What is The Extent of Whistleblower Protection Under ERISA?

Posted on August 8, 2014

The Employee Retirement Income Security Act of 1974 (“ERISA”), includes section 510, which protects a plan participant from retaliation where they exercise their rights under ERISA. That section also protects a participant from retaliation where he or she has given information or has testified or is about to testify in any inquiry or proceeding relating to ERISA. However, the language of the statute is unclear as to whether employees qualify for these protections if they file internal complaints with their employer or plan administrator, rather than with an outside governmental authority.

The federal courts have not been consistent in dealing with this issue. Some have interpreted the statute broadly, deciding that the whistleblower protection provision applies to employees who make internal as well as external complaints. Other courts have decided that making internal complaints only is not enough to be eligible for whistleblower protection.

A recent federal appellate court, in a 2 to 1 decision, held that a one-time, unsolicited complaint about a possible ERISA violation did not constitute providing information in an inquiry as required that is protected under Section 510.  The plaintiff in this case was a trustee of his employer’s retirement plan trust.  He and another trustee were removed as trustees after actively campaigning for the election of two board candidates who won their election, but who the company ultimately refused to seat.  Subsequently, plaintiff sent an email to the chairman of the board of directors asserting that the refusal to seat the board candidates and his removal as trustee was a violation of ERISA and state law.  He threatened that if the violations were not “remedied,” he would go to the Department of Labor and the state regulators.  No further action was taken by the company or the plaintiff.  About six months after the email, the plaintiff was terminated.  He sued, alleging that he was terminated in retaliation for sending the email, which he argued constituted protected conduct under ERISA Section 510.

The court analyzed the statutory language and similar language used in other laws. The issue is whether the language used protects complaints, as opposed to only inquiries based on a complaint, and whether the inquiry must be external one (such as one conducted by a government agency) or is an inquiry by the employer sufficient. The court concluded that Congress had enacted the law concerning protection for giving information with the intent of preventing interference with inquiries and proceedings, as opposed to protecting all persons who disclosed violations of ERISA. The court distinguished the decision of another circuit appeals court that reached the opposite conclusion. The dissenting judge would have followed that other circuit court decision and concluded that unsolicited internal employee grievances should be protected regardless who initiated the inquiry. It is also important that the Department of Labor urged to the court to follow the courts that hold that the internal inquiries are protected under a broader reading of the statute.

Given the conflicting appellate court decisions and the Department of Labor’s position that the statute should be read broadly, employers should be mindful that even unsolicited, internal complaints involving ERISA could be found to be protected for the purposes of ERISA Section 510 claims. Employer’s contemplating any retaliatory action after an ERISA complaint has been lodged should proceed cautiously and only after obtaining the advice of counsel. Moreover, legislation has been introduced in Congress that would specifically protect internal complaints from retaliation, but its fate is uncertain.

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