Employment Relationship Not Required For Claim Of ERISA Violation For Benefit Rights


In a recent Seventh Circuit Court of Appeals decision successfully litigated by Laner Muchin, the Court addressed novel aspects of whether an employer interfered with employees’ benefit rights in violation of ERISA. The case of Teamsters Local Union No. 705 v. Burlington Northern Santa Fe, LLC involved a railroad terminating a railyard service contract with an outside contractor, Rail Terminal Services (RTS).  As a result, RTS laid-off its employees.  Those employees were offered the opportunity to apply for employment with the railroad, which had negotiated a less generous benefits package with a different union.  Discharged RTS employees and their union sued RTS claiming that the discharges constituted unlawful interference with benefit rights in violation of Section 510 of ERISA.  That statute prohibits employers from taking employment actions for the purpose of interfering with employees’ attainment of benefit rights.  The court upheld the lower court’s dismissal of the interference claim because the discharge was not alleged to have been done for the purpose of interfering with benefit rights.  The court noted that the specific intent to impair benefit rights must be “at least a motivating factor,” and that fact had not been alleged.  However, the court explained that Section 510 of ERISA is not restricted to actions taken by an employer; any person who takes action adverse to benefit plan participants could fall within the scope of Section 510.  This case serves as a reminder that employers should: (1) beware of non-employment decisions and actions that adversely affect benefit rights; and (2) carefully document the reasons for making any decisions that adversely affect the benefit rights of employees and ensure the documented reasons do not include cutting back benefits as “a motivating factor” for the actions taken.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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