Thomas V. Engfer vs. General Dynamics Advanced Information Systems, Inc.

Respondent Thomas V. Engfer ended his employment with General Dynamics

Advanced Information Systems, Inc., in December 2011. Thereafter, Engfer applied for

and received state unemployment benefits from appellant Department of Employment

and Economic Development (DEED), and supplemental unemployment benefits through

a plan offered by General Dynamics. DEED subsequently reviewed the SUB plan

payments, determined that the payments counted as “wages” under Minn. Stat.

§ 268.035, subd 29(a) (2014),1 and concluded that Engfer had been overpaid state

unemployment benefits. An unemployment-law judge (ULJ) affirmed DEED’s

overpayment determination. The court of appeals reversed, concluding that the

Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001-1461 (2012),

preempts a timing provision in Minn. Stat. § 268.035, subd. 29(a)(13), which requires

that a SUB plan “provide supplemental payments only for those weeks the applicant has

been paid regular, extended, or additional unemployment benefits” in order for the

supplemental payments to be excluded from the definition of “wages.” The court of

appeals therefore concluded that Engfer was entitled to keep the state unemployment

benefits. We affirm the decision of the court of appeals.

Thomas Engfer was laid off by his employer General Dynamics Advanced

Information Systems as part of a workforce reduction. When Engfer’s employment

ended, he was offered the opportunity to participate in a SUB plan established by General

Dynamics. The weekly SUB plan payments were intended to supplement Engfer’s

weekly state unemployment benefits, and when combined, equaled 100 percent of his

normal weekly gross pay prior to termination. The SUB plan required Engfer to apply

and be found eligible for state unemployment benefits and to contact General Dynamics’

plan management firm on a weekly basis to confirm his continued eligibility for those

1 In the 2014 session, the Legislature amended Minn. Stat. § 268.035, subd. 29(a)(12), and renumbered the provision as subdivision 29(a)(13). Act of May 16, 2014, ch. 251, art. 1, § 1, 2014 Minn. Laws 841, 842. The amendment does not affect the issues presented here, other than to change the numbering of the subdivision. We therefore use the current subdivision numbering for section 268.035.

4

benefits. According to the plan, Engfer would receive SUB plan payments, even when

ineligible for state unemployment benefits, in three separate circumstances: (1) during

the 1-week “waiting period” for state unemployment benefits, (2) if he had insufficient

earnings for state benefits, and (3) if his state benefits expired first. The SUB plan

provided 26 weeks of payments, after which Engfer would continue to receive his state

unemployment benefits.

Engfer established a benefit account with DEED on December 18, 2011. He

began receiving benefits under the SUB plan immediately and state unemployment

benefits after the 1-week waiting period. He received $597 every week in state

unemployment benefits and $2,369 every 2 weeks in SUB plan payments. The SUB plan

payments continued through July 5, 2012, and ended before Engfer’s eligibility for state

unemployment benefits expired. Engfer received a total of $31,398 in payments from the

SUB plan.

In January 2013, DEED relied upon the definition of “wages” in Minn. Stat.

§ 268.035, subd. 29(a), to conclude that Engfer was not eligible for state unemployment

benefits during the period he was receiving supplemental payments through the SUB

plan. Because the SUB plan paid benefits during weeks in which plan participants were

not eligible to receive state unemployment benefits—specifically, the 1-week waiting

period—DEED determined that the SUB plan payments do not qualify for the exclusion

from “wages” under the Minnesota unemployment statutes. See Minn. Stat. § 268.035,

subd. 29(a)(13) (stating that “wages” do not include “payments made to supplement

unemployment benefits under a plan established by an employer” if the plan meets

5

certain conditions, including the condition that the plan provides supplemental payments

only for those weeks the applicant has been paid unemployment benefits). Therefore,

DEED notified Engfer that he had been overpaid $10,746 in state unemployment

benefits. See Minn. Stat. § 268.085, subd. 3(a)(2) (2012) (providing generally that

applicants are not eligible to receive unemployment benefits for weeks they have

received payments that are considered “wages” equal to or in excess of their

unemployment benefit amount).

Engfer appealed the overpayment determination, and a ULJ affirmed. Engfer

requested reconsideration, but did not challenge the ULJ’s conclusion that, under Minn.

