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OSHA Safety: El Paso, Texas Manufacturing Company Faces Fines–Texas Workplace Safety Law

OSHA News Release: With long history of violations, El Paso, Texas, company faces more than $321K in federal fines [07/13/2015]

With long history of violations, El Paso, Texas, company faces more than $321K in federal fines

D&D Manufacturing ignores worker safety repeatedly, allows operation of defective press

EL PASO, Texas — With a history of safety violations dating back 15 years, an El Paso metal stamping plant is no stranger to warnings from the U.S. Department of Labor’s Occupational Safety and Health Administration.

OSHA issued 13 safety and health citations to D&D Manufacturing Inc. today following a recent inspection prompted by a formal complaint. The inspection identified 13 safety and health citations for exposing workers to amputations and other serious injuries from unsafe machinery, including a violation for ignoring the danger of allowing employees to work with a defective 500-ton metal press that the company knew had repeatedly dropped without warning.

Completed under OSHA’s National Emphasis Program on Amputations, the inspection resulted in $321,750 in proposed department fines for D&D. This inspection follows one in December 2014 that resulted in 36 federal citations for serious safety violations.

“D&D is aware of the dangers at its production facility, but has done nothing to correct them. An employee could have been seriously injured,” said Diego Alvarado Jr., OSHA’s area director in El Paso. “There is no reason, or excuse for a company to ignore basic safety requirements.”

OSHA cited the company for four willful, one repeated, six serious and two other violations. In addition to allowing workers to use the defective press, D&D did not ensure that employees on the production floor wore appropriate eye protection, given the risk of flying metal particles blinding them.

Additionally, the company failed to make sure employees used hearing protection in areas where noise levels were above the acceptable limits. The repeated violation was for failing to have all illuminated exit signs lit.

View the citations at https://www.osha.gov/ooc/citations/D_D_Manufacturing_1018388_0710_15.pdf

D&D Manufacturing fabricates stamped, metal components for equipment manufacturers. The company has headquarters in Bolingbrook, Illinois, and employs about 37 workers in El Paso. It also has a facility in Mexico. D&D has 15 business days from receipt of its citations to comply, request an informal conference with OSHA’s El Paso area director, or contest the citations and penalties before the independent Occupational Safety and Health Review Commission.

To ask questions, obtain compliance assistance, file a complaint, or report amputations, eye loss, workplace hospitalizations, fatalities or situations posing imminent danger to workers, the public should call OSHA’s toll-free hotline at 800-321-OSHA (6742) or the agency’s El Paso Area Office at 915-534-6251.

Under the Occupational Safety and Health Act of 1970, employers are responsible for providing safe and healthful workplaces for their employees. OSHA’s role is to ensure these conditions for America’s working men and women by setting and enforcing standards, and providing training, education and assistance. For more information, visit http://www.osha.gov.

OSHA News Release: [07/13/2015]
Contact Name: Diana Petterson or Juan Rodriguez
Phone Number: (972) 850-4710 or x4709
Email: Petterson.Diana@dol.gov or Rodriguez.Juan@dol.gov
Release Number: 15-1354-DAL

Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s new office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.

Jul 23rd, 2015 Construction Law, Employment Law Defense, Insurance Defense Litigation, Nonsubscriber Law, Workers' Compensation Defense

Texas Employer Sample Form for Employee Final Warning–Texas Employment Law

Final Warning On __________, you were given a written warning concerning excessive personal phone calls while on duty. You were told that while the company allows personal phone calls for emergency reasons, such calls do not include conversations lasting several minutes with friends and family. We reminded you that your coworkers have to shoulder the burden of extra and unnecessary work when you make yourself unavailable to do your job by talking on the phone under such circumstances.

Since that time, you have been observed on ____ occasions engaging in personal conversations on the phone while on duty, which is in violation of your previous warning.
This is your f inal warning. There will be no further chances given. If you violate the Company’s phone call policy again, you will be subject to immediate dismissal from employment. We sincerely hope it will not come to that, but you must understand that you have arrived at this point by your own actions, and it is only by following the phone call policy that you will be able to remain employed.
I understand that my signature on this form does not necessarily mean that I agree that I did anything wrong, but rather only that I have seen this warning and have had it explained to me.
I Agree: _________________
I Disagree: _________________
Date: _________________
[* Note: regarding why it might be a good idea to include the “I disagree” signature line, see “Refusal to Sign Policies or Warnings” further along in this outline of employment law issues.]
Grievances

