Class Action Alleging 401(k) Shortchanging Moves Forward

The U.S. District Court for the Eastern District of Louisiana grants in part and denies in part the motion by the defendant health system to dismiss the plaintiff current and former employees’ complaint alleging that they were underpaid.

The plaintiffs are full-time, hourly employees involved in direct patient care, including certified registered nurse anesthetists, registered nurses and nurse first assistants. The defendants are their employers. The plaintiffs claim that the defendants failed to correctly calculate employee weekly pay by excluding shift differentials and on-call and callback pay, automatically deducting lunch periods even if employees worked during those periods, failing to pay some stipends and bonuses, and undervaluing overtime. The plaintiffs claim these practices violated the Fair Labor Standards Act (FLSA), the Employee Retirement Income Security Act of 1974 (ERISA) and Louisiana law. The defendants seek dismissal of the plaintiffs’ Louisiana Wage Payment Act (LWPA) claims, state law claims to the extent that they request unpaid overtime wages and all ERISA claims. They also seek to strike state law class action allegations and suggest that the possibility of double recovery at the end of litigation warrants the dismissal of certain claims now.

The defendants argue that LWPA claims should be dismissed for failure to make demand for payment prior to the commencement of the present litigation. The plaintiffs contend that the complaint itself serves as amicable demand in satisfaction of LWPA. The main purpose of LWPA is to compel an employer to pay the earned wages of an employee promptly after his or her dismissal or resignation and to protect discharged Louisiana employees from unfair and dilatory wage practices by employers. Pursuant to Louisiana Revised Statutes Section 23:631(A)(1)(a)-(b), demand is not required to assert a claim for unpaid wages under LWPA, and failure to make demand prior to filing suit does not merit dismissal of an LWPA claim for unpaid wages. However, claims for penalty wages and attorney fees do require demand prior to filing suit. The plaintiffs argue that the complaint itself serves as demand, but one of the elements of a claim for penalty wages and attorney fees requires that demand for payment must have been made where the employee was customarily paid. The employees are not paid at the courthouse and, therefore, the court finds that the plaintiffs have failed to state a claim upon which relief can be granted. Accordingly, the court dismisses the plaintiffs’ claims for penalty wages and attorney fees under LWPA but allows the other claims under LWPA to survive dismissal.

The defendants also argue that the court should dismiss the plaintiffs’ ERISA claims of (1) breach of fiduciary duty by failing to credit overtime compensation and other wages toward employees’ benefits under the employer-sponsored employee benefit plan and (2) failure to maintain accurate plan records. The plaintiffs allege that the governing instrument of the plan gives the defendant discretionary authority with respect to the crediting of compensation and that the employees’ rights to share in contributions to the plan are dependent, in part, on their eligible compensation, including, among other things, employees’ wages and overtime compensation. The plaintiffs further allege that the defendants did not fulfill the responsibility and obligation under the plan to credit overtime compensation and other wages toward employees’ plan benefits, meaning the defendants exercised their discretionary authority respecting plan management in such a way as to deny the named employees the plan benefits to which they are entitled. The defendants contend that, even if the allegations were true, the decisions were corporate business decisions, not decisions the defendants made in a capacity as ERISA fiduciaries. The court finds that while it is one thing for a business to set or withhold compensation, it is another for the business not to credit an employee’s wages and overtime toward an ERISA-regulated plan where the plan documents provide that benefits under the plan are determined based on uncredited wages and overtime. See ERISA Sections 402(a) (1) and (b)(4) and 404(a)(1)(D). The defendants have a fiduciary duty to credit all compensation that the plan requires them to credit, and a failure to do so would violate that duty.

In addition, the plaintiffs allege that the defendants violated ERISA recordkeeping requirements under ERISA Section 209, which requires that every employer maintain records with respect to each of its employees sufficient to determine the benefits due or that may become due to such employees. The plaintiffs claim the defendants failed to record and/or report all of the hours worked by the named plaintiffs and other employees. In contrast, the defendants argue that the recordkeeping claims under ERISA Section 209 are based on hours recorded while benefits under the plan are based on compensation. However, the court finds that because the plaintiffs are hourly employees, the number of hours worked each week determines compensation, including overtime pay, and because eligible compensation, including overtime, is the basis for calculating benefits under the plan, the plaintiffs have appropriately stated claims for recordkeeping violations. Finally, the defendants argue that the plaintiffs did not exhaust their administrative remedies prior to filing suit for their ERISA claims. While claimants seeking benefits from an ERISA plan must exhaust administrative remedies, claims for breach of fiduciary duty do not require exhaustion.

In addition, the defendants argue that the plaintiffs’ state law claims should be dismissed to the extent that those claims seek payment of overtime wages because Louisiana law does not mandate the payment of overtime wages. However, the complaint explicitly excludes payment of unpaid overtime wages from the damages sought pursuant to those state law claims. The court finds that the plaintiffs have addressed the defendants’ concern. The defendants further argue that all of the plaintiffs’ state law class action allegations should be stricken, contending that they cannot satisfy the predominance requirement of Rule 23(b)(3). The court does not find this appropriate at this stage of litigation because the plaintiffs have proposed at least one common question of fact that may predominate the resolution of claims. The defendants’ final argument concerning a potential putative double recovery problem also is not appropriate at this time.

Accordingly, the court dismisses the plaintiffs’ claims for penalty wages and attorney fees under LWPA and denies the defendants’ motion to dismiss in all other respects.