Stat. § 268.035, subd. 29(a)(13), the SUB plan payments qualify as “wages.” Instead,

Engfer argued that the SUB plan was not valid under ERISA, 29 U.S.C. §§ 1001-461.

The ULJ again affirmed, concluding that whether the SUB plan was valid under ERISA

was not relevant to the determination of whether the plan provisions affected Engfer’s

eligibility for state unemployment benefits.

The court of appeals reversed the ULJ’s decision in a divided decision, concluding

that ERISA preempts the timing provision in Minn. Stat. § 268.035, subd. 29(a)(13),

which provides that, in order for SUB plan payments to be excluded from the definition

of “wages,” “[t]he plan must provide supplemental payments only for those weeks the

applicant has been paid regular, extended, or additional unemployment benefits.” Engfer

v. Gen. Dynamics Adv. Info. Sys., Inc., 844 N.W.2d 236, 241 (Minn. App. 2014). The

dissent concluded that the provision is not preempted by ERISA. 844 N.W.2d at 244

(Schellhas, J., dissenting). We granted review to resolve the ERISA preemption issue.

6

I.

DEED argues that the court of appeals erred in concluding that ERISA preempts

what we refer to as “the timing provision” of Minn. Stat. § 268.035, subd. 29(a)(13),

which provides that, in determining eligibility for state unemployment benefits, SUB plan

payments are excluded from the definition of “wages” only if, among other conditions,

the plan “provide[s] supplemental payments only for those weeks the applicant has been

paid regular, extended, or additional unemployment benefits.” Specifically, DEED

argues that the timing provision does not “relate to any employee benefit plan” under 29

U.S.C. § 1144(a), and therefore the timing provision is not preempted by ERISA.

Alternatively, DEED argues that the General Dynamics plan is exempt from ERISA

coverage under 29 U.S.C. § 1003(b) because the plan is maintained solely for the purpose

of complying with applicable unemployment compensation laws. Engfer responds that

the court of appeals correctly ruled that there was no overpayment of state unemployment

benefits because ERISA preempts the timing provision.

This appeal concerns the interpretation and application of the ERISA preemption

clause, which provides:

Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title.

29 U.S.C. § 1144(a). To resolve the preemption question, we will first address whether

the timing provision in Minn. Stat. § 268.035, subd. 29(a)(13), “relate[s] to” an

“employee benefit plan” under ERISA. 29 U.S.C. § 1144(a). We then will address

7

whether the General Dynamics plan is exempt from ERISA coverage under 29 U.S.C.

§ 1003(b).

Statutory interpretation is a question of law that we review de novo. In re Welfare

of J.J.P., 831 N.W.2d 260, 264 (Minn. 2013). Our goal in interpreting a state statute is to

ascertain and effectuate the intent of the Legislature. Minn. Stat. § 645.16 (2014). When

interpreting a statute, we give words and phrases their plain and ordinary meaning. Staab

v. Diocese of St. Cloud, 813 N.W.2d 68, 72 (Minn. 2012). Further, we read the statute as

a whole and give effect to all of its provisions. Our first step is to examine the language

of the statute to determine whether it is ambiguous. Premier Bank v. Becker Dev., LLC,

785 N.W.2d 753, 759 (Minn. 2010). Statutory language is ambiguous only if, as applied

to the facts of the particular case, it is susceptible to more than one reasonable

interpretation. Am. Family Ins. Grp. v. Schroedl, 616 N.W.2d 273, 277 (Minn. 2000). If

the statutory language is unambiguous, we must enforce the plain meaning of the statute

and not explore the spirit or purpose of the law. Premier Bank, 785 N.W.2d at 759.

Our approach in interpreting a statute enacted by Congress is the same. We first

examine the language of the statute and give the words used their ordinary meaning.

Lawson v. FMR LLC, ___ U.S. ___, 134 S. Ct. 1158, 1165 (2014). When a statute’s

language is plain, the sole function of the courts is to enforce the statute according to its

terms. Sebelius v. Cloer, ___ U.S. ___, 133 S. Ct. 1886, 1896 (2013). We must presume

that “a legislature says in a statute what it means and means in a statute what is says.”

