not eligible for coverage, the company was attempting to threaten employees considering unionization in violation of the employees’ rights under the NLRA. Since the benefit books are distributed in stores nationwide, the judge recommended that the company be required to post a notice of its violation at all stores where employees have received benefit books, as well as to rescind the offending passage.

>The proposed settlement agreement, which is detailed in a May 29 letter from the NLRB’s division of advice to Wal-Mart, would contain a non-admission clause concerning the benefit language and would require Wal-Mart only to post a notice at the Kingman store, rather than at all its stores nationwide as recommended by the administrative judge.

>In regard to the settlement agreement, a Wal-Mart spokeswoman told BNA May 30 the company was in the process of exploring a resolution to dispose of various charges regarding the language in the employee handbook rather than litigate them all separately.