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Column: Decision provides protection from ERISA retaliation

November 6, 2013
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By Christopher Stake

The 7th Circuit Court of Appeals has issued a key decision affecting the rights of employees who complain internally to their employers about failures to properly fund employee benefit plans governed by the Employee Retirement Income Security Act. In George v. Junior Achievement of Central Indiana, Inc., 694 F.3d 812 (7th Cir. 2012), the court held that such complaints are protected by ERISA’s anti-retaliation provision, which states, in part, that “[i]t shall be unlawful for any person to discharge … any person because he has given information or has testified or is about to testify in any inquiry or proceeding related to this Act.” 29 U.S.C. § 1140.

Prior to the 7th Circuit’s decision, the courts that had taken a textual approach, such as the 2nd, 3rd and 4th circuits, ruled in favor of the employer. On the other hand, the courts that had ruled in favor of the employee, the 5th and 9th circuits, interpreted the provision more broadly and relied more heavily on the purpose and intent of the statute. The 7th Circuit relied upon the text of the statute, but reached a different result than the other courts that had done so. The decision is a significant breakthrough for employees who attempt to resolve problems internally but face retaliation from their employers for attempting to do so.

Victor George, an employee of Junior Achievement of Central Indiana Inc., discovered that his employer was not funding his 401(k) and health savings accounts with funds that were being withheld from his pay. After discovering the problem, he reported it to his employer and asked JACI to fix it. George filed a claim for ERISA retaliation against JACI after his employment was terminated, claiming JACI violated the statute.

JACI disputed that George’s internal complaints to his employer were protected under the ERISA anti-retaliation statute. JACI filed a motion for summary judgment setting forth this argument. JACI relied upon the 3rd and 4th circuits, which had each held that internal complaints were never protected. Edwards v. A.H. Cornell & Son, Inc., 610 F.3d 217 (3d Cir. 2010); King v. Marriot International, Inc., 337 F.3d 421 (4th Cir. 2003). JACI also relied upon a decision from the 2nd Circuit, which limited protection of internal complaints to particularized circumstances. Nicolaou v. Horizon Media, Inc., 402 F.3d 325 (2d Cir. 2005). The plaintiff relied upon decisions from the 5th and 9th circuits, which had held that internal complaints about alleged ERISA violations were protected by the anti-retaliation statute. Anderson v. Electric Data Systems Corp., 11 F.3d 1311 (5th Cir. 1994); Hashimoto v. Bank of Hawaii, 999 F.2d 408 (9th Cir. 1993).

The District Court held that the internal complaints were not protected. In doing so, it relied heavily on the 3rd Circuit’s decision. The 3rd Circuit held that an “inquiry” is defined as a “request for information.” It held that the employee had simply made “statements” to her employer, and that these statements did not create an “inquiry.” The 3rd Circuit rejected the possibility that an employee could both make the inquiry and give information to the employer in that same inquiry. The District Court agreed, finding that George did not give information to JACI in response to any inquiry initiated by JACI. It held that the statute was unambiguous, and it did not include unsolicited, internal complaints within its plain meaning. It also rejected the counterargument articulated by the 9th Circuit, which reasoned that the “normal first step” in giving information or testifying would be for the employee to notify the employer of the problem. If that first step is not protected, then employers would have incentives to discharge complaining employees immediately rather than beginning an inquiry into the problem. This “interrupts the problem at its start,” and “discourages the whistle blower before the whistle is even blown.”

George appealed the District Court’s decision to the 7th Circuit. George received the support of the U.S. Department of Labor, which filed an amicus brief in support of his interpretation. The 7th Circuit agreed that “the District Court was right to rely on the text.” However, the 7th Circuit disagreed with the District Court’s interpretation of the text. The 7th Circuit concluded that the statutory language was ambiguous, stating that it was “a mess of unpunctuated conjunctions and prepositions.” This was an important determination because, as the court recognized, it is supposed to resolve ambiguous anti-retaliation statutes “in favor of protecting employees.”

