Pension & Benefits News Discharged employee can’t show ‘specific intent’ to interfere with ERISA rights
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Wednesday, January 9, 2019

Discharged employee can’t show ‘specific intent’ to interfere with ERISA rights

By Pension and Benefits Editorial Staff

A 44-year-old employee who lost his entitlement to retirement benefits under his employer’s deferred compensation plan when he was terminated “with cause” due to purported performance issues failed to defeat summary judgment on his ERISA Sec. 510 claim since he could not demonstrate “specific intent” to interfere with his rights, a U.S. district court in Washington has ruled. However, he was able to advance his claim that he was discharged in retaliation for complaining about the termination of a coworker with terminal cancer, in violation of the Washington Law Against Discrimination.

Plan terms. The employee worked for a privately-owned insurance and risk management brokerage firm that offered its employees the opportunity to participate in its deferred compensation plan. This retirement plan, which was governed by ERISA, provided payments due upon retirement after age 60, death, or disability, and denied payments to those who resigned before age 60 or who were terminated “with cause.”

A participant in the plan experienced performance issues over a period of years, including being placed on a performance improvement plan for a period of time. Subsequently, he objected to the termination of an employee who was suffering from terminal cancer. Several months later, he was terminated with cause, purportedly due to his “long-term, unresolved performance issues.” He claimed, however, that the firm discharged him so it could divest him of the $1.5 million in retirement benefits he would have been owed under the plan and in retaliation for his objections to the ill employee’s termination.

Exhaustion of remedies. The court rejected the firm’s assertion that the employee was required to exhaust his administrative remedies under ERISA since his claim should have been brought under ERISA Sec. 502(a) and not ERISA Sec. 510. ERISA Sec. 510 prohibits employers from taking adverse employment actions to avoid paying ERISA benefits or to retaliate against employees for claiming ERISA benefits. On the other hand, ERISA Sec. 502(a) permits a plaintiff to recover “benefits due to him under the terms of his plan.”

Here, the employee did not—and could not—claim that he was due benefits under the plan since he was no longer a participant and was not owed benefits at the time of his termination. Because he instead claimed that the firm terminated him “with cause” to interfere with his ability to attain benefits under the plan, he properly brought his claim under ERISA Sec. 510 and was not required to exhaust administrative remedies before suing.

No specific intent. However, he still could not advance his ERISA Sec. 510 claim since he failed to show the firm’s specific intent to interfere with his benefit rights. While the firm may have been “cost conscious” with respect to its obligations under the deferred compensation plan, because the employee was terminated at age 44, any cost savings to the firm would not accrue for another 15 years. A gap of several years between the adverse employment action and the attainment of ERISA rights is, without additional facts suggesting intentional discrimination, too great to be the basis of a prima facie case under ERISA Sec. 510.

SOURCE: O’Farrell v. Parker Smith & Feek, Inc. (DC WA). 

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