Jul 23rd, 2015 Employment Law Defense

Progressive Discipline Policy Considerations for Texas Employers–Texas Employment Law

Discipline Progressive disciplinary systems usually include a range of disciplinary measures, including:

• oral and written warnings

• probation

• suspension with or without pay

• disciplinary pay cuts (it is best to make this a token amount of one or two per cent – do not impose such a cut without a prior written warning – give notice of the cut in writing in order to reduce risk of a wage claim)

• demotion or reassignment • final warning • discharge Documentation is very important for use in justifying a personnel action and defending against claims and lawsuits

• The employee should get a copy, and a copy should go into the personnel file.

• Have the employee or a witness sign and date the warning, and have a company representative sign and date it as well. • The warning should clearly let the employee know what the next step will be if the problem continues.

• The employer should follow its own policy and prior warnings as closely as possible, unless there is a compelling reason not to do so; do not issue warnings until the company is ready to take action and mean it; warnings that are not enforced are even worse than completely ignoring a problem.

• Do not issue a “final warning” until and unless the company is ready to terminate the employee upon the very next occurrence of the problem that caused the warning to be issued

Jul 23rd, 2015 Employment Law Defense

Estoppel in The Employment Law Context

ESTOPPEL

An estoppel is not created by purely oral representations as to employment for an indefinite time period. In Patterson & Associates v. Leal, No. 13-96-059-CV, a file clerk quit her job at a lawfirm after speaking to a manager at another firm who inquired into the clerk’s availability to commence work the following week and invited the clerk to interview that week. In the clerk’s suit against the second firm for promissory estoppel after she was not hired, the court holds that the claim is barred by the doctrine of employment at will because it was an oral agreement and of no definite time period and is therefore terminable at will by either party.

Jul 23rd, 2015 Employment Law Defense

Grievances Process for Texas Employers–Texas Employment Law

Grievances Process for Texas Employers:
• every company with more than just a few employees needs a clear procedure for reporting and resolving grievances
• the procedure should provide for the situation where the supervisor is the subject of the grievance – another person should be designated to handle the grievance in such a case
• an effective grievance procedure can be a useful tool in helping a n employer avoid morale problems or unionization efforts
• it can also be an important part of an alternative dispute resolution system
• keep grievance records in a separate grievance and investigation file

Jul 23rd, 2015 Employment Law Defense

Trench Collapse Seriously Injures Employee, OSHA Fines Texas Employer $424K For Safety Law Violations

OSHA News Release: Trench collapse seriously injures worker, leads to $424K fine for employer [07/22/2015]

Trench collapse seriously injures worker, leads to $424K fine for employer

Hassell Construction cited for egregious safety violations in Richmond, Texas collapse

HOUSTON — One minute he was working in the 8-foot trench below ground. The next, he was being buried in it. His co-workers came to his rescue, digging him out with their bare hands. Moments after they pulled the injured man to safety, the unprotected trench collapsed again. His injuries were serious and led to his hospitalization.

The man’s Houston-area employer, Hassell Construction Co. Inc. knew the Richmond, Texas excavation site was dangerous, but failed to protect its workers.

Today, the U.S. Department of Labor’s Occupational Safety and Health Administration cited Hassell Construction for 16 safety violations, including six egregious willful violations for failing to protect workers inside an excavation from a cave-in. The company faces penalties totaling $423,900.

“For more than 2,500 years, man has known how to prevent deadly trench collapses. It is absolutely unacceptable that employers continue to endanger the lives of workers in trenches,” said Assistant Secretary of Labor for Occupational Safety and Health Dr. David Michaels. “An employer is responsible for providing a workplace safe from hazards. Hassell Construction failed to do that in this case.”

In addition to the willful violations, Hassell was cited for nine serious violations, including failing to remove debris from the edge of the excavation. The company also did not provide a safe means to get in and out of the excavation for workers or conduct atmospheric testing inside excavations after a sewer leak.

“Trench cave-ins are preventable,” said John Hermanson, OSHA’s regional administrator in Dallas. “There are long-established, basic precautions. They’re not new, and they’re not secret. Hassell Construction knew its trenches weren’t safe, but still put its workers in harm’s way.”

