Court Finds Employee Benefit Trust Fund's Trustee, Legal Counsel Liable for Retaliating Against ERISA Whistleblower
A U.S. District Court has determined, in Perez v. Scott Brain, that an employee benefit trust fund's trustee and legal counsel engaged in illegal activity when they retaliated against a fund employee who communicated with the Department of Labor ("DOL") during its investigation of the fund's administration.
Background. In 2011, the fund employee, who served as director for the fund's audit and collections department, responded to the DOL's investigation into the fund trustee's activities. In particular, the employee complained to DOL about the trustee's interference with her efforts to collect delinquent contributions from contractors who were required to contribute to the fund. After learning of the employee's contact with DOL, the trustee, on the advice of the fund's legal counsel, suspended the employee from her employment with the trust and, less than six months later, fired the employee.
Applicable Law. ERISA offers retaliation protections to help encourage people with knowledge of potential ERISA violations to share information in order to prevent or remedy those violations. Specifically, ERISA Section 510 prohibits employers from discharging, fining, suspending, expelling, disciplining, or discriminating against a person because he or she has given information in any ERISA-related inquiries or proceedings by DOL. Employers that violate ERISA Section 510 are subject to liability.
District Court Decision. In reviewing whether the defendants had violated ERISA by retaliating against the employee, the court concluded that the employee's suspension and termination were a direct result of her communication with the DOL. The court also found that the DOL had demonstrated that the defendants encouraged the fund's other trustees to support outsourcing the services that the employee performed and to eliminate her position.
As punishment for these actions, the court removed the defendant trustee from his position with the fund and ordered the defendant attorney to terminate her legal relationship (with the fund). The court also ordered the attorney to pay back to the fund the legal fees that she received for work related to the retaliatory conduct.
Takeaway for Employers. The Brain decision demonstrates the care that plan fiduciaries must use when investigating whistleblower allegations of wrongdoing regarding an employee benefit plan. Plan fiduciaries must be sure to avoid retaliating against employees or others for reporting or cooperating in the investigation of alleged misconduct involving an employee benefit plan. Moreover, plan fiduciaries are advised to prepare to defend against potential retaliation claims by prudently investigating and responding to allegations of misconduct in the administration of the plan.