When the ERISA Ax Falls
Updated: Jan 27, 2021
In the land of ERISA – a very harsh and stark world – the ax may fall, and your client could lose both a job and benefits all at once. Cases like the one below reveal the necessity of involving experienced ERISA counsel early on and before the claim process is exhausted. Guidance during the claim process before a lawsuit is filed is absolutely critical. Claimants will “sleep in the bed made” otherwise. In other words, the facts known before litigation can lock in the claimant to those facts. Experienced ERISA counsel is better able to develop those facts during the claim process.
Facts of the Case:
Mr. Hawthorn was a shift supervisor at a mill in Brewton, Alabama, where he had been employed since 1977. That was until, after 39 years of service, he was severed from his employment in December 2016.
He sought severance benefits that were available under the company severance plan, which had been in place for many years at the mill; however, those benefits were refused.
The company contended that the circumstances of the termination, which amounted to contending that he had a bad attitude and miscoded payroll data on 28 different occasions, made him ineligible for those severance benefits. When in reality, there had been a change in the payroll system only one month before, and implementation of that system had been very challenging and difficult.
Mr. Hawthorne disputed the circumstances of his termination. The company refused to change its position and refused the severance benefit, leaving the 61-year-old man without a job and little prospect of obtaining another one.
However, after further investigation, it was discovered that the company did not replace him after his termination, leading Mr. Hawthorne to believe that the company was just looking for an excuse to let him go because it wanted to downsize and eliminate his position. Therefore, he thought he should be entitled to that severance benefit even more since that was the real reason he was terminated.
Mr. Hawthorne filed a lawsuit and asserted various claims including a claim under ERISA section 510. Section 510 of ERISA prohibits an employer from discharging a participant or beneficiary "under the provisions of an employee benefit plan . . . for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan." 29 U.S.C. § 1140. Hawthorn v. Ga. Pac. Brewton, LLC, CIVIL ACTION No. 17-488-JB-MU, at *16 (S.D. Ala. Dec. 17, 2020).
Despite the circumstantial evidence of his position not being filled, the well-documented employer’s file of the bad attitude and the miscoding of payroll data on 28 occasions, gave the employer an adequate basis for termination.
The burden then shifted to the plaintiff to show that those reasons were pretext; however, Mr. Hawthorne was not able to do that. How could he know the minds of supervisors? He lost that claim.
Mr. Hawthorne also challenged the refusal to pay the severance benefit under ERISA 29 USC §1132(a)(1)(B), but that too was pointless. The court found that there was sufficient cause to disqualify Mr. Hawthorn from the benefit.
The entire case was lost.
Courts have interpreted ERISA Section 510 to make it very difficult to prove a case, as one must furnish proof of specific intent to interfere with the benefit. Frankly, that has practically gutted the statute, as most employers will likely not act so outlandishly as to demonstrate evidence of specific intent to deprive an employee of a benefit. Some courts have made it a little easier by stating that the plaintiff does not have to show interference with the benefit was the sole reason for termination but must still show more than an incidental loss of the benefit. While the 11th Circuit has held that establishing a section 510 claim is “not onerous,” practically speaking, it really is onerous if not impossible in most situations.