Court Report

An unmarried cohabitant was entitled to half her partner’s pension; failure to provide notice prior to a layoff excused; more.

By Amy Onder Apr 1, 2009

April 2009 CoverUnmarried Cohabitant Awarded Half of Partner’s Pension

Owens v. Automotive Machinists Pension Trust, 9th Cir., No. 07-35253 (Jan. 12, 2009).

An unmarried couple cohabitating together in a quasi-marital relationship can, upon separation, be entitled to a portion of each other’s pension plans if certain requirements are met, according to the 9th U.S. Circuit Court of Appeals.

Norma and Philip Owens lived together for more than 30 years in King County, Wash., and used the same last name, though they weren’t married. The state does not recognize common-law marriages, but does recognize quasi-marital relationships like the Owenses’.

Professional PointerIn states that recognize common-law marriage and quasi-marital relationships, a longtime cohabitant may be lawfully entitled to a portion of the partner’s retirement benefits upon separation.

Even though the couple was never legally married, they had two children together and held themselves out to the public as married. During their relationship, they acquired numerous joint assets including real property, furniture, furnishings and vehicles. Funds acquired by the Owenses were held in various financial institutions, and some were held in joint accounts. Further, Philip accumulated an interest in various retirement accounts as a result of his employment during their 30-year relationship.

Throughout their relationship, Philip provided the main financial support, while Norma devoted her time to caring for Philip and their sons.

Philip and Norma filed joint tax returns, and the returns for 2001, 2002 and 2003 listed Norma as Philip’s "wife." And, Norma was named as Philip’s wife and beneficiary in his life insurance application.

In March 2004, Norma and Philip separated. The couple was able to agree on the division of most of the assets. However, the lone asset that remained was Philip’s Employee Retirement Income Security Act (ERISA) pension plan. The monthly benefits check from that ERISA pension plan was the subject of this litigation.

Shortly after the Owenses separated, Norma filed a petition in the Superior Court for King County, claiming that she was entitled to 50 percent of each of Philip’s monthly pension benefits payments. The court issued an order in favor of Norma and awarded her 50 percent of each benefits payment.

Under most circumstances, ERISA prohibits the assignment of pension benefits. One important exception allows pension benefits to be assigned under a "Qualified Domestic Relations Order" (QDRO).

A QDRO is any judgment or order issued under state domestic relations law and relates to the provision of one of the following:

  • Child support.
  • Alimony payments.
  • Marital property rights to a spouse, former spouse, child or other dependent of a participant.

The issue in this case was whether the order granting Norma 50 percent of Philip’s pension was a valid QDRO. Specifically, the court focused on whether Philip’s pension plan constituted marital property rights under ERISA and whether Norma was a dependent of Philip according to ERISA.

Initially, a "dependent" is defined under the Internal Revenue Code as an individual other than a spouse who has the same principal place of abode as the taxpayer and is a member of the taxpayer’s household. On appeal, the 9th Circuit ruled that Norma was a dependent of Philip according to the definition outlined above, thereby qualifying her as an alternate payee of Philip’s pension plan.

In addition, ERISA requires a QDRO to be made under state domestic relations law. According to Washington law, quasi-marital relationships are the legal equivalent to marriages. Therefore, the distribution of property following a quasi-marital relationship in Washington is limited to property that would have been characterized as community property if the parties had been married.

The 9th Circuit determined that the Superior Court’s order clearly related to "marital property rights," as Philip’s pension benefits constituted property that would have been characterized as community property if the parties had been married. Accordingly, assigning Norma a 50 percent interest in Philip’s pension benefits was consistent with Washington law regarding the distribution of property following a quasi-marital relationship.

By Ross Gardner, an attorney with Berens & Tate in Omaha, Neb.

Unforeseeable Circumstances May Relieve WARN Notice Obligation

Gross v. Hale-Halsell Co., 10th Cir., No. 08-5028 (Jan. 20, 2009).