Conn. Nat’l Bank v. Germain, 503 U.S. 249, 253-54 (1992). Thus, when the words of the

8

statute are unambiguous, the first step is also the last, and “judicial inquiry is complete.”

Rubin v. United States, 449 U.S. 424, 430 (1981).

A.

We begin our analysis with the state statutory provision. The Minnesota

Unemployment Insurance Law provides temporary partial wage replacement to workers

who are unemployed through no fault of their own. Minn. Stat. § 268.03, subd. 1 (2014).

An applicant is not eligible for state unemployment benefits for any week he or she

receives “wages” from his or her employer after completion of employment. See Minn.

Stat. § 268.085, subd. 3(a)(2) (2012). The term “wages” is defined in Minn. Stat.

§ 268.035, subd. 29 (2014).2 The statute excludes certain types of payments from the

definition of “wages,” including payments made under SUB plans that meet certain

statutory conditions. See Minn. Stat. § 268.035, subd. 29(a)(1)-(17).

Subdivision 29(a)(13) generally excludes SUB plan payments from the definition

of “wages.” Under Minn. Stat. § 268.035, subd. 29(a)(13), “payments made to

supplement unemployment benefits under a plan established by an employer” are not

“wages” for purposes of Minnesota unemployment law. But the statute requires that the

plan satisfy the following conditions in order for the exclusion to be available: 2 “Wages” generally means “all compensation for employment, including commissions; bonuses, awards, and prizes; severance payments; standby pay; vacation and holiday pay; back pay as of the date of payment; tips and gratuities paid to an employee by a customer of an employer and accounted for by the employee to the employer; sickness and accident disability payments, except as otherwise provided in this subdivision; and the cash value of housing, utilities, meals, exchanges of services, and any other goods and services provided to compensate an employee.” Minn. Stat. § 268.035, subd. 29(a).

9

The plan must provide supplemental payments solely for the supplementing of weekly state or federal unemployment benefits. The plan must provide supplemental payments only for those weeks the applicant has been paid regular, extended, or additional unemployment benefits. The supplemental payments, when combined with the applicant’s weekly unemployment benefits paid, may not exceed the applicant’s regular weekly pay. The plan must not allow the assignment of supplemental payments or provide for any type of additional payment. The plan must not require any consideration from the applicant, other than a release of claims, and must not be designed for the purpose of avoiding the payment of Social Security obligations, or unemployment taxes on money disbursed from the plan.

Id. In this case, the General Dynamics SUB plan did not comply with the timing

provision, which provides that “[t]he plan must provide supplemental payments only for

those weeks the applicant has been paid regular, extended, or additional unemployment

benefits.” Id. Therefore, the supplemental payments that Engfer received under the

General Dynamics SUB plan are counted as “wages” for purposes of determining his

eligibility for unemployment benefits. Minn. Stat. § 268.035, subd. 29.

B.

There is no dispute that the General Dynamics SUB plan did not comply with the

timing provision in Minn. Stat. § 268.035, subd. 29(a)(13). The dispute here centers on

whether ERISA preempts the timing provision. ERISA is a comprehensive federal law

“designed to promote the interests of employees and their beneficiaries in employee

benefit plans.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983). ERISA imposes

participation, funding, and vesting requirements on employee benefit plans. Ingersoll

Rand Co. v. McClendon, 498 U.S. 133, 137 (1990). ERISA also sets various uniform

standards, including rules concerning reporting, disclosure, and fiduciary responsibility,

for covered plans. Shaw, 463 U.S. at 91.

10

The determination of whether a state law is preempted by federal law is a question

of congressional intent. Ingersoll-Rand, 498 U.S. at 137-38. Congressional purpose is

“the ultimate touchstone” of the preemption inquiry. Id. at 138. According to the

Supreme Court, Congress intended to make the regulation of employee benefit plans

“exclusively a federal concern,” Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523

(1981), and to “avoid a multiplicity of regulation in order to permit the nationally

uniform administration of employee benefit plans,” N.Y. State Conference of Blue Cross

& Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 657 (1995). To discern the

intent of Congress, we examine the statutory language and the structure of the statute. Id.

at 655; Shaw, 463 U.S. at 95.