OSHA has placed the company in its Severe Violator Enforcement Program. The program concentrates resources on inspecting employers who have demonstrated indifference towards creating a safe and healthy workplace by committing willful or repeated violations, and/or failing to abate known hazards. It also mandates follow-up inspections to ensure compliance with the law.

The citations Hassell Construction received are available here.

Hassell Construction employs about 150 employees to help construct water and sewer lines in the Houston area. Its workers compensation insurance carrier is Liberty Mutual. The employer has 15 business days from receipt of its citations to comply, request an informal conference with OSHA’s Houston South area director, or contest the citations and penalties before the independent Occupational Safety and Health Review Commission.

OSHA News Release: [07/22/2015]
Contact Name: Diana Petterson or Juan Rodriguez
Phone Number: (972) 850-4710 or x4709
Email: Petterson.Diana@dol.gov or Rodriguez.Juan@dol.gov
Release Number: 15-1429-DAL

Jul 22nd, 2015 Construction Law, Employment Law Defense, Insurance Defense Litigation, Workers' Compensation Defense

Texas Workers’ Compensation Law and Employer Reimbursement–Texas Department of Insurance

Entitlement To Reimbursement

After an injury, an employer may begin benefit payments to the IW. Section 408.003(a)(1). An employer may initiate benefits, including medical benefits to compensate an employee during a period in which the IC has contested compensability of the injury, contested liability for the injury, or has not completed its initial investigation of the injury. Section 126.13(a)(2). If there is a written request or written agreement from the IW, the employer may supplement income benefits paid to the IW by the IC in an amount up to the difference between the income benefit paid by the IC and the IW’s net preinjury wage. Section 408.003(a)(2); APD 070871-s . Any payments made by the employer under Section 408.003 may not be construed as an admission of liability. Section 408.003(d)(1) . An employer may request reimbursement from the IC when the employer has paid for health care provided for a compensable injury provided notice of injury is in compliance with Section 409.005 (Employer’s First Report of Injury). Section 133.280(a).

In order to establish entitlement to reimbursement, all of Section 408.003 must be complied with fully, including Section 408.003(c) requiring the employer to notify the Division and the IC of the initiation of and amount of payments made under this section. APD 030257-s; APD 030258-s; APD 030259-s; APD 070871-s.

An employer who initiates payment of benefits shall report the payment to the IC within seven days of payment. Section 126.13(c)(1) . An IC who receives notification of payment by an employer shall notify the employer in writing within seven days of acceptance of the claim by the IC or a determination of liability for the claim. Section 126.13(c)(2). The employer shall report to the IC the amount of any benefits provided to the employee within seven days of being notified by the IC that it has accepted or been found liable for a claim. Section 126.13(c)(3). An IC shall, not later than the seventh day after the carrier receives the report of the benefits provided to the employee, reimburse the employer the compensation the IC would have otherwise paid. Section 126.13(c)(4).

Amount Of Reimbursement. The IC shall reimburse the employer for the amount of benefits paid by the employer to which the IW was entitled if the injury is found to be compensable. Section 408.003(b); Section 126.13(b); Am. Cas. Co. v. Martin, 97 S W. 3d 679 (Tex.App.–Dallas 2003, no pet.).

Employer Ineligible For Reimbursement. If the employer is required to make salary continuation payments due to a contractual obligation with the IW or a group of employees (such as a collective bargaining agreement), or a written agreement or policy, the employer is not eligible for reimbursement under Section 408.003 for those payments. Section 408.003(g); Section 129.7(a).

Employer Waiver Of Reimbursement. The employer waives the right to reimbursement from the IC, if the employer fails to notify the IC of the IW’s injury in accordance with Section 409.005 (Employer’s First Report of Injury). Section 408.003(e); Section 126.13(b)(1); Section 120.2(h); Am. Cas Co. v. Martin, 97 S. W. 3d 679 (Tex. App.–Dallas 2003, no pet.); APD 002977-s.

Reduction of IIBS. Employer payments made under Section 408.003 that are not reimbursed or reimbursable under Section 408.003 may be reimbursed under Section 408.127 by reducing IIBs. Section 408.003(b); Section 408.127. However, no reduction of IIBs is allowed where the employer payments do not meet the criteria to be a payment made under Section 408.003. APD 070871-s.

