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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. KUDOS to the Indiana Supreme Court for realizing that some bureacracies need to go to the stake. Recall what RWR said: "No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!" NOW ... what next to this rare and inspiring chopping block? Well, the Commission on Gender and Race (but not religion!?!) is way overdue. And some other Board's could be cut with a positive for State and the reputation of the Indiana judiciary.

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  5. I love this, Dave! Many congrats to you! We've come a long way from studying for the bar together! :)

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