Wisconsin’s Family and Medical Leave Act (“WFMLA”), requires that employers allow employees six weeks of unpaid leave following “[t]he birth of an employee’s natural child,” and that employers allow an employee to substitute “paid or unpaid leave of any other type provided by the employer” for the unpaid leave provided by the law. However, in a recent decision, the United States Court of Appeals for the Sixth Circuit (covering Kentucky, Michigan, Ohio and Tennessee) held that the WMFLA is preempted to the extent it would require the payment of short-term disability benefits contrary to the terms of an ERISA plan. The Sixth Circuit decided that the WMFLA was directly in the crosshairs of express and implied preemption under ERISA that “are so broad as to overlap, laying down converging fields of fire whose intensity is greatest upon a single point: the one held by a state law that purports to mandate the payment of benefits contrary to the terms of an ERISA plan.”
At issue in the case was the ERISA plan of an insurance company applying to participants in 49 states and providing that its administrator could pay “short-term disability” benefits only to employees who qualify as short-term disabled as defined by the plan. The claim, brought by Wisconsin’s Department of Workforce Development (the “Department”), arose out of a complaint by an employee of the insurance company located in Wisconsin who received six weeks of short-term disability benefits under the plan when she had a baby, but then requested an additional period of short-term disability benefits under the WMFLA’s provisions that would require an employer to allow an employee to substitute additional period of short-term disability benefits for the unpaid leave provided by the statute. The company denied the employee’s request because she no longer had a short-term disability under the company’s ERISA plan. In response, the employee filed a complaint with the Department, which found the insurance company to be in violation of the WFMLA and ordered it to pay the additional benefits.
However, the appellate court found that this put the employer in the untenable situation of either paying short-term disability benefits to a person who did not have a short-term disability as defined in the company’s ERISA plan in violation of ERISA, or not paying the benefits and being in violation of the state’s WFMLA. The court accordingly found that the WFMLA interfered with the uniform administration of the insurance company’s ERISA-qualifying plan in the 49 states in which it operates –precisely the burden that ERISA preemption is intended to prevent. The Sixth Circuit also found that the WFMLA was impliedly preempted by ERISA because it imposed conflicting obligations upon the plan administrator – i.e., if the administrator complied with the obligation of one law, it would violate the obligation of another – and obstructs the purposes and objectives of ERISA by interfering with “nationally uniform plan administration.”
The recent decision highlights the need for employers to be alert for situations where the requirements of state and/or local laws may conflict with the requirements of a federal law such as ERISA. Whenever in doubt, employers should engage counsel knowledgeable about the requirements of federal employment-related laws such as ERISA, the laws of the jurisdiction(s) in which the employer operates, and how those different laws intersect and interact.