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Court Illuminates Criteria for an Employee Welfare Benefit Plan

Blogs, Erisa

The United States District Court for the Western District of Kentucky, in Brown v. Metropolitan Life Ins. Co., No. 3:11-CV-451-H, 2011 WL 68266638 (W.D.Ky. Dec. 28, 2011), recently held that ERISA did not preempt a plaintiff’s state law claims against her long-term disability benefits plan provider, the National Conference of Bankruptcy Clerks (“NCBC”), because, the court determined, the NCBC was not an “employee organization” within the meaning of ERISA. 

In doing so, the Court looked to the Eleventh and Ninth Circuits for guidance on whether an organization will be considered an “employee organization” under ERISA, citing Slamen v. Paul Revere Life Ins. Co., 166 F.3d 1102, 1104 (11th Circ. 1999) (holding that plan falls within ERISA only where it covers “participants because of their employee status in an employment relationship, and an employer or employee organization is the person that establishes or maintains the plan. . . .”) and Saffaf v. Standard Ins. Co., 102 F.3d 991, 992-93 (9th Cir. 1996) (finding that an organization qualifies as an “employee organization” if it limits its membership to employees and excludes employers or independent contractors from joining.”).

The court in Brown v. Metropolitan Life Ins. Co. found that the NCBC “opens it membership to virtually anyone. . . [and that] [e]ven though NCBC does limit its membership to a category of employees, it also undeniably offers membership of some type to any and all individuals, irregardless of their employee status.” Id. The court further noted that non-employees were able to participate in NCBC’s welfare benefit plan. Id.

Based on these facts, the court held that NCBC did not qualify as an “employee organization” within the ambit of ERISA:

To qualify as an ’employee organization’, NCBC must directly base membership upon employee status. Thus, to the extent NCBC allows membership beyond a specified category of employees, it would fall beyond the definition of an ’employee organization’ as ERISA defines it.

The court also rejected HCBC’s reliance on its filing of ERISA Form 5500 and its compliance with ERISA’s procedural protections, which, the court found “laudatory” but could not confer ERISA preemption.