The 7th Circuit then recognized that an “inquiry” could be understood as an informal alternative to a “proceeding,” and that “giving information” was the informal alternative to “testifying.” The court concluded that George satisfied the informal elements. He gave information to his employer about the missing funds, and thus initiated the inquiry. In reaching this conclusion, the court rejected the argument that an inquiry was limited to questions made to an employer. It said, “There is no linguistic reason why ‘inquiry’ cannot refer to the employee’s questions as well as the employer’s.”

The 7th Circuit did leave open one point that could be disconcerting for employees in the future. It suggested that if the employer had “ignored” the employee’s complaints, and later discharged the employee, then the complaints could not have logically caused the discharge. This would seem to punish the employer that responds to a legitimate complaint, and suggests that an employer would better protect itself from retaliation claims by ignoring an employee’s complaint altogether. Hopefully, employers will recognize that ignoring ERISA violations will lead to legal trouble for other reasons.

After the 7th Circuit’s decision, the Circuit split on this question became equally divided. It remains so today, as no other circuits have yet to consider the issue. Time will tell if other circuits will read the statute in favor of employees or employers, or if the Supreme Court of the United States will eventually resolve the split. For the moment, at least, employees in Indiana, Illinois and Wisconsin have gained an important victory in their attempts to seek informal, internal redress of ERISA violations and retain protection from retaliation.•

__________

Christopher S. Stake is an attorney with DeLaney & DeLaney LLC, which represented plaintiff/appellant Victor George in George v. Junior Achievement of Central Indiana Inc. He practices employment litigation, commercial litigation and products liability defense litigation. He can be reached by email at cstake@delaneylaw.net and by phone at 317-920-0400.

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  1. I have been on this program while on parole from 2011-2013. No person should be forced mentally to share private details of their personal life with total strangers. Also giving permission for a mental therapist to report to your parole agent that your not participating in group therapy because you don't have the financial mean to be in the group therapy. I was personally singled out and sent back three times for not having money and also sent back within the six month when you aren't to be sent according to state law. I will work to het this INSOMM's removed from this state. I also had twelve or thirteen parole agents with a fifteen month period. Thanks for your time.

  2. Our nation produces very few jurists of the caliber of Justice DOUGLAS and his peers these days. Here is that great civil libertarian, who recognized government as both a blessing and, when corrupted by ideological interests, a curse: "Once the investigator has only the conscience of government as a guide, the conscience can become ‘ravenous,’ as Cromwell, bent on destroying Thomas More, said in Bolt, A Man For All Seasons (1960), p. 120. The First Amendment mirrors many episodes where men, harried and harassed by government, sought refuge in their conscience, as these lines of Thomas More show: ‘MORE: And when we stand before God, and you are sent to Paradise for doing according to your conscience, *575 and I am damned for not doing according to mine, will you come with me, for fellowship? ‘CRANMER: So those of us whose names are there are damned, Sir Thomas? ‘MORE: I don't know, Your Grace. I have no window to look into another man's conscience. I condemn no one. ‘CRANMER: Then the matter is capable of question? ‘MORE: Certainly. ‘CRANMER: But that you owe obedience to your King is not capable of question. So weigh a doubt against a certainty—and sign. ‘MORE: Some men think the Earth is round, others think it flat; it is a matter capable of question. But if it is flat, will the King's command make it round? And if it is round, will the King's command flatten it? No, I will not sign.’ Id., pp. 132—133. DOUGLAS THEN WROTE: Where government is the Big Brother,11 privacy gives way to surveillance. **909 But our commitment is otherwise. *576 By the First Amendment we have staked our security on freedom to promote a multiplicity of ideas, to associate at will with kindred spirits, and to defy governmental intrusion into these precincts" Gibson v. Florida Legislative Investigation Comm., 372 U.S. 539, 574-76, 83 S. Ct. 889, 908-09, 9 L. Ed. 2d 929 (1963) Mr. Justice DOUGLAS, concurring. I write: Happy Memorial Day to all -- God please bless our fallen who lived and died to preserve constitutional governance in our wonderful series of Republics. And God open the eyes of those government officials who denounce the constitutions of these Republics by arbitrary actions arising out capricious motives.

