Jottings By An Employer's Lawyer

Tuesday, May 08, 2007

Be Careful When You Promise — Misrepresentation and ERISA Escape

Discussions with potential employees are fraught with opportunity for misunderstanding, although employers are often able to escape ultimate liability when challenged. The causes of action under which these claims are brought vary but misrepresentation is one. Today's decision in Thurman v. Pfizer, Inc. (6th Cir. 5/8/07) [pdf] is a good example of the situations that occur and a reminder that while ERISA preemption is about as broad as it gets, it too has its limits.

The facts are simple and straight forward (they always are when, as here, the court must accept plaintiff's pleadings as true). Dr. Thurman, a veterinary pathologist, interviewed for a job with Pfizer and was told that if he accepted the position, at age 62 he would be entitled to a pension in the amount of $3,100. He accepted and later was told that the information he received was incorrect and his monthly pension benefits would be about $816 a month.

Thurman sued seeking either the difference or for rescission and reliance damages in the form of benefits he relinquished by leaving his prior position (higher wage and stock options among others). The district court held that his entire claim was preempted by ERISA.

Not entirely said the Court — while his claim for the difference is, his claim for rescission and reliance damages is not. They explained their decision this way:

What we have here is simply a case of a person who left his old employer based on promises made by his new employer. These promises could have concerned anything — for example, an increase in wages, more vacation days, or free parking. Here, these promises just so happened to concern retirement benefits. We see no reason to bind employers to some promises used to induce acceptance of an employment offer, but give them a ‘get out of jail free card’ when their promises concern the scope of a plan governed by ERISA.

Stressing that they were not ruling on the merits, the Court left employers with a cautionary warning:

If adhering to promises regarding ERISA governed plans proves too cumbersome for employers, then during the recruitment process, those employers must simply be more careful before informing potential employees of the ERISA governed benefits to which they might be entitled.

Ah, if only it were so easy in real life.


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