Section 510 of ERISA provides an employee with protection against two types of conduct: adverse action because a plan participant has availed himself of an ERISA right or adverse action to interfere with attainment of an ERISA right. Consequently, the section provides protection, regardless of whether the claim is based on existing or prospective rights under a plan.
From a plaintiff's point of view, Section 510 and age discrimination claims are complementary. Common factual issues provide a strong argument for trying the claims together, thus presenting evidence that a jury hearing only an age claim might not otherwise hear.
The common factual issues stem from the framework used by courts. As with an age discrimination claim, an employee may establish discrimination by producing evidence that establishes a prima facie case and evidence that the stated reason for discharge is false. The common issues present in both claims are useful to the plaintiff because the ADEA does not provide an employee with a claim for a termination motivated entirely on a desire to reduce costs; Section 510, however, does provide a basis for such a claim where a benefit plan is involved.
Thus, an ERISA claim tied to an age discrimination claim could present the strong emotional evidence that is absent in many age discrimination claims – older workers were fired to deprive them of their hard-earned compensation. To fully appreciate positive effects that flow to a plaintiff, one need only consider the sympathies that can be evoked by evidence related to the loss of pension rights when a long-term employee approaching retirement losses his or her job. The problem may be particularly acute if the employee is a participant in a defined benefit plan that calculates retirement benefits using an average of the employee's most recent salary and years of service. In these cases, evidence of savings to the pension plan and the employee's age are particularly problematic, since the employer's contribution obligations may increase significantly in an employee's final years of service. That evidence helps convince a jury of a financial motive for the termination.
Although courts have discretion to order separate trials, the decision is theirs. Consequently, a court may deny an employer's request for separate trials of ERISA and age claims. An option open to the court when faced with jury and non-jury claims is to try the case to the jury and accept the factual findings common to both claims as binding; but accept the verdict concerning the non-jury claims as advisory. An employer should expect that common issues of fact will predominate and thus militate toward a single trial, since evidence related to the existence of a prima facie case (i.e., evidence of facts which, if unexplained, support the inference of discrimination), pretext, and damages will be the same for both claims. Consequently, given the demands of busy trial dockets in many federal courts, one can see reasons of judicial economy that would motivate the court to try ERISA and age claims together.
Where does this leave an employer? Initially, an employer may wish to evaluate whether it could be subject to an ERISA claim. Red flags include the following:
- Existence of a defined benefit plan which is underfunded, or immediate prospects of significant funding obligations
- Underperforming investments that comprise the plan's assets
- Variations in the plan or dual plans, which have the effect of disfavoring employees with a shorter tenure in the company
In addition, information concerning an employer's plans is fully discoverable. Employers must file yearly statements (Form 5500) with the Department of Labor and the Internal Revenue Service, along with various schedules that set forth the health of the plan. The information is accessible through a Freedom of Information Request, and in the context of an ERISA claim is relevant and should be subject to proper discovery requests. Thus the employer should assume that plaintiff's counsel will assess this information and use it to his or her client's advantage.
The presence of these factors does not mean that a termination decision is or will be indefensible. However, an employer saddled with several of these factors should cautiously assess the basis of all decisions to terminate. This requires being mindful of the specific evidence that can help a plaintiff raise an issue of fact on intent, like a written economic estimate concerning the savings associated with the termination the absence of a performance review, statistics related to a group of terminated employees, and the use of subjective methods to select employees for termination.
At times employers create written economic assessments of the cost savings associated with terminations. Where these assessments include the cost savings associated with benefit plans, they could be evidence of intent to interfere with an employee's right to attain benefits under the ERISA plan, especially where the decision-maker or the human resources representative has reviewed the estimates. Depending on who used the economic analysis and how it was used, the analysis and its consideration could constitute direct evidence of discrimination.
Next on the list of potential problems is use of subjective criteria in selecting employees for termination. Courts view the use of subjective criteria as suspect because such criteria are easily fabricated. Examples of problematic subjective reasons for selecting on employee for retention over another include the following: enthusiasm, dedication, soft skill that cannot be taught, and being "upbeat." Use of subjective criteria is aggravated by the absence of performance appraisals or disciplinary reports, since lack of this documentation tends to support suspicion of a completely subjective decision.
In the context of ERISA and age claims, statistics are helpful if they help a plaintiff present a prima facie case of discrimination. Specifically, to show a prima facie case of discrimination, a plaintiff must show that he or she was in a protected group, was terminated (or suffered an adverse employment action), and was replaced by a person outside the protected group, or suffered the adverse employment action under circumstances that, if unexplained, support an inference of discrimination. Statistical evidence that demonstrates that persons in the protected group were disproportionately affected will help a plaintiff establish a prima facie case.
The most important fact to consider in assessing whether an employee's termination can lead to protracted litigation is the credibility of reasons stated by the decision-maker for his or her decision. In reviewing the decision, it is imperative to confirm that there is no evidence of pretext. If an internal review suggests that the stated reason for discharge is false or hard to believe, a court and jury may feel the same way.