Our analysis begins with the language of the ERISA preemption clause, which

provides that the provisions of ERISA “shall supersede any and all State laws insofar as

they may now or hereafter relate to any employee benefit plan described in section

1003(a) of this title and not exempt under section 1003(b) of this title.” 29 U.S.C.

§ 1144(a). The Supreme Court has observed that the language of the ERISA preemption

clause is deliberately broad. Ingersoll-Rand, 498 U.S. at 138. Specifically, ERISA

preempts any state law that “relate[s] to any employee benefit plan” described in section

1003(a) and that is not exempt under section 1003(b). 29 U.S.C. § 1144(a). In Alessi, the

Supreme Court explained the ERISA preemption analysis under 29 U.S.C. § 1144(a). On

the one hand, the Court concluded the only state laws that survive, or fall outside, the

broad reach of the ERISA preemption clause are those that do not “relate to” employee

benefits plans under section 1003(a) of ERISA. 451 U.S. at 523 n.20. On the other hand,

11

a state law that “relate[s] to” employee benefit plans under section 1003(a) of ERISA,

may nonetheless “survive ERISA preemption” if all of the employee benefit plans

covered by the state law fall within the exception to ERISA coverage under section

1003(b). Id.

DEED concedes that the General Dynamics SUB plan is an “employee benefit

plan” under ERISA. An “employee benefit plan” includes an “employee welfare benefit

plan” established or maintained by an employer for the purpose of providing its

participants or their beneficiaries with certain benefits set forth in ERISA, including

unemployment benefits. 29 U.S.C. §§ 1002(1), 1003(a). In this case, General Dynamics

established the SUB plan for the purpose of providing plan participants with

supplemental unemployment benefits in addition to state or federal unemployment

benefits. Therefore, the General Dynamics SUB plan, which is covered by Minn. Stat.

§ 268.035, subd. 29(a)(13), satisfies the definition of an “employee benefit plan”

described in section 1003(a) of ERISA.3

C.

Having established that the General Dynamics SUB plan is an “employee benefit

plan” under ERISA, we must next determine whether the timing provision in Minn. Stat.

§ 268.035, subd. 29(a)(13), “relate[s] to” the plan for purposes of the ERISA preemption

clause, 29 U.S.C. § 1144(a). DEED argues that the timing provision in subdivision 3 The dissent argues that because the General Dynamics SUB plan is not part of the record, the court is unable to decide whether the plan is covered by ERISA. Because DEED concedes that the General Dynamics plan satisfies the definition of an “employee benefit plan” under ERISA, this argument fails.

12

29(a)(13), which requires the SUB plan to pay benefits only for weeks that the plan

participant was paid unemployment benefits, does not “relate to” the plan and therefore is

not preempted under 29 U.S.C. § 1144(a). According to DEED, the conditions in

subdivision 29(a)(13) merely identify the supplemental payments that are excluded from

the calculation of an individual’s “wages” for purposes of determining eligibility for state

unemployment benefits, and therefore the provision does not interfere with ongoing SUB

plan payments or bind plan administrators in a particular way. Engfer responds that there

is “no doubt” that the timing provision “relate[s] to” the General Dynamics plan because

the provision places restrictions on the timing of supplemental payments by limiting

payments only to weeks the applicant has been paid unemployment benefits.

The Supreme Court has held that the phrase “relate to any employee benefit plan”

in the ERISA preemption clause, 29 U.S.C. § 1144(a), means a state law that “has a

connection with or reference to such a plan.” N.Y. State Conference of Blue Cross &

Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656 (1995) (quoting Shaw v. Delta

Air Lines, Inc., 463 U.S. 85, 96-97 (1983)). The Court has observed that the phrase

“relate[s] to” is deliberately broad and expansive, and establishes that regulation of

employee benefit plans is exclusively a federal concern. Ingersoll-Rand Co. v.

McClendon, 498 U.S. 133, 138 (1990). Notably, Congress used equally broad language

to define “State law” as “all laws, decisions, rules, regulations, or other State action

having the effect of law.” 29 U.S.C. § 1144(c)(1). According to the Court, a state law is

preempted “even if the law is not specifically designed to affect [ERISA] plans, or the

effect is only indirect.” Ingersoll-Rand, 498 U.S. at 139. Thus, the Court’s ERISA

13

preemption jurisprudence examines whether the state law has a connection with or makes

reference to an ERISA employee benefit plan to determine whether the state law

“relate[s] to” the plan. Travelers, 514 U.S. at 656.

