• Supreme Court Approves ERISA Exemption For Church-Affiliated Hospitals

    ERISA – Employee Retirement Income Security Act  scotus erisa exemption

    ERISA is a federal statute that covers all employee group policies, regardless of whether they are long term or short term disability, long term care, health, and life insurance policies, with certain exceptions such as if the employer is a governmental agency, charity or religious organization. ERISA, established in 1974, obligates private employers to offer pension plans that adhere to rules to ensure plan solvency and protect the employees. Since 1980 church plans have been exempt from these regulations.

    On Monday, the U.S. Supreme Court ruled that church-affiliated hospital systems do not have to comply with ERISA. In other words, the nation’s highest court extended ERISA’s religious exemption provision to benefit plans maintained by church affiliates, regardless of whether an actual church established the plan. The Court’s decision is welcomed news to hospital systems across the country looking to take advantage of the exemption and avoid certain elements of pension plan compliance.

    Background

    Employees from three different hospital systems–New Jersey-based Saint Peter’s Healthcare System, Illinois-based Advocate Health Care Network and California-based Dignity Health, accused the hospital systems of being big businesses posing as church organizations in order to avoid minimum funding and reporting requirements under ERISA. The hospital systems claimed that their religious affiliation made them exempt from ERISA as St. Peters is affiliated with the Roman Catholic Church; Dignity operates both Catholic and non-Catholic hospitals; and Advocate is affiliated with the United Church of Christ and the Evangelical Lutheran Church in America. Three separate regional federal appeals courts had ruled against Saint Peter’s, Advocate and Dignity in separate cases, refusing to dismiss employees’ lawsuits against them.

    Supreme Court Ruling

    The Court ruled 8-0 that church-affiliated organizations are exempt from ERISA, overturning several federal circuit court rulings that the exemption applied only if the church established the benefit plan. Writing for the court, Justice Elena Kagan said the law’s religious exemption applies to plans whether they were established by churches themselves or organizations affiliated with the churches.

    Judge Sonia Sotomayor filed a concurring opinion though said she was troubled by the outcome. Sotomayor went on to state, “The decision to exempt plans neither established nor maintained by a church could have the kind of broad effect that is usually thoroughly debated during the legislative process and thus recorded in the legislative record.” It is not at all clear that Congress would take the same action today, “with respect to some of the largest health-care providers in the country. Despite their relationship to churches, organizations such as petitioners operate for-profit subsidiaries.”

    The Supreme Court case was Advocate Health Care Networks versus Maria Stapleton, Saint Peter’s Healthcare System versus Laurence Kaplan and Dignity Health versus Starla Rollins.

    California Employment Lawyers

    With significant penalties in effect for ERISA violations, California employers should remain vigilant and informed to ensure compliance with the various employment laws enforced by the Labor Department. Should you have questions about federal laws such ERISA, or any of California’s labor laws, don’t hesitate to contact experienced California employment lawyers at Kingsley & Kingsley. Feel free to contact us online or call us toll-free at 888-500-8469.

    Kingsley & Kingsley

    16133 Ventura Boulevard, Suite 1200
    Encino, California 91436
    Phone: 888-500-8469
    Local: 818-990-8300 (Los Angeles Co.)

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