Subclaimant Status. An employer is properly a subclaimant when seeking reimbursement under Section 408.003 for benefits provided to the IW. APD 002977-s. If the IW is barred from recovery under the 1989 Act, a subclaimant (the employer) is not entitled to recovery under the 1989 Act. Tex. Mut. Ins. Co. v. Sonic Sys. Int’l Inc., 214 S. W. 3d 469 (Tex. App.–Houston [14th Dist.] 2007, pet. de ked); APD 020771.

Jul 22nd, 2015 Employment Law Defense, Workers' Compensation Defense

Texas Employers Fined By OSHA When a Temporary Construction Worker Is Injured After Being Denied Safety Equipment

OSHA News Release: Texas worker injured after being denied safety equipment; employers cited [07/22/2015]

Texas worker injured after being denied safety equipment; employers cited

OSHA fines Cotton Commercial USA and Gardia Construction more than $367K

HOUSTON — Despite his request for a safety harness, a temporary worker without fall protection on a roof later fell 12 feet through the roof. His fall resulted in his hospitalization with fractured arms and severe contusions.

The employer, Cotton Commercial USA Inc. in Katy, Texas, waited three days to report the injury, an investigation by the U.S. Department of Labor’s Occupational Safety and Health Administration found. Federal law requires employers to report such incidents within 24 hours.

OSHA today fined Cotton Commercial $362,500 for seven safety violations, including one willful and four willful egregious. The violations include failing to provide fall protection for four workers, failure to promptly report the hospitalization of an employee resulting from a workplace incident, and not training employees in the use of fall protection and ladders. Cotton Commercial citations are available here.

Gardia Construction, which provided the laborers to Cotton Commercial, received a citation for one serious violation and a fine of $4,900, for failing to conduct frequent and regular inspections of the job site where its laborers worked. The Gardia citations are available here.

“Falls kill workers, but they are preventable,” said Assistant Secretary for Occupational Safety and Health Dr. David Michaels. “Cotton Commercial denied its workers the safety equipment they are required to provide, and the company intentionally waited several days to report the incident and misled OSHA’s inspectors.”

Staffing agencies and host employers are jointly responsible for maintaining a safe work environment for temporary workers. This includes ensuring that OSHA’s training, hazard communications and record-keeping requirements are fulfilled. And for construction workers, this responsibility includes ensuring that frequent and regular inspections of worksites are conducted.

“Cotton Commercial was well aware of how to prevent safety hazard and, in fact, on the following day Cotton made sure all workers were provided with the required safety equipment. It shouldn’t have to take a serious injury for a company to comply with the law,” said OSHA Regional Administrator John Hermanson.

Cotton Commercial employs about 227 workers and operates throughout the U.S. The company provides remediation services for commercial and residential structures damaged from disasters. At the time of the accident, Texas Mutual provided company employees with workers compensation insurance. Its current provider is Affordable Insurance of Texas. Gardia Construction, located in Gretna, La., employs about 80 workers and provides labor to Cotton Commercial. Gardia does not carry workers compensation insurance.

Both employers have 15 business days from receipt of its citations to comply, request an informal conference with OSHA’s Houston South area director, or contest the citations and penalties before the independent Occupational Safety and Health Review Commission.

Jul 22nd, 2015 Construction Law, Employment Law Defense, Insurance Defense Litigation, Nonsubscriber Law, Workers' Compensation Defense

Who is Covered in the Employee Polygraph Protection Act of 1988 (EPPA)–Texas Employment Law

Employee Polygraph Protection Act of 1988 (EPPA)
(29 USC §2001 et seq.(http://www4.law.cornell.edu/uscode/29/2001.html); 29 CFR Part 801(http://www.dol.gov/cgi-bin/leave-dol.asp?exiturl=http://s.dol.gov/8T&exitTitle=www.ecfr.gov&fedpage=yes))

Who is Covered

The Employee Polygraph Protection Act (EPPA) is administered by the Wage and Hour Division (WHD). The EPPA applies to most private employers. The law does not cover federal, state, and local government agencies.

Basic Provisions/Requirements

The EPPA prohibits most private employers from using lie detector tests, either for pre‑employment screening or during the course of employment. Employers generally may not require or request any employee or job applicant to take a lie detector test, or discharge, discipline, or discriminate against an employee or job applicant for refusing to take a test or for exercising other rights under the Act.

Employers may not use or inquire about the results of a lie detector test or discharge or discriminate against an employee or job applicant on the basis of the results of a test, or for filing a complaint or for participating in a proceeding under the Act.

