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Former Employee’s Claim of Retaliation for Testifying in DOL Investigation Allowed to Proceed

· 5 minute read

· 5 minute read

Eaves v. Eye Centers of Tenn., LLC, 2020 WL 134116 (M.D. Tenn. 2020)

As a result of DOL criminal and civil actions that alleged mishandling of an employer-sponsored retirement plan, the employer’s CEO was sentenced to probation and ordered (along with the company’s owner) to restore plan losses exceeding $500,000. An employee who had testified in both actions claimed that she began experiencing adverse employment actions shortly after her testimony in the DOL’s civil lawsuit. She eventually resigned and then sued the employer under ERISA § 510, which prohibits discrimination against individuals for exercising their ERISA rights or for testifying in any proceeding relating to ERISA. The employer asked the court to rule in its favor without a trial because the employee had resigned voluntarily, but the court declined, allowing the case to proceed.

The court explained that, to establish an ERISA § 510 claim, the employee must demonstrate a “causal link” between an ERISA-protected activity (her testimony) and an adverse employment action. The employee asserted that, two weeks after her testimony in the civil suit, the CEO instructed her never to communicate with him directly again, even though her job duties previously required direct contact. After contact from the employee’s attorney, this instruction was “clarified” to permit direct communication if a third party was copied or was present. The CEO also transferred some of the employee’s job duties to her subordinates. And, although the employee had been allowed to work remotely for years, the employer for the first time questioned her job performance and absence from the office. According to the employee, these actions caused her to fear for her job and left her no choice but to resign, amounting to constructive discharge. The employer countered that it had no intention of terminating the employee and had not taken adverse action following the employee’s testimony in the DOL’s criminal investigation several years earlier—thus, there was no causal link between her ERISA-protected activity and her resignation. The court concluded that the employee’s assertions of changed work conditions, and the relatively short time between her civil testimony (which led to negative financial consequences for the CEO) and the changes, raised sufficient questions of fact to necessitate a trial to determine whether she was constructively discharged as a result of engaging in an ERISA-protected activity.

EBIA Comment: It can be difficult for individuals to prevail in these cases because they must show that the employer had the specific intent to violate ERISA § 510. Here, the stark changes in work conditions coming so soon after the employee’s testimony looked suspicious. The employee must still prove her case at trial, however, and her available remedies are uncertain, so this employer may yet prevail. But it will have expended considerable time, money, and energy litigating this claim—a claim that perhaps could have been avoided with timely legal advice and a carefully considered course of action. For more information, see EBIA’s ERISA Compliance manual at Section XXXVI.K (“ERISA § 510 Claims for Interference With Protected Rights”).

Contributing Editors: EBIA Staff.

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