PLAINTIFFS MUST EXHAUST ADMINISTRATIVE REMEDIES IN A 510 CLAIM
Burds v. Union Pacific Corporation, 223 F.3d 814 (8th Cir. 2000) (Unpublished)-The 23 appellant nurses entered into individual employment contracts with the railroad appellees to provide nursing consulting services. Each contract specifically designated the nurse as an independent contractor rather than an employee of the railroads.
The Railroad Retirement Board (RRB) examined the propriety of Union Pacific's classification of nine nurses as independent contractors. The RRB concluded that the nurse consultants were employees rather than independent contractors. Following the RRB's determination, these twenty-three nurses sued seeking damages for violations of ERISA. The district court granted Union Pacific's motion for summary judgment after finding that the nurses failed to exhaust their administrative remedies.
The nurses argued that exhaustion requirements are not applicable to violations of § 510. The nurses contended that § 510 claims implicate questions of statutory analysis and do not require courts to interpret the ERISA benefit plan to determine whether a statutory violation has occurred.
Although the nurses alleged that they "are challenging the legality of [Union Pacific's] plan provisions which attempt to define out the Nurses in violation of ERISA and the IRS code," the district court cannot consider such a challenge without interpreting the plans. Hence, the challenge is not simply a question of statutory analysis. Rather, the question of whether the plans operate in a manner that impermissibly excluded the nurses from participation necessarily requires the district court to interpret the operation and application of the employee benefits plans. In cases where resolution of the § 510 issue turns on an interpretation of the ERISA benefits plan at issue, a district court does not abuse its discretion in requiring plaintiffs to exhaust their administrative remedies.