Massachusetts v. Morash
490 U.S. 107, 104 L. Ed. 2d 98, 1989 U.S. LEXIS 2027 (1989)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An employer's policy of paying discharged employees for accrued, unused vacation time from its general assets is a payroll practice, not an "employee welfare benefit plan" within the meaning of ERISA.
Facts:
- Richard N. Morash was the president of the Yankee Bank for Finance and Savings (Bank).
- The Bank had an established policy, through handbooks and practice, to pay employees a lump sum for any unused vacation time upon their termination.
- These payments for unused vacation time were made out of the Bank's general assets, not from a separate trust or fund.
- The Bank discharged two of its vice presidents.
- Morash, on behalf of the Bank, failed to pay the two discharged vice presidents for the vacation time they had accrued but not used.
Procedural Posture:
- The Commonwealth of Massachusetts filed two criminal complaints against Richard N. Morash in the Boston Municipal Court, a trial court.
- Morash moved to dismiss the complaints, arguing that the state wage payment law was preempted by ERISA.
- The trial judge reported the preemption question to the Massachusetts Appeals Court without ruling.
- The Massachusetts Supreme Judicial Court, the state's highest court, transferred the case to its own docket on its own initiative.
- The Supreme Judicial Court held that the Bank's policy was an 'employee welfare benefit plan' and that the state prosecution was preempted by ERISA.
- The U.S. Supreme Court granted certiorari to review the judgment of the Massachusetts Supreme Judicial Court.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an employer's policy of paying discharged employees for their unused vacation time from the employer's general assets constitute an 'employee welfare benefit plan' under §3(1) of ERISA, thereby preempting a state criminal action for failure to make such payments?
Opinions:
Majority - Justice Stevens
No. A policy to pay employees for unused vacation time from an employer's general assets is not an employee welfare benefit plan under ERISA. Congress's primary concern in enacting ERISA was to prevent the mismanagement of funds accumulated to finance employee benefits, a risk not present in ordinary vacation payments made from general assets. Such payments are more akin to regular wages, which are traditionally regulated by state law. The list of benefits covered by ERISA, such as medical, sickness, and disability benefits, typically involve contingencies outside the employee's control, unlike vacation pay which is a predictable part of compensation. The Secretary of Labor’s regulations, which are entitled to deference, reasonably interpret the statute by excluding such 'payroll practices' from ERISA’s scope. Treating these policies as ERISA plans would have profound, unintended consequences, including the federalization of all vacation pay disputes and the displacement of state laws that often provide greater protection for employees in this area.
Analysis:
This decision significantly narrows the scope of what constitutes an 'employee welfare benefit plan' under ERISA, particularly regarding vacation benefits. By distinguishing between payments from general assets (payroll practices) and those from separate funds (ERISA plans), the Court preserved a major area of traditional state regulation over employee wages. This ruling prevents the federal preemption of state wage-payment laws as they apply to unused vacation pay, ensuring that employees can continue to rely on state-level remedies for such claims. The case stands for the principle that ERISA was not intended to regulate all forms of employee compensation, but rather to safeguard dedicated funds set aside for specific, often contingent, benefits.
Unlock the full brief for Massachusetts v. Morash