  3. From back in the day before secularism got a stranglehold on Hoosier jurists comes this great excerpt via Indiana federal court judge Allan Sharp, dedicated to those many Indiana government attorneys (with whom I have dealt) who count the law as a mere tool, an optional tool that is not to be used when political correctness compels a more acceptable result than merely following the path that the law directs: ALLEN SHARP, District Judge. I. In a scene following a visit by Henry VIII to the home of Sir Thomas More, playwriter Robert Bolt puts the following words into the mouths of his characters: Margaret: Father, that man's bad. MORE: There is no law against that. ROPER: There is! God's law! MORE: Then God can arrest him. ROPER: Sophistication upon sophistication! MORE: No, sheer simplicity. The law, Roper, the law. I know what's legal not what's right. And I'll stick to what's legal. ROPER: Then you set man's law above God's! MORE: No, far below; but let me draw your attention to a fact I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of law, oh, there I'm a forester. I doubt if there's a man alive who could follow me there, thank God... ALICE: (Exasperated, pointing after Rich) While you talk, he's gone! MORE: And go he should, if he was the Devil himself, until he broke the law! ROPER: So now you'd give the Devil benefit of law! MORE: Yes. What would you do? Cut a great road through the law to get after the Devil? ROPER: I'd cut down every law in England to do that! MORE: (Roused and excited) Oh? (Advances on Roper) And when the last law was down, and the Devil turned round on you where would you hide, Roper, the laws being flat? (He leaves *1257 him) This country's planted thick with laws from coast to coast man's laws, not God's and if you cut them down and you're just the man to do it d'you really think you would stand upright in the winds that would blow then? (Quietly) Yes, I'd give the Devil benefit of law, for my own safety's sake. ROPER: I have long suspected this; this is the golden calf; the law's your god. MORE: (Wearily) Oh, Roper, you're a fool, God's my god... (Rather bitterly) But I find him rather too (Very bitterly) subtle... I don't know where he is nor what he wants. ROPER: My God wants service, to the end and unremitting; nothing else! MORE: (Dryly) Are you sure that's God! He sounds like Moloch. But indeed it may be God And whoever hunts for me, Roper, God or Devil, will find me hiding in the thickets of the law! And I'll hide my daughter with me! Not hoist her up the mainmast of your seagoing principles! They put about too nimbly! (Exit More. They all look after him). Pgs. 65-67, A MAN FOR ALL SEASONS A Play in Two Acts, Robert Bolt, Random House, New York, 1960. Linley E. Pearson, Atty. Gen. of Indiana, Indianapolis, for defendants. Childs v. Duckworth, 509 F. Supp. 1254, 1256 (N.D. Ind. 1981) aff'd, 705 F.2d 915 (7th Cir. 1983)

  4. "Meanwhile small- and mid-size firms are getting squeezed and likely will not survive unless they become a boutique firm." I've been a business attorney in small, and now mid-size firm for over 30 years, and for over 30 years legal consultants have been preaching this exact same mantra of impending doom for small and mid-sized firms -- verbatim. This claim apparently helps them gin up merger opportunities from smaller firms who become convinced that they need to become larger overnight. The claim that large corporations are interested in cost-saving and efficiency has likewise been preached for decades, and is likewise bunk. If large corporations had any real interest in saving money they wouldn't use large law firms whose rates are substantially higher than those of high-quality mid-sized firms.

  5. The family is the foundation of all human government. That is the Grand Design. Modern governments throw off this Design and make bureaucratic war against the family, as does Hollywood and cultural elitists such as third wave feminists. Since WWII we have been on a ship of fools that way, with both the elite and government and their social engineering hacks relentlessly attacking the very foundation of social order. And their success? See it in the streets of Fergusson, on the food stamp doles (mostly broken families)and in the above article. Reject the Grand Design for true social function, enter the Glorious State to manage social dysfunction. Our Brave New World will be a prison camp, and we will welcome it as the only way to manage given the anarchy without it.

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