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Court Allows Terminated Employee to Pursue ERISA § 510 Claims Tied to Son’s Large Medical Expenses



Stein v. Atlas Indus., Inc., 2018 WL 1719097 (6th Cir. 2018)

The Sixth Circuit has ruled that a terminated employee may pursue retaliation and interference claims against his former employer under ERISA § 510, reversing the district court’s summary dismissal of the case. The employee was fired after he failed to report for work (or call in) during the three days after his doctor released him for light-duty work following knee surgery. The employee argued that his firing was motivated, at least in part, by the employer’s desire to avoid liability under its self-insured health plan for large medical bills incurred by the employee’s son. As the court explained, the employee’s retaliation claim required proof that the employer’s decision to fire him was linked to his son’s past health plan claims, while his interference claim required proof of the employer’s intent to interfere with future health plan benefits for his son.

The court followed a three-step framework to evaluate the employee’s claims: First, the court held that the employee established a prima facie case for both retaliation and interference by presenting evidence that his son’s condition was common knowledge among company employees and that company managers had openly expressed concerns about the cost of care. Although the employee’s direct supervisor did not know the precise costs or have reason to cut those costs himself, the court noted that other decisionmakers had that knowledge and knew that the son’s condition was permanent and deteriorating. Next, the court concluded that the employer rebutted the prima facie case with a legitimate, nondiscriminatory reason for firing the employee, i.e., his failure to return to work or call in after being released for light duty. Finally, the court decided that the employee overcame that rebuttal by showing that a reasonable jury could find that unlawful considerations were a motivating factor in his discharge, citing the employee’s 20-year career with the employer, receipt of at least one perfect attendance award, and willingness to work overtime when asked. The court further noted that the employer’s failure to contact the employee when he did not return to work could raise a jury’s suspicions about the employer’s motives, especially given evidence of selective enforcement of the absenteeism policy.

EBIA Comment: In another part of the opinion, the court affirmed dismissal of the employee’s claims under the Family and Medical Leave Act (FMLA), holding that FMLA regulations entitled the employer to enforce its requirement that employees call in or report for work. But actions justifiable under the FMLA proved the employer’s undoing—at least at this stage of the case—under ERISA. While ERISA § 510 claims are less common than claims for benefits, cautious employers should take care to separate employment decisions from employee benefit plan considerations. In fact, this separation is mandatory under HIPAA’s privacy rule for employers receiving protected health information from their health plan. For more information, see EBIA’s ERISA Compliance manual at Section XXXVI.K (“ERISA § 510 Claims for Interference With Protected Rights”) and EBIA’s HIPAA Portability, Privacy & Security manual at Section XXIII.C (“Sharing PHI and Electronic PHI With Plan Sponsors”). You may also be interested in our recorded webinar “Learning the Ropes: An Introduction to HIPAA Privacy & Security” (recorded 1/17/18).

Contributing Editors: EBIA Staff.

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