We begin our analysis by examining whether the timing provision in Minn. Stat.

§ 268.035, subd. 29(a)(13), has “a connection with” the General Dynamics SUB plan.

Travelers, 514 U.S. at 656. To determine whether a state law has the forbidden

“connection with” an employee benefit plan, we examine the objectives of ERISA as a

guide to the scope of the state law that would survive preemption, and the nature of the

effect of the state law on the plan. Cal. Div. of Labor Standards Enf’t v. Dillingham

Constr., N.A., Inc., 519 U.S. 316, 325 (1997); see also Travelers, 514 U.S. at 661.

In Egelhoff v. Egelhoff, the Supreme Court considered whether a Washington state

law, which provided for the automatic revocation upon divorce of the spousal beneficiary

designation for nonprobate assets consisting of life insurance proceeds and pension plan

benefits, had a connection with ERISA-covered plans and therefore was preempted by

ERISA. 532 U.S. 141, 143 (2001). Applying the framework from Travelers and

Dillingham, the Court concluded that the state statute had an impermissible connection

with an ERISA plan because it bound plan administrators to a particular choice of rules

for determining beneficiary status. Id. at 147. Specifically, plan administrators were

required to pay benefits to the beneficiaries chosen by the state law, rather than to those

identified in the plan documents. Id. The state statute therefore implicated the payment

of benefits, an area of core ERISA concern. Id. Moreover, the state statute interfered

with nationally uniform plan administration. Id. at 148. Specifically, plan administrators

14

could not make payments simply by identifying the beneficiary specified in the plan

documents; instead, the administrators were forced to familiarize themselves with state

statutes in order to determine whether the named beneficiary’s status had been “revoked”

by operation of the state law. Id. at 148-49.

We conclude that the timing provision in Minn. Stat. § 268.035, subd. 29(a)(13),

which requires a SUB plan to pay benefits only for weeks that the plan participant was

paid unemployment benefits, has a “connection with” the General Dynamics plan.4 Two

reasons support this conclusion. First, the timing provision in subdivision 29(a)(13)

restricts the ability of a SUB plan to supplement state unemployment benefits during

certain time periods, such as during the 1-week waiting period for state unemployment

benefits. As a result, supplemental benefits paid to an unemployed individual during

restricted time periods constitute “wages” and affect the individual’s eligibility for state

unemployment compensation benefits. See Minn. Stat. § 268.085, subd. 3(a)(2).

Moreover, if the individual is not eligible for state unemployment benefits because the

SUB plan payments constitute “wages,” then the individual is not eligible for SUB plan

payments either because the SUB plan requires plan participants to prove and maintain

eligibility for state unemployment benefits.

4 The dissent correctly points out that there is a presumption against preemption in areas of traditional state regulation. The Court, however, explained in Egelhoff that this presumption may be overcome when Congress has “made clear its desire for preemption.” 532 U.S. at 151. The Court indicated that it has not “hesitated to find state . . . law pre-empted when it conflicts with ERISA or relates to ERISA plans” when there is a connection between the state law and an ERISA plan. Id. We rely on that connection here too.

15

Consequently, Minn. Stat. § 268.035, subd. 29(a)(13), operates to undermine the

purpose of a SUB plan to supplement state unemployment benefits. The payment of

ERISA plan benefits is an area of core ERISA concern. Egelhoff, 532 U.S. at 147

(concluding that the state law was preempted because it governed the payment of

benefits). To avoid this result, plan administrators would need to modify SUB plans for

Minnesota participants in order to comply with Minnesota law. Therefore, the state

statute requires plan administrators to make certain choices in providing supplemental

unemployment benefits to unemployed individuals in Minnesota.5

Second, the state law interferes with the ERISA objective of nationally uniform

administration of employee benefit plans. See Egelhoff, 532 U.S. at 148; Travelers, 514

U.S. at 656-57. Such uniformity is impossible if SUB plans are subject to different

conditions in different states. Here, plan administrators would need to familiarize

