Third Circuit Affirms Damages for ERISA Retaliation Claim

On July 25, 2023, the Third Circuit Court of Appeals (the Third Circuit) affirmed an award of damages for retaliation by the United States District Court for the Western District of Pennsylvania. One of the plaintiff’s claims was based on ERISA Section 510, which makes it unlawful to discharge a participant or beneficiary for exercising a right under an employee benefit plan or for the purpose of interfering with the attainment of any right under the plan.

The plaintiff in this case was an employee hired as VP of Sales by the owner and CEO of the employer/plan sponsor. Soon after starting work, the employee was diagnosed with a condition that required a hip replacement. The employee notified his supervisor, the CFO of a sister company also owned by the CEO, that he would take a week of paid time off to have the surgery. The employee also told his supervisor that he would need to have the other hip replaced in the future.

The ERISA group health plan in this case covered a total of 20 employees of three related companies, and the employee was one of three in the company he worked for. The health plan was self-funded and the employer/plan sponsor received weekly invoices that listed claim costs. Although employees were not identified by name on the invoices, there were so few employees that it was possible to determine to whom the claim expenses applied. The expenses for the employee’s claims spiked following his surgery. At trial, the CEO testified that he may have looked at the claims cost invoices as part of his job reviewing the company’s financials. Four months after the surgery, the CEO fired the employee, claiming that his position was being eliminated even though the employee had earned an $11,458.00 bonus a week before he was fired. Less than two months later, the company hired another employee whose job duties included sales maintenance (maintaining customer relationships), which was part of the employee’s job prior to being terminated.

The employee sued his former employer for several violations, including discrimination and retaliation under the Americans with Disabilities Act (ADA), discrimination under the Age Discrimination in Employment Act (ADEA), retaliation under ERISA, breach of contract and violations of two Pennsylvania statutes. The jury found for the employer on the ADA, ADEA, and one of the Pennsylvania state law counts but found for the employee on the other Pennsylvania state count and awarded $5,384.62. The District Court found for the employee on the ERISA retaliation claim and awarded an additional $67,500. The District Court also awarded $111,981.79 in attorneys’ fees. The employer appealed to the Third Circuit on the ERISA and attorneys’ fees awards.

The Third Circuit determined that the decision turned on the findings of fact based on the evidence and testimony at trial. After reviewing all the evidence and the District Court judge’s factual findings, the Third Circuit found that the findings on the ERISA count were not clearly erroneous and affirmed the District Court’s judgment.

This case demonstrates that the remedies provided for participants and beneficiaries under ERISA are alive and well. ERISA requires plan sponsors to always act in the best interests of participants and prohibits employment decisions based on the utilization of plan benefits. Plan sponsors and administrators should avoid, if possible, access to the claims and claims costs of employees and their families by company employees and decision makers to eliminate the possibility of decisions being influenced based on that information.

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