Subject to restrictions, the Act permits polygraph (a type of lie detector) tests to be administered to certain job applicants of security service firms (armored car, alarm, and guard) and of pharmaceutical manufacturers, distributors, and dispensers.

Subject to restrictions, the Act also permits polygraph testing of certain employees of private firms who are reasonably suspected of involvement in a workplace incident (theft, embezzlement, etc.) that resulted in specific economic loss or injury to the employer.

Where polygraph examinations are allowed, they are subject to strict standards for the conduct of the test, including the pretest, testing, and post‑testing phases. An examiner must be licensed and bonded or have professional liability coverage. The Act strictly limits the disclosure of information obtained during a polygraph test.

Employee Rights

The EPPA provides that employees have a right to employment opportunities without being subjected to lie detector tests, unless a specific exemption applies. Where polygraph examinations are allowed, they are subject to strict standards at the pre-test, testing, and post-testing stages. Specific notices must be given to employees or prospective employees. The Act also provides employees the right to file a lawsuit for violations of the Act. In addition, the Wage and Hour Division accepts complaints of alleged EPPA violations.

Recordkeeping, Reporting, Notices and Posters

Notices and Posters

Poster. Every employer subject to EPPA shall post and keep posted on its premises a notice explaining the Act. The notice must be posted in a prominent and conspicuous place in every establishment of the employer where it can readily be observed by employees and applicants for employment. There is no size requirement for the poster.

The EPPA poster is available in English(http://www.dol.gov/whd/regs/compliance/posters/eppa.htm) and Spanish(http://www.dol.gov/whd/regs/compliance/posters/eppaspan.htm). Posting of the EPPA poster in Spanish is optional.

Notices. There are specific notices that must be given to examinees and examiners in instances where polygraph tests are permitted:

When a polygraph test is administered pursuant to the economic loss or injury exemption, the employer is required to provide the examinee with a statement prior to the test, in a language understood by the examinee, which fully explains the specific incident or activity being investigated and the basis for testing particular employees. The statement must contain, at a minimum, the following information:

An identification with particulars on the specific economic loss or injury to the business of the employer
A description of the employee’s access to the property that is the subject of the investigation
A detailed description of the basis of the employer’s reasonable suspicion that the employee was involved in the incident or activity under investigation
The signature of a person (other than the polygraph examiner) authorized to legally bind the employer

Every employer who requests an employee or prospective employee to submit to a polygraph examination, pursuant to the ongoing investigation, drug manufacturer, or security services EPPA exemptions, must provide:

Reasonable written notice of the date, time, and place of the examination and the examinee’s right to consult with legal counsel or an employee representative before each phase of the test.
Written notice of the nature and characteristics of the polygraph instrument and examination
Extensive written notice explaining the examinee’s rights, including a list of prohibited questions and topics, the examinee’s right to terminate the examination, and the examinee’s right to file a complaint with the Department of Labor alleging violations of EPPA

Employers must also provide written notice to the examiner identifying the persons to be examined.

Recordkeeping

In the limited instances where EPPA permits the administration of polygraph tests, recordkeeping requirements apply both to employers and polygraph examiners. Employers and polygraph examiners must retain required records for a minimum of three years from the date the polygraph examination is conducted (or from the date the examination is requested if no examination is conducted).

Employers investigating an economic loss or injury must maintain a copy of the statement that sets forth the specific incident or activity under investigation and the basis for testing that particular employee and proof of service of that statement to the examinee.

Employers who manufacture, distribute, or dispense controlled substances must maintain records specifically identifying the loss or injury in question and the nature of the employee’s access to the person or property that is the subject of the investigation.

Every employer who requests an employee or prospective employee to submit to a polygraph examination pursuant to the ongoing investigation, drug manufacturer, or security services EPPA exemptions must maintain:

A copy of the written statement that sets forth the time and place of the examination and the examinee’s right to consult with counsel
A copy of the written notice provided by the employer to the examiner identifying the persons to be examined
Copies of all opinions, reports or other records furnished to the employer by the examiner relating to such examinations

All polygraph examiners must maintain all opinions, reports, charts, written questions, lists, and other records relating to polygraph tests of such persons, as well as records of the number of examinations conducted during each day, and the duration of each test period.