5 The dissent maintains that the conditions set forth in Minn. Stat. § 268.035, subd. 29(a)(13), do not impose any requirements on SUB plans because plan administrators may choose to provide SUB benefits in compliance with state law or choose to ignore state law and provide benefits in any manner they wish. The dissent’s argument that plan administrators have a choice is not a choice at all. The dissent acknowledges that “the premise” of the General Dynamics SUB plan is that discharged employees will receive both state unemployment benefits and SUB plan payments. The dissent further acknowledges that federal law requires SUB plan payments to be linked to the receipt of state unemployment compensation. But when a SUB plan does not comply with state law, as here, plan participants delay or lose their eligibility for state unemployment benefits. Consequently, the supplemental payments are not in fact supplemental. Moreover, since payments under a SUB plan “depend[] on state benefits,” as the dissent recognizes, any benefits provided under a nonconforming SUB plan are purely illusory. In short, the failure of the SUB plan to comply with state law eviscerates the very premise of the plan, as well as the benefits contemplated to be paid under the plan. Therefore, the effect of the Minnesota law on the General Dynamics SUB plan cannot reasonably be characterized as merely “incidental.”

16

themselves with Minnesota law so that they can determine when SUB plan payments

may be made without negatively affecting the participant’s eligibility for state

unemployment benefits. See Egelhoff, 532 U.S. 148-49. Requiring SUB plan

administrators to master the relevant laws of the various states would undermine the goal

of Congress to “minimize the administrative and financial burden” on plan

administrators. Ingersoll-Rand, 498 U.S. at 142. “The ‘tailoring of plans and employer

conduct to the peculiarities of the law of each jurisdiction’ is exactly the burden ERISA

seeks to eliminate.” Egelhoff, 532 U.S. at 151 (quoting Ingersoll-Rand, 498 U.S. at 142).

DEED and the dissent argue that the conditions set forth in subdivision 29(a)(13)

do not come into effect until after the participant has received SUB plan payments, and

therefore, the conditions do not affect SUB plans. It may be factually correct that the

calculation of “wages” under the unemployment statutes and the determination of

eligibility for state unemployment benefits are not resolved until after the SUB plan

payments have been made. But the proper inquiry is whether the state law “relate[s] to”

an ERISA-governed employee benefit plan. 29 U.S.C. § 1144(a). That inquiry does not

depend on the temporal aspect of when the benefits are received. Instead, the inquiry

focuses on whether plan administrators may need to restructure employee benefit plans to

comply with the conditions of subdivision 29(a)(13). See Egelhoff, 532 U.S. at 147.

Here, if the state law is not preempted, plan administrators would need to change their

SUB plans to achieve the objective of supplementing state unemployment benefits. Thus,

the state law directly affects the substantive coverage and administration of SUB plans.

17

In sum, we hold that the timing provision in Minn. Stat. § 268.035,

subd. 29(a)(13), which requires SUB plans to provide supplemental payments only for

weeks that the plan participant was paid unemployment benefits in order for the

supplemental payments to be excluded from the definition of “wages,” relates to the

General Dynamics SUB plan, an employee benefit plan under ERISA. Specifically, the

statutory condition has a connection with the substantive coverage and administration of

the plan. Moreover, the condition effectively binds plan administrators to certain choices

and interferes with the ERISA objectives of avoiding a multiplicity of regulation and

permitting the nationally uniform administration of employee benefit plans.6

II.

Having concluded that the timing provision in Minn. Stat. § 268.035, subd.

29(a)(13), is connected with and thus “relate[s] to” the General Dynamics plan, an

employee benefit plan described in 29 U.S.C. § 1003(a), the timing provision is

preempted by ERISA unless the General Dynamics plan is exempt from ERISA coverage

under 29 U.S.C. § 1003(b). 29 U.S.C. § 1144(a). DEED argues that the General

Dynamics plan is exempt from ERISA coverage under 29 U.S.C. § 1003(b)(3) because

the plan is maintained solely for the purpose of complying with applicable unemployment

compensation laws. Engfer counters that DEED failed to raise the exemption issue 6 Because we conclude that the timing provision in Minn. Stat. § 268.035, subd. 29(a)(13), has a “connection with” an employee benefit plan, we need not consider whether the timing provision also makes “reference to” such a plan. N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656 (1995) (holding that a state law that has a “connection with or reference to” an ERISA employee benefit plan is preempted by ERISA (emphasis added)).

