In Lavery v. Restoration Hardware, Inc., (D. Mass.), No. 17-10856, March 28, 2018, Plaintiff John Lavery (“Lavery”) filed a claim against Defendant Restoration Hardware, Inc. (“RHI”), based on RHI’s alleged misclassification of Lavery as an independent contractor when Lavery was allegedly in fact in employee under Massachusetts law. Lavery seeks among other damages the value of benefits plan (i.e., a welfare benefits package) that he would have received had he been classified as an employee. RHI moved to dismiss Lavery’s claim for damages with respect to the welfare benefits because RHI contended that claim was preempted by federal law.
The undisputed facts established that Lavery provided services to RHI from April 2013 until September 2014. From April 2013 until May 12, 2014, RHI classified Lavery as an independent contractor. During that period, Lavery worked full time at least two days a week performing “store maintenance as directed” at RHI’s store in Boston. Beginning around April 2014, Lavery began working at additional stores and regularly working more than forty hours a week. When Lavery became classified as an employee on May 12, 2014, his duties did not change. While Lavery provided services for RHI, he was “not free from RHI’s control and direction in connection with the performance of his services” and the services he performed were “not [ ] outside the usual course of RH’s business.” Lavery “did not have an independently established trade, occupation, profession, or business of the same nature as that involved in the services he performed for RH.” Lavery contends that, as a result of his misclassification, he “suffered lost wages and other benefits; . . . [including] the value of RHI’s benefit plans (such as life insurance, disability insurance, medical insurance, and retirement plans).”
RHI contended that the state law causes of action in Lavery’s complaint that sought damages based on the lost value of the welfare benefit plan provided by RHI were preempted by ERISA. ERISA “supersede[s] any all State laws insofar as they may now or hereafter relate to any employee benefit plan”. The parties agreed that the benefit plans in question were benefit plans covered by ERISA. The question was whether the state law causes of action that Lavery asserted “relate to” the employee benefit plans covered by ERISA. There are “three categories of state laws that ‘relate to’ ERISA plans” such that they are preempted: “(1) state laws that ‘mandate[ ] employee benefit structures or their administration,’ (2) state laws that ‘bind plan administrators to [a] particular choice,’ and (3) state law causes of action that provide ‘alternative enforcement mechanisms’ to ERISA’s enforcement regime.” RHI argued that Lavery’s claims fall into the third category of providing an alternative enforcement mechanism to ERISA’s enforcement regime. The Court agreed.
The Court’s holding rested in large measure of Hampers v. W.R. Grace & Co., Inc., 202 F.3d 44, 51 (1st Cir. 2000) which reasoned that the failure to include an employee in the employer’s benefit plan was the basis both for that employee’s state law contract claim and his ERISA-benefits claim, which the First Circuit said “suggests that the state law claim is an alternative mechanism for obtaining ERISA plan benefits.” Because Lavery, in trying to prove that RHI behaved incorrectly, would have “relied on the terms of” the underlying benefit plan, the Court ruled that his claim was preempted, because “a cause of action ‘relates to’ an ERISA plan when a court must evaluate or interpret the terms of the ERISA-regulated plan to determine liability under the state law cause of action.”