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HR and Tax Newsletter-September 2003

ERISA Does Not Bar Participants Medical Malpractice Claim Against HMO

The Eleventh Circuit has concluded that ERISA does not bar a plan participant's state law malpractice claim against an HMO if the claim is based on a bad treatment decision. This is so even if the treatment decision is based on a plan term.

Robbie Land was bitten on the hand by his cat. His hand became infected. His treating physician recommended that he be hospitalized but the nurse employed by CIGNA's HMO concluded that hospital treatment was not necessary treatment under the plan. She approved outpatient care. Land got worse and lost a finger. He sued CIGNA for malpractice.

The Eleventh Circuit held that Land's claim was not preempted by ERISA. Even though the claim involved the interpretation of the plan (whether hospital care was necessary under the plan) the decision to not hospitalize Land was a treatment decision. Because a treatment decision was involved, ERISA did not preempt Land's malpractice suit. Had the decision not had a treatment aspect (for example a decision as to whether an individual was eligible for coverage) ERISA preemption would apply. Land v. CIGNA Healthcare of Florida.

Joint Employer Status Not Found

The Eleventh Circuit has held that a contract containing detailed planting specifications did not make Champion International the employer of farm workers under a joint employer theory. The workers were employed by a farm labor firm that contracted with Champion. That contract detailed how seedlings were handled, their spacing, and the methods for planning. The Eleventh Circuit decided that these specifications were agricultural decisions, not employment decisions and so were irrelevant. Employment decisions are things such as start and quit times, number of breaks, size of work force, and retention and discipline decisions. This case serves as a reminder that too much contractual specificity on employment issues with so called independent contractors can create employee status. Martinez-Mendoza v. Champion.

Hiring Competitor Employees

The hiring of a competitor's employees, if done wrong, can have serious consequences. Here are three tips to avoid antitrust or unfair competition lawsuits.

    1. Do not hire employees that you don't need and do not make offers that are much higher than the employee's skills justify.     Put new employees to work right away.

    2. Do not encourage employees of a competitor to leave enmasse.

    3. Prohibit new employees from taking written or electronic materials from former employer.