18

below, and therefore the issue is not properly before us. Engfer also argues that DEED’s

argument lacks merit.

We first address whether to consider the exemption issue, because DEED did not

raise this issue in the court of appeals. Although generally we will not consider an issue

raised for the first time on appeal, State v. Sontoya, 788 N.W.2d 868, 874 (Minn. 2010),

we may review any “matter as the interest of justice may require,” Minn. R. Civ. App. P.

103.04. Further, we may base our decision upon a theory not previously presented or

considered where the issue is “plainly decisive of the entire controversy on its merits”

and where “there is no possible advantage or disadvantage to either party in not having

had a prior ruling by the trial court on the question.” Watson v. United Servs. Auto.

Ass’n, 566 N.W.2d 683, 687 (Minn. 1997) (quoting Holen v. Minneapolis-St. Paul Metro.

Airports Comm’n, 250 Minn. 130, 135, 84 N.W.2d 282, 286 (1957)).

Because resolving whether the General Dynamics plan is exempt from ERISA

coverage under 29 U.S.C. § 1003(b) is clearly essential to our ERISA preemption

analysis, we will resolve the issue. See 29 U.S.C. § 1144(a) (stating that a state law is

preempted if it relates to “any employee benefit plan described in section 1003(a) of this

title and not exempt under section 1003(b) of this title” (emphasis added)); Alessi v.

Raybestos-Manhattan, Inc., 451 U.S. 504, 523 n.20 (1981) (“The only relevant state laws,

or portions thereof, that survive [ERISA] preemption . . . are those relating to plans that

are themselves exempted from ERISA’s scope.”). Moreover, the parties have briefed the

issue, and all of the relevant facts are before us.

19

The ERISA exemption provision sets forth certain types of employee benefit plans

that are not covered by ERISA. 29 U.S.C. § 1003(b). It provides in relevant part:

The provisions of this subchapter shall not apply to any employee benefit plan if . . . (3) such plan is maintained solely for the purpose of complying with applicable workmen’s compensation laws or unemployment compensation or disability insurance laws. 29 U.S.C. § 1003(b)(3).7

We conclude that the text of the ERISA exemption clause in section 1003(b)(3) is

clear and unambiguous. Specifically, an employee benefit plan that is maintained solely

for the purpose of complying with state unemployment compensation laws is not covered

by ERISA.

In Shaw v. Delta Air Lines, Inc., the Supreme Court explained the meaning of the

exemption in section 1003(b)(3). 463 U.S. 85, 107 (1983). The Shaw Court considered

whether a New York disability benefits law, which required that employers pay sick

leave benefits to employees who were unable to work because of pregnancy, was

preempted by ERISA. Id. As part of its analysis, the Court considered whether the

employee benefit plans affected by the law were exempt from ERISA coverage under 29

U.S.C. § 1003(b)(3). Id. The Court concluded that to satisfy the exemption provision in

section 1003(b)(3), the plan, as an administrative unit, must provide “only those benefits

required by the applicable state law.” Id. The Court reasoned that the use of the word

7 ERISA also exempts from its coverage government plans, church plans, and plans maintained outside the United States primarily for the benefit of nonresident aliens, or unfunded excess benefit plans. 29 U.S.C. § 1003(b)(1)-(2), (4)-(5). These exemptions are not applicable to the SUB plan at issue here.

20

“solely” in section 1003(b)(3) demonstrates that to be exempt from ERISA, the purpose

of the entire plan must be to comply with the applicable state disability insurance law. Id.

The Court concluded that the employer’s multi-benefit plan was not exempt from ERISA

coverage because the plan was not a separately administered plan maintained solely to

comply with New York disability law. Id. at 108.

The Shaw Court observed, however, that a state “may require an employer to

maintain a disability plan complying with state law as a separate administrative unit.” Id.