All exempt private sector employers and polygraph examiners retained to administer examinations to persons identified by employers must keep the required records safe and accessible at the place or places of employment or business or at one or more established central recordkeeping offices where employment or examination records are customarily maintained. If the records are maintained at a central recordkeeping office, other than in the place or places of employment or business, such records must be made available within 72 hours following notice from the Secretary of Labor or an authorized representative such as Wage and Hour Division personnel.

Reporting

There are no reporting requirements under EPPA.

Penalties/Sanctions

The Secretary of Labor can bring court action to restrain violators and assess civil money penalties up to $10,000 per violation. An employer who violates the law may be liable to the employee or prospective employee for appropriate legal and equitable relief, which may include employment, reinstatement, promotion, and payment of lost wages and benefits.

Any person against whom a civil money penalty is assessed may, within 30 days of the notice of assessment, request a hearing before an Administrative Law Judge. If dissatisfied with the Administrative Law Judge’s decision, such person may request a review of the decision by the Administrative Review Board which the Secretary of Labor has designated to issue final agency decisions. Final determinations on violations are enforceable through the courts.

Relation to State, Local, and Other Federal Laws

The law does not preempt any provision of any state or local law or any collective bargaining agreement that is more restrictive with respect to lie detector tests.

Compliance Assistance Available

More detailed information, including copies of explanatory brochures and regulatory and interpretative materials, may be obtained from a local Wage and Hour office(http://www.dol.gov/whd/america2.htm).

The Department of Labor provides employers, workers, and others with clear and easy-to-access information and assistance on how to comply with the Employee Polygraph Protection Act. Compliance assistance related to the Act, including the Employee Polygraph Protection Act (EPPA) Fact Sheet(http://www.dol.gov/whd/regs/compliance/whdfs36.pdf), and regulatory and interpretive materials, is available on the Compliance Assistance “By Law”(http://www.dol.gov/compliance/laws/comp-eppa.htm) Web page.

DOL Contacts

Wage and Hour Division(http://www.dol.gov/whd/)
Contact WHD(http://www.dol.gov/whd/contactform.asp)
Tel: 1-866-4USWAGE (1-866-487-9243); TTY: 1-877-889-5627

Jul 22nd, 2015 Employment Law Defense

ERISA Litigation and Significant Issues in Litigation–DOL- Employment Law For Texas Employers

Fulghum v. Embarq Corp. (10th Cir.)
The merits issue in this case is whether participants were promised and are entitled under the employer’s plan to certain lifetime medical and life insurance benefits upon retirement. The district court dismissed the case as untimely, agreeing with the majority of courts that hold that the “fraud or concealment” exception to the ERISA section 413’s six-year statute of limitations requires an affirmative act of “fraudulent concealment” separate from the underlying misrepresentation constituting the alleged breach of fiduciary duty. It also decided the claims were untimely because they accrued at the time of the misrepresentation of lifetime benefits, more than six years before suit was brought. The court issued its initial decision on February 14, 2013, and it issued a decision denying reconsideration on July 16, 2013. A notice of appeal was timely filed on September 17, 2013. On December 18, 2013, the Secretary filed an amicus brief arguing that the district court erred in concluding that the “fraud or concealment” standard for statute of limitations purposes only applies when a fiduciary takes steps in additional affirmative steps to conceal the fiduciary misrepresentation. Plan Benefits Security Division

Fuller v. Sun Trust Banks (11th Cir.)

This case involves both the three-year and six-year statutes of limitations under section 413 of ERISA. Appellant’s brief was filed on February 12, 2013, and the Secretary filed an amicus brief in support of the plaintiff-appellant on March 12, 2013. The brief argued, with respect to the three-year actual knowledge standard, that the district court wrongly applied a constructive knowledge standard by relying on certain documents attached to the motion to dismiss that plaintiff never saw, and that she would not have had actual knowledge of all the elements of the alleged fiduciary breach even if she had reviewed those documents. The brief did not address the six-year statute of limitations issues. Oral argument, in which the Secretary participated, was held on November 7, 2013. Plan Benefits Security Division

Hi-Lex Controls, Inc. v. Blue Cross and Blue Shield of Michigan (6th Cir.)

