Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
March 30 — Family Dollar Stores Inc. and Hartford Financial Services Inc. defeated a lawsuit accusing them of operating an impermissible kickback scheme in the course of providing life insurance benefits to the retailer's employees.
A federal judge dismissed all the employees' class action claims in a March 29 decision, explaining that the payment system they described “is simply not a rate structure that is prohibited” by federal law.
The employees alleged that the two companies negotiated a system in which Family Dollar employees were charged higher rates for supplemental life insurance coverage to lower the premiums the retailer paid to Hartford for its basic life insurance plan. The employees argued that this “cross-subsidization and kickback scheme” violated the Employee Retirement Income Security Act.
Judge Vanessa L. Bryant of the U.S. District Court for the District of Connecticut dismissed the lawsuit in its entirety, relying heavily on a 2011 decision by another district court that rejected similar challenges to an identical rate structure (Amatangelo v. Nat'l Grid USA Serv. Co., 2011 BL 217857, 52 EBC 1741 (W.D.N.Y. 2011); 38 BPR 1589, 8/30/11) 167 Employment Policy & Law Daily, 8/29/11)166 DLR A-6, 8/26/11)166 PBD, 8/26/11) 166 DER EE-5, 8/26/11).
In particular, Bryant took issue with the employees' logic, which she said assumed that Hartford was a “philanthropic institution” that provided insurance free of charge. That Hartford profited from its deal with Family Dollar “is neither unique nor improper,” Bryant said.
The employees also argued that by describing the supplemental plan as “contributory” and the basic plan as “non-contributory,” the companies misrepresented or concealed the true nature of the arrangement. Bryant rejected this tactic as well, finding no reason to think those statements were false or misleading.
Klafter Olsen & Lesser LLP, Law Office of Michael M. Mulder, Fay Law Group PLLC and Hayber Law Firm LLC represented the employees. Sidley Austin LLP and Robinson & Cole LLP represented Hartford. Morgan Lewis & Bockius LLP represented Family Dollar.
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