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Employer Violated ERISA By Terminating Employee

Many employers offer health care plans and other benefits that fall under the purview of the Employee Retirement Income Security Act of 1974 (ERISA). A recent federal court decision serves as a reminder that employers need to know their legal rights and limits regarding employee terminations and ERISA-protected benefits.

Plaintiff’s Argument
In Kairys v. S. Pines Trucking, Inc., a former employee brought a discrimination case contending, among other things, that he was terminated in retaliation for substantial medical expense claims and anticipated future use of his employer’s self-insured ERISA health plan.

The plaintiff argued that his employer violated Section 510 of ERISA, which makes it unlawful to:

  • Discharge, fine, suspend, expel, discipline, or discriminate against a participant for exercising a right to which the participant is entitled under an employee benefits plan, or
  • Interfere with attainment of any right to which a participant may become entitled under the plan

The employer claimed that the employee’s position was eliminated, and his job was intended to be temporary and had become unnecessary.

Court’s Decision
The U.S. District Court for the Western District of Pennsylvania rejected the employer’s argument. It held that the employer retaliated against the employee for exercising his rights to ERISA-protected benefits. Under Section 510, the court explained, the employee must show that there was a causal connection between his termination and his use of an employee benefits plan. The court determined that the employer’s explanation was pretextual (false) for several reasons.

For starters, the employee was never told his job was temporary and, less than two months after his termination, another employee was borrowed from within the company to perform his duties. Furthermore, the employee showed that the employer closely tracked invoices for its self-insured, ERISA plan and that, though the information was ‘de-identified,’ it would be easy for the employer to identify participants because there were so few employees. The plaintiff also demonstrated that the employer was aware that he’d need further costly medical care.

Noting that the employee was terminated shortly before a new benefits year started, the court concluded that the evidence showed retaliation for use of benefits and specific intent to prevent future use of benefits. The court awarded the employee equitable relief in the form of reasonable attorneys’ fees and costs, as well as $67,500 in front pay — roughly the difference between the compensation he’d have received in his former position and that he’d receive with his new employer for a five-year period. The employer has appealed.

Notable Outcome
Most Section 510 claims against ERISA welfare plans are unsuccessful. When a participant does prevail, a court is generally permitted to award only appropriate ‘equitable’ relief, such as reinstatement, to remedy the violation. Monetary damages are usually unavailable.

Where reinstatement is impractical or not feasible, an employee may be left without a remedy because some courts have rejected claims for lost benefits and back pay. Notably, however, the court in Kairys found, “it most appropriate to determine a front pay period by analogizing it as closely as possible to reinstatement — the preferred remedy this award seeks to approximate.”

Work with your legal and benefits advisors to ensure you stay in compliance with ERISA plans and other employee benefits.

Kairys v. S. Pines Trucking, Inc., No. 2:19-CV-1031-NR, March 31, 2022 (U.S. District Court, W.D. Pennsylvania)

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