In this private action, the court found that Blue Cross violated its fiduciary duties by charging health care plans sponsors hidden administrative fees and ordered Blue Cross to reimburse the sponsor $5.1 million. The court held that the claims were not time-barred under ERISA’s three or six-year statute of limitations because ERISA’s “fraud or concealment” exception to the normal statutory period applied. In so holding, the district court relied on a Second Circuit decision construing the exception more leniently than the construction applied by other circuits. On December 10, 2013, the Secretary filed an amicus brief agreeing with the court’s analysis of the statute of limitations issue, and also taking the position that the court was correct in deciding that Blue Cross acted as a fiduciary and committed a fiduciary breach in collecting the hidden fees from the plan assets it controlled. Plan Benefits Security Division

In re Revstone Casting Fairfield (N.D. Tex.)

On February 25, 2013, the Secretary obtained an inspection warrant that allowed the Department and an appraiser entry on to property owned by the Revstone Casting Fairfield Plan, in order for the appraiser to prepare a valuation of the property. See also Perez v. Hofmeister, Section K. Financial Institution and Service Provider Cases. Dallas and Chicago Offices

Solis v. Rice (N.D. Ohio)

On January 23, 2013, the court entered an amendment to a consent order and judgment, entered on November 25, 2003, involving the Ohio Industries, Inc. Group Medical, Dental and Weekly Disability Income Plan and the Ohio Locomotive Crane Co., Inc. Savings Investment Plan. The amendment, which appoints a new independent fiduciary to replace the one who withdrew, provides for the new fiduciary to accept $29,562.83 in funds ($25,314.46 for the Group Medical, Dental and Weekly Disability Income Plan and $4,248.37 for the Savings Investment Plan) distributed from Ohio Industries’ bankruptcy case. In addition, the independent fiduciary is to secure unclaimed funds in the name of the plans from the State of Ohio and distribute these assets, along with the bankruptcy funds, to the plans’ participants. Cleveland Office

Smith v. Aegon (6th Cir.)

This is an appeal from a district court decision dismissing an ERISA pension benefits case brought in Kentucky based on a forum selection clause that was incorporated into the plan more than seven years after the participant retired, which clause required him to file suit in Ohio rather than Kentucky. The plaintiff filed his opening brief on July 22, 2013. On August 12, 2013, the Secretary filed an amicus brief arguing that ERISA invalidates the forum selection clause. Plan Benefits Security Division

In re Ormet Corporation (Bankr. Del.)

On November 15, 2013, the Secretary filed two objections in the Ormet Corporation Chapter 11 bankruptcy proceeding. Ormet was an Ohio corporation with four affiliated companies. It had approximately 14 employee benefit plans, some of which were subject to ERISA. The Secretary’s first objection involved the debtors’ motion for the approval of the sale of all of its assets relating to one of its facilities, including the transfer of employee benefit plans. The Secretary objected to the motion because the debtors’ filings failed to include sufficient information for the Secretary to determine whether the sale would violate any provisions of ERISA, including its COBRA provisions, or to determine whether the buyer would incur any successor liability. The Secretary also objected based on the debtors’ attempt to disclaim all ERISA liability with respect to the buyer and non-debtor third parties. In addition, the Secretary also objected to the debtors’ second emergency motion, which sought relief from its current obligations to several ERISA-covered plans and attempted to disclaim all COBRA obligations and some of its plan payment obligations. Chicago Office

In re Robert Plan Corp. (Bankr. E.D.N.Y.)