The 10th U.S. Circuit Court of Appeals affirmed summary judgment in favor of an employer that had relied on the "unforeseeable business circumstances" exception as an explanation for failure to provide the required notice prior to a total shutdown of the company.

The plaintiffs were employed by Hale-Halsell Co. (HHC), a wholesale grocer in Tulsa, Okla. HHC’s largest customer was United Supermarkets in west Texas. HHC and United had enjoyed a 30-year business relationship where United provided 40 percent of HHC’s orders.

Professional PointerEmployers should be aware that if passed, the FOREWARN Act, originally co-sponsored by then-Sens. Hillary Clinton and Barack Obama, would substantially expand the reach of the WARN Act.

Occasionally, however, HHC would fall short on orders submitted by United—a circumstance termed a "stockout." In 2002, the percentage of stockouts in response to United’s orders increased. By the end of 2003, it had risen to 18.9 percent of orders, and early in 2004 it spiked to 53.8 percent. On Jan. 8, 2004, United wrote to let HHC officials know that it would have to "place orders with alternative suppliers" and that its orders to HHC "would be declining." But United reiterated its willingness to continue to do business with HHC.

On Jan. 15, United wrote HHC officials to announce that it planned to replace HHC as its primary supplier. The next day, HHC officials wrote back, expressing hope that HHC’s problems still could be solved. However, on Jan. 20, HHC officials met with its primary accounts holder, F&M Bank. Based on that meeting, HHC decided it could no longer survive as a company. HHC informed office personnel and warehouse staff of the impending company closure the following day. And the next day, approximately 200 employees who would be laid off received notice in their paychecks.

They sued, alleging violation of the Worker Adjustment and Retraining Notification (WARN) Act. The company’s motion for summary judgment based on the exceptions to that act was granted and upheld on appeal. The 10th Circuit specifically held that United’s termination of HHC was unforeseeable at the time that the 60-day WARN notice should have been given and that HHC had provided notice of the closure to the employees "as soon as practicable," as required.

By Maria Greco Danaher, an attorney with the firm of Ogletree Deakins in Pittsburgh.

Bipolar Worker Unlawfully Denied Accommodations

Tobin v. Liberty Mutual Ins. Co., 1st Cir., Nos. 07-1764, 07-1765 (Jan. 23, 2009).

The 1st U.S. Circuit Court of Appeals ruled that an employee suffering from bipolar disorder presented enough evidence to support a jury award under federal and state anti-discrimination laws, including $800,000 for economic loss and $500,000 for emotional distress.

Professional Pointer"Only a fine line exists between the employee’s showing of reasonableness and the company’s claim of undue hardship," the court noted, so make sure your company has a robust reasonable accommodation process.

Kevin Tobin worked as a sales representative for Liberty Mutual Insurance Co. He had been under the care of a psychiatrist since 1976, was diagnosed with bipolar disorder and had taken two short-term disability leaves while under the employ of Liberty Mutual. Tobin’s bipolar disorder affected his ability to do his job in a variety of ways: His focus and concentration were impaired, and he had difficulty prioritizing and completing work.

He began to routinely fall short of annual quotas for new sales. Liberty Mutual terminated him after he had worked for the company for nearly 37 years.

Tobin filed an Americans with Disabilities Act (ADA) action. Liberty Mutual defended against the claims by asserting that Tobin received certain accommodations and that he was fired because of poor job performance. A district court jury awarded Tobin damages based on the failure of Liberty Mutual to accommodate his disability.

On appeal, the 1st Circuit agreed with the district court that Tobin had failed to present evidence showing that Liberty Mutual’s reason for his discharge was unlawful.

However, the court reached a contrary conclusion on the reasonable accommodation claim, concluding that Tobin could have performed the essential functions of his job if Liberty Mutual had given him adequate customer service support and had assigned him to a mass marketing account.

By Amy Onder, general counsel of iXP Corp. in Cranbury, N.J.

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