Section 510 of the Employee Retirement Income Security Act (ERISA) prohibits employers from retaliating or discriminating against participants in employee benefit plans for exercising rights they are entitled to under the plans. It also prohibits employers from discharging or discriminating against plan participants for the purpose of interfering with the attainment of any right to which the participants may become entitled under a plan. To establish an ERISA benefit interference claim, a plaintiff must demonstrate by the preponderance of evidence that prohibited employer conduct was taken for the purpose of interfering with the attainment of any right the participant may become entitled to under the plan.
Background on ERISA Section 510
Section 510 prohibits two types of conduct: “adverse action taken because a participant availed himself of an ERISA right (an ‘exercise’ or ‘retaliation’ violation), and interference with the attainment of a right under ERISA (an ‘interference’ violation).”[1] The statutory language states:
“It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan, [or ERISA] . . . or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan, [or ERISA]. . . .[2]”
There are four primary causes of action brought by most ERISA plaintiffs:
- claims for penalties under Section 502(a)(1)(A) and Section 502(c) when a company’s plan fail to provide statutorily mandated information;
- claims under Section 502(a)(1)(B) for benefits due under a plan or to enforce rights or to clarify rights under a plan;
- claims for breach of fiduciary duties under Section 502(a)(2); and
- claims under Section 502(a)(3) – ERISA’s “catchall” provision – for injuries that Section 502 does not remedy elsewhere.
Creating independent claims for both “retaliation” and “interference,” ERISA section 510 is very similar to the Family and Medical Leave Act (“FMLA”) which is regularly referenced by employment attorneys. In fact, FMLA and ERISA claims often brought in the same case.
Brief historical background. The US Congress created section 510 “primarily to prevent persons and entities from taking actions that might cut off or interfere with a participant’s ability to collect present or future benefits or which punish a participant for exercising his or her rights under an employee benefit plan.”[3] Congress created section 510 because it was a “crucial part of ERISA because, without it, employers would be able to circumvent the provision of promised benefits.”[4]While section 510 was intended “primarily at preventing unscrupulous employers from discharging or harassing their employees in order to keep them from obtaining vested pension rights,”[5] it applies to non-vested benefits as well.[6] As a result, claims under section 510 often revolve around employer-provided health insurance plans (a non-vested benefit) and the employer’s efforts to avoid added costs under those plans.
Common Scenarios for ERISA 510 Violations
ERISA claims are often overlooked by both employees and Labor and Employment lawyers alike. Below are common scenarios which represents ERISA 510 violations.
- If the employer fires the employee because the employee’s illness would result in increased costs under the employer’s group health insurance plan. This termination would represents a section 510′s “interference” violation.
- An employer also violates section 510’s interference prong by firing an employee because the employee has a sick family member who is either covered under the group health plan, or who may become eligible for it.
- Section 510 may also apply if an employee is fired because the employee previously suffered from a disability that results in higher healthcare costs for the employer (i.e. cancer in remission or a chronic condition that periodically re-appears)
- Termination of older employees to prevent them from vesting in their pensions.
- Laying off older employees because they have higher healthcare
- Taking any steps to stop an employee from attaining group healthcare benefits.
- Failure to comply with a participant’s rollover instructions, resulting in the participant’s account losing value, may constitute a breach of the plan administrator’s fiduciary duty.
- An employer properly delegate claims authority to a third-party administrator (TPA) in accordance with the documents governing the plan and that TPA improperly denies benefits under the Plan.
- An employer improperly classifying an employee or groups of employees as part time workers in order to deny them benefits that they would otherwise be entitled under the Plan.
If you have an ERISA question, call the attorneys at the Tran Law Firm LLP for a free consultation (713) 223-8855.