According to the Court, if a state “is not satisfied that the ERISA plan comports with the

requirements of its disability insurance law, it may compel the employer to maintain a

separate plan that does comply.” Id. But the state may not require employers to alter

ERISA plans. Id. Moreover, employee benefit plans that not only provide benefits

required by state disability insurance laws but also “more broadly serve employee needs

as a result of collective bargaining” are not exempt under section 1003(b)(3). Id. at 107

(quoting Alessi, 451 U.S. at 523 n.20).

We conclude that the General Dynamics SUB plan, which is covered by Minn.

Stat. § 268.035, subd. 29(a)(13), is not exempt from ERISA coverage under 29 U.S.C.

§ 1003(b)(3). The scope of the exemption clause under section 1003(b)(3) is limited to

plans maintained solely to comply with applicable state workers’ compensation,

unemployment compensation, or disability insurance laws. The phrase “maintained

solely to comply with” applicable state laws means a plan that “provides only those

benefits required” by the state laws. Shaw, 463 U.S. at 107. Minnesota law, however,

does not require employers to pay supplemental unemployment benefits. The General

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Dynamics SUB plan is designed and maintained to provide supplemental unemployment

compensation benefits in excess of the benefits provided under state law. Therefore, the

plan is not maintained solely for the purpose of complying with applicable

unemployment compensation laws.8

DEED urges us to consider the context in which the ERISA exemption provision

was enacted. Specifically, DEED notes that, unlike state disability insurance and

workers’ compensation laws, no state requires employers to maintain private

unemployment compensation benefit plans. Because SUB plans were regulated by the

states at the time ERISA was enacted, DEED contends that Congress intended to carve

out an exemption for SUB plans in section 1003(b)(3), as this is the only type of plan that

an employer would maintain to comply with a state’s unemployment compensation laws.

We conclude that the language of section 1003(b)(3) is unambiguous, and

therefore we need not go beyond the text of the statute. When the words of a statute are

unambiguous, judicial inquiry is complete. Bank One Chi., N.A. v. Midwest Bank &

Trust Co., 516 U.S. 264, 279 (1996) (Scalia, J., concurring in part and concurring in

judgment) (“[A] law means what its text most appropriately conveys, whatever the

Congress that enacted it might have ‘intended.’ The law is what the law says, and we

should content ourselves with reading it rather than psychoanalyzing those who enacted

it.”); Ratzlaf v. United States, 510 U.S. 135, 147-48 (1994) (“[W]e do not resort to

legislative history to cloud a statutory text that is clear.”); Rubin v. United States, 449 8 The dissent rightly concedes that the SUB plan at issue in this case is not exempt from ERISA coverage under 29 U.S.C. § 1003(b)(3).

22

U.S. 424, 430 (1981). Regardless of the status of SUB plans at the time of ERISA’s

enactment, ERISA is clear that such a plan must be maintained solely to comply with

state unemployment compensation laws to be exempt under section 1003(b).

DEED next argues that SUB plans must comply with state unemployment

compensation laws because an employee’s receipt of supplemental unemployment

benefits is conditioned on the receipt of state unemployment benefits. DEED’s argument

is unavailing. The inquiry under section 1003(b)(3) is not whether the SUB plan

complies with state unemployment laws; instead, the inquiry is whether the supplemental

plan is “maintained solely for the purpose of complying with” state unemployment laws.

29 U.S.C. § 1003(b)(3) (emphasis added). SUB plans like the General Dynamics plan are

not maintained solely for the purpose of complying with applicable state unemployment

laws. Therefore, the General Dynamics plan is not exempt from ERISA coverage under

section 1003(b)(3), and in turn, based upon our analysis above, the conditions placed

upon SUB plans by the state law do not survive ERISA preemption. See Alessi, 451 U.S.

at 523 n.20.

In sum, we conclude that ERISA preempts the timing provision in Minn. Stat.

§ 268.035, subd. 29(a)(13), relating to supplemental payments under a SUB plan because the provision “relate[s] to” an employee benefit plan under 29 U.S.C. § 1003(a), and the General Dynamics SUB plan is not maintained solely for the purpose of complying with applicable unemployment compensation laws under 29 U.S.C. § 1003(b)(3). Accordingly, the SUB plan payments Engfer received are not “wages” for purposes of his eligibility for state unemployment benefits, and he was not overpaid state unemployment benefits.

Affirmed.