Labor and Employment

Coca Cola Gets "Popped" with an ERISA Lawsuit

Now you have it, now you don't? Can an employer suddenly cancel its workers' health care benefits? Probably, at least for now, and you can bet workers will fight it tooth-and-nail.

Coca-Cola Unbottles Trouble

In April 2010, Soda giant Coca-Cola (Coke) began negotiating a new labor contract or collective bargaining agreement (CBA) with hundreds of workers at its plant near Seattle. Negotiations didn't go too well, and 500 workers went on strike - they stopped working. They claimed Coke violated the federal law that's designed to make sure employers and unions treat each other fairly.

The day after the strike began, Coke canceled the striking employees' health care benefits. The workers responded by filing a class action lawsuit claiming Coke violated the Employee Retirement Income Security Act (ERISA).

ERISA

ERISA is a federal law that governs retirement and health care plans provided by private employers like Coke. ERISA doesn't require employers to provide these benefits. Rather, if employers choose to create a benefit plan, they have to follow certain rules. It's a complicated law, but some of the rules include:

  • Having the plan in writing
  • Making the benefits available to all employees
  • Keeping proper records and reporting specifics about the plan, including changes in the plan, to the employees and the federal government
  • Having a grievance and appeals process for workers to get benefits or challenge the denial of plan benefits

Among other things, ERISA makes it illegal for employers to interfere with employees' rights to benefits under the plan. Details of the Coke suit are sketchy, but according to news reports, the workers claim Coke unlawfully denied them rights under the benefits plan. Specifically, they claim Coke cut-off their rights to file claims and appeals over the denial of benefits and Coke's decision to terminate their benefits.

Coke's argument is that because of the strike, the workers weren't "employees" under the benefit plan and had no rights to the plan's benefits.

According to one union involved in the case, the workers planned to return to work in early September, about one week after Coke terminated their health care benefits. That doesn't end the lawsuit, though. Both sides are raising valid and interesting claims under ERISA that the courts may need to settle. In any event, it appears Coke still has to deal with the unions' claims under federal labor laws.

What's It All Mean To You?

Employers need to be careful to follow the rules set out in their benefit plans and in ERISA, especially the rules requiring reporting or notification of changes to covered employees. Employers may also want to consider if it should terminate benefits and not so much whether it can.

For instance, one Coke worker who lost his benefits also lost the ability to get essential prescription medication for his wife. Events like these don't foster healthy, productive employee-employer relationships.

ERISA's Future

Since ERISA was first enacted in 1974 and up to the present in 2010, employers, as a general rule, can change the terms and benefits of their health care and other benefit plans at any time. They can also cancel benefit plans altogether. All they need to do is follow the rules set out in ERISA. That may change, though.

Under the new health care reform laws, most employers are required to provide health care insurance for their employers. The requirement goes into effect in 2014. So, it appears employers won't be able to terminate ERISA health care plans unless they provide some other health care benefit.

Workers need to protect their rights. Get a copy of your benefit plan and read it, all of it, and very carefully. Find out exactly who and what's covered and when coverage ends - typically it's when you're no longer an "employee," such as in Coke's plan. If you have any questions, ask your human resources department. And if you think your employer is doing something wrong, talk to an attorney immediately.

Questions for Your Attorney

  • What are my options for health care coverage if I'm laid off?
  • Are my employee contributions to an ERISA health care plan tax deductible?
  • When striking workers return to work, are they entitled to the exact same pay, benefits, and seniority they had before the strike?
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