This case involves an ongoing dispute with a Chapter 7 trustee over a bankruptcy court’s jurisdiction to approve payments to the trustee and his retained professionals for work performed in terminating the debtor’s 401(k) plan. On October 26, 2010, the bankruptcy court held that it had core jurisdiction to rule on the fee requests, but avoided ruling on whether it had jurisdiction to determine the amount of the fees to be paid using plan assets. On March 1, 2011, the bankruptcy court issued a first interim fee award to the trustee and his professionals in amounts greater than the Secretary believed appropriate, but consistent with the October 2010 Order, and refused the trustee’s request to rule on what amounts were payable by the plan. On December 11, 2011, the Secretary filed an objection to the second interim fee request by the trustee and his law firm and a final fee application by the auditor and pension consultant assisting the trustee. On August 20, 2012, the bankruptcy court overruled the Secretary’s objections and granted the fee applications. Departing from the terms of the 2010 Order, which had stated that “[a]ny order awarding fees would contain no determination of whether Plan funds could be used to satisfy the award,” the bankruptcy court expressly provided in the August 2012 decision that the trustee could use plan funds to pay the professionals, thereby effectively asserting jurisdiction over the ERISA plan and its assets. The interim fee award to the trustee of $132,378.24 resulted in an effective hourly rate of approximately $2,000 per hour. As a portion of the relief granted in the 2012 decision was interlocutory, on September 4, 2012, the Secretary filed a motion for leave to appeal to the district court. On September 14, 2012, the trustee filed an opposition to the Secretary’s motion. On September 27, 2012, the Secretary filed a motion for leave to file a reply brief, to which the trustee filed an opposition on October 4, 2012. On April 9, 2013, rather than rule on the Secretary’s request to file a reply brief, the district court granted the Secretary’s request to appeal solely that portion of the August 2012 decision that asserted the bankruptcy court’s jurisdiction to order the payment of fees from plan assets; it determined that the issues regarding the amount of the compensation of the trustee and his law firm would be appealable at a later date when final orders of compensation were issued in the bankruptcy case. The Secretary filed its appeal brief on April 30, 2013, and the trustee filed an opposition on May 15, 2013. The district court has not yet issued an opinion. Plan Benefits Security Division

In re Saetveit (Bankr. D. Colo.)

The Secretary filed a joint stipulation as to non-dischargeability of debt in December 2013 in the bankruptcy case of William Roger Saetveit, a fiduciary responsible, along with others, for committing a series of ERISA violations in the course of investing plan assets and allowing plan participants to direct their plan account assets into a hedge fund that later was revealed to be a Ponzi scheme. Saetveit, the fiduciary debtor, was grossly negligent with regard to his responsibilities as a plan fiduciary and thus committed defalcation. Denver Office

Schoenfeld v. Perez (9th Cir.)

This is an appeal from a case brought by the Secretary in which the Secretary successfully argued that fiduciaries breached their duties to an ESOP by allowing the corporate sponsor to withdraw funds from the ESOP to pay corporate expenses and that the debt is non-dischargeable under the bankruptcy code because of defalcation. The appellants filed their brief on August 20, 2013, and the Secretary filed a response brief on extension on October 25, 2013. San Francisco Office and Plan Benefits Security Division

In re Thelen LLP (Bankr. S.D.N.Y.)

Thelen LLP, a major national law firm and Chapter 7 debtor, was the sponsor and plan administrator for three ERISA-covered plans: a 401(k) plan, a defined benefit plan, and a cash balance plan. Pursuant to section 704(a)(11) of the Bankruptcy Code, Thelen’s Chapter 7 trustee became obligated to fulfill the plan administrator role. On or about July 13, 2010, the trustee filed a motion seeking payment from the plans for legal services provided by Fox Rothschild LLP (“Fox”), the trustee’s law firm. The trustee filed motions on January 13, 2011, and October 13, 2011, seeking: (i) authorization to terminate the plans; (ii) authorization for the plans to pay for services provided by professionals retained by the trustee; (iii) the retention of an independent fiduciary to terminate the plans and pay retained professionals from plan assets; and (iv) to quash an administrative subpoena issued by the Secretary to the trustee. On March 17, 2011, and February 10, 2012, the Secretary objected to the jurisdiction of the bankruptcy court to approve the payment of the fees and expenses of Fox and the other professionals, the appointment of the independent fiduciary, and the quashing of the subpoena. On October 20, 2011, the PBGC filed an objection to the appointment of an independent fiduciary and the failure of the trustee to sign a trusteeship agreement for the transfer of the defined benefit plan to the PBGC for termination. On May 17, 2012 a consensual order was entered by the district court providing for, among other things: (i) a withdrawal of the reference of the motions from the bankruptcy court to the district court; (ii) the appointment of an independent fiduciary for the cash balance and the 401(k) plans to terminate those plans and to pay the plan professionals (including Fox); (iii) fixing Fox’s fees at $125,000, less than half of what Fox would have claimed; (iv) the assignment of the defined benefit plan to the PBGC; and (v) the Secretary’s release of her prohibited transaction claims and certain other claims against the trustee and Fox. The independent fiduciary is now in the process of terminating the cash balance and 401(k) plans; termination of the 401(k) plan is near completion. Plan Benefits Security Division

Jul 22nd, 2015 Collections and Foreign Judgments, Contracts and Commercial Litigation, Employment Law Defense, Insurance Defense Litigation