In George v. Junior Achievement of Central Indiana (pdf), the Seventh Circuit held that ERISA Section 510 protects from retaliation employees who lodge unsolicited, informal complaints regarding alleged violations of ERISA, in addition to those who make complaints or provide information in connection with formal proceedings such as claims procedures, administrative actions or court proceedings. In so holding, the Seventh Circuit joined the Fifth and Ninth Circuits Circuits[1] and widened the split with the Second, Third, and Fourth Circuits.[2]

The plaintiff in George noticed that amounts withheld from his wages had not been contributed to his retirement and health savings accounts by the fiduciaries of those plans, a potential violation of ERISA. He complained to several of his employer’s accounting staff and corporate officers, including the president, and shortly thereafter the withheld funds were repaid to him with interest. Six months later, he was fired. The plaintiff sued his former employer for retaliatory discharge, alleging that the company had fired him in violation of ERISA’s anti-retaliation provision, Section 510. ERISA Section 510 prohibits an employer from discharging or discriminating “against any person because he has given information or testified or is about to testify in any inquiry or proceeding relating to [ERISA]”.

The district court dismissed the complaint, citing cases from the Second, Third and Fourth Circuits requiring an employee to make a formal (as opposed to an informal), solicited complaint before coming within the protection of the anti-retaliation provision. On appeal, the Seventh Circuit reversed, construing the term “inquiry” in Section 510 to include informal workplace complaints. Moreover, the court held, there is nothing in Section 510 that limits “inquiries” to questions posed and investigations initiated by the employer; the term may also include questions asked by an employee. The appellate court specified that not all informal complaints will be covered; rather “the grievance must be a plausible one.” And the adverse action “must be caused by the question or the response.”

Lessons learned. . .

ERISA’s fiduciary and prohibited transaction provisions require that those administering employee benefit plans do so prudently and free of self-dealing or conflicts of interest. An administrator who is put on notice of a potential breach should therefore take prompt corrective action, even if the complaint deals with wrongdoing by employer representatives, because a fiduciary who fails to act may face co-fiduciary liability for the ongoing losses caused by the breach. Where that notice originates from an employee who is also a participant or beneficiary of an ERISA covered plan, the plan administrator also will need to be mindful of Section 510’s protections. Employers who administer their employee benefit plans should ensure that: (i) they have a mechanism in place for receiving complaints about plan administration; (ii) that those responding to the complaints are (if possible) separated from those who review and discipline the complaining employee; and (iii) that such complaints and any investigation or corrective action taken in response is well-documented. As with any anti-retaliation claim, maintenance of a consistent, documented, and progressive disciplinary system will also aid in defending a claim by a former employee who had made an ERISA-based complaint. Having a well-documented complaint review and disciplinary process is unlikely to eliminate claims of retaliation, but may assist in defending against such claims if and when they surface.