National Litigation Hotline

Employees of Third-Party Employer Not Entitled To Retroactive Benefits

The Fifth Circuit recently held that workers who performed services for Mobil Corp. while on the payroll of third-party companies were not entitled to retroactive employment benefits. MacLachlan v. ExxonMobil Corp., 2003 WL 22508859 (5th Cir. Nov. 20, 2003).

Prior to the merger of Mobil and Exxon Corp. in 1999, John MacLachlan provided services for Mobil Corp. for 11 years as an electronic technician. However, he was directly employed during that time by an outside contractor. (Several other plaintiffs were similarly employed by third-party companies while working for Mobil.) All were considered by Mobil to be independent contractors or employees of the third parties.

Under the Mobil benefit plans, benefit eligibility was restricted to “regular employees.” A 1994 amendment to the retirement plan excluded employees of third parties and independent contractors. MacLachlan, claiming that he was a “common-law employee,” alleged that he fell under the definition of “regular employee,” and sought retroactive benefits. This request was denied by the plan administrator. MacLachlan brought suit in the U.S. District Court for the Eastern District of Louisiana, bringing a class action with the other plaintiffs, claiming entitlement to benefits under the Mobil plans. The district court granted Mobil's motion for summary judgment.

On appeal, the Fifth Circuit affirmed. It held that the administrator acted reasonably in denying the plaintiffs any benefits. the court noted that none of the workers who were on payrolls other than Mobil's were paid benefits. Further, MacLachlan's contract with his third-party employer explicitly stated that he was on the third-party employer's payroll, and entitled to benefits from that employer. Finally, the court observed that the contract between Mobil and the third-party employer provided that all such workers were solely the employees of that employer.

Disparate Impact Claims Not Viable under ADEA in Fifth Circuit

The Fifth Circuit has recently held that plaintiffs may not bring claims under the ADEA for disparate impact. Smith v. City of Jackson, Miss., 2003 WL 22671061 (5th Cir. Nov. 13, 2003).

Thirty city police officers and public safety dispatchers brought suit under the ADEA against the city of Jackson and its police department in the U.S. District Court for the Southern District of Mississippi. They asserted claims under both the disparate treatment and disparate impact theories. The plaintiffs' disparate impact claim asserted that while the performance pay plan was facially neutral, it resulted in pay increases to officers and dispatchers under 40 that were greater than the raises received by those over 40. The district court granted the defendant's motion for summary judgment, dismissing plaintiffs claims.

On appeal, the Fifth Circuit affirmed with regard to the disparate impact claims. The court noted that the ADEA contains an exception for employment actions “based on reasonable factors other than age” while Title VII does not. The court observed that a similar exception contained in the Equal Pay Act had previously been held by the Supreme Court to preclude disparate impact claims under the EPA. Further, the court observed that the ADEA's purpose was “to prohibit arbitrary age discrimination in employment,” a narrower scope than the purpose behind Title VII. However, the Fifth Circuit reversed the district court with regard to the plaintiffs' disparate treatment claims, and remanded for further consideration.

Employees of Third-Party Employer Not Entitled To Retroactive Benefits

The Fifth Circuit recently held that workers who performed services for Mobil Corp. while on the payroll of third-party companies were not entitled to retroactive employment benefits. MacLachlan v. ExxonMobil Corp., 2003 WL 22508859 (5th Cir. Nov. 20, 2003).

Prior to the merger of Mobil and Exxon Corp. in 1999, John MacLachlan provided services for Mobil Corp. for 11 years as an electronic technician. However, he was directly employed during that time by an outside contractor. (Several other plaintiffs were similarly employed by third-party companies while working for Mobil.) All were considered by Mobil to be independent contractors or employees of the third parties.

Under the Mobil benefit plans, benefit eligibility was restricted to “regular employees.” A 1994 amendment to the retirement plan excluded employees of third parties and independent contractors. MacLachlan, claiming that he was a “common-law employee,” alleged that he fell under the definition of “regular employee,” and sought retroactive benefits. This request was denied by the plan administrator. MacLachlan brought suit in the U.S. District Court for the Eastern District of Louisiana, bringing a class action with the other plaintiffs, claiming entitlement to benefits under the Mobil plans. The district court granted Mobil's motion for summary judgment.

On appeal, the Fifth Circuit affirmed. It held that the administrator acted reasonably in denying the plaintiffs any benefits. the court noted that none of the workers who were on payrolls other than Mobil's were paid benefits. Further, MacLachlan's contract with his third-party employer explicitly stated that he was on the third-party employer's payroll, and entitled to benefits from that employer. Finally, the court observed that the contract between Mobil and the third-party employer provided that all such workers were solely the employees of that employer.

Disparate Impact Claims Not Viable under ADEA in Fifth Circuit

The Fifth Circuit has recently held that plaintiffs may not bring claims under the ADEA for disparate impact. Smith v. City of Jackson, Miss., 2003 WL 22671061 (5th Cir. Nov. 13, 2003).

Thirty city police officers and public safety dispatchers brought suit under the ADEA against the city of Jackson and its police department in the U.S. District Court for the Southern District of Mississippi. They asserted claims under both the disparate treatment and disparate impact theories. The plaintiffs' disparate impact claim asserted that while the performance pay plan was facially neutral, it resulted in pay increases to officers and dispatchers under 40 that were greater than the raises received by those over 40. The district court granted the defendant's motion for summary judgment, dismissing plaintiffs claims.

On appeal, the Fifth Circuit affirmed with regard to the disparate impact claims. The court noted that the ADEA contains an exception for employment actions “based on reasonable factors other than age” while Title VII does not. The court observed that a similar exception contained in the Equal Pay Act had previously been held by the Supreme Court to preclude disparate impact claims under the EPA. Further, the court observed that the ADEA's purpose was “to prohibit arbitrary age discrimination in employment,” a narrower scope than the purpose behind Title VII. However, the Fifth Circuit reversed the district court with regard to the plaintiffs' disparate treatment claims, and remanded for further consideration.