The U.S. Court of Appeals for the Fifth Circuit has affirmed a lower court's certification of a class of more than 290,000 workers against several benefits administration companies. However, the Court also ruled that this Employee Retirement Income Security Act (ERISA) suit, in which workers allege mismanagement of their fringe benefits, should proceed as an opt-out rather than a mandatory class action. The case is Chavez et al. v. Plan Benefit Services et al., Case Number 22-50368, U.S. Court of Appeals for the Fifth Circuit.
A three-judge panel of the Court withdrew its August opinion and granted a petition for rehearing. Simultaneously with that order, the panel docketed this published opinion upholding a Texas federal court's grant of class certification to participants in thousands of benefits plans against three benefits administration companies – Plan Benefit Services, Fringe Insurance Benefits, and Fringe Benefit Group. In their suit, the workers claim that the companies violated ERISA by mismanaging trusts they had contributed to through their employers and charging them excessive fees. Under the contracts between employers and the benefits administration companies, employers funded trusts to provide wage and fringe benefits for non-union workers whose employers sought government contracts. These trusts allowed the employers to pay employees the prevailing wage, often required in government contracts.
As part of its opinion, the Fifth Circuit panel also affirmed that the participants in over 3,000 benefit plans at more than 2,000 employers had standing to pursue their claim against the benefits administration companies. The panel's other modification to the class certification order allowed class members to opt out of the suit rather than making it a mandatory class action. According to the panel, the opt-out provision was appropriate because the suit is an action for damages, and individual adjudications would not necessarily impair the interests of non-party members. Furthermore, a large amount of the damages would be used to restore assets to the benefits trusts.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and H.R./employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees.
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