Adam Reinke, Reversing the Perversion: Interpreting Erisa to Protect Employees Who Report Violations of Federal Law to Their Managers

• Jurisdiction: United States,Federal
• Publication year: 2012
• Citation: Vol. 61 No. 5

REVERSING THE PERVERSION: INTERPRETING ERISA TO PROTECT EMPLOYEES WHO REPORT VIOLATIONS OF FEDERAL LAW TO THEIR MANAGERS

ABSTRACT

Congress enacted the Employee Retirement Income Security Act of 1974 (ERISA) to protect workers’ retirement savings from mismanagement and misuse. Section 510 of ERISA makes it unlawful for any individual to interfere with a person who attempts to enforce her rights under ERISA. Section 510 also contains an antiretaliation provision, which protects employees who report potential ERISA violations by imposing civil penalties on employers that commit an adverse employment action against an employee in retaliation for making such a report.

Courts are divided as to whether informal, unsolicited complaints to management are protected by section 510’s antiretaliation provision. The courts holding that these types of complaints are within section 510’s scope have largely ignored the provision’s plain text and focused their analyses on congressional purpose and intent. Courts holding the opposite have focused solely on the provision’s plain text, largely ignoring congressional purpose and intent. Both approaches have been incomplete and inadequate from a statutory-interpretation perspective and have created perverse incentives for both employers and employees that frustrate the overarching goal of ERISA: to provide security for workers’ benefits while minimizing the administrative burden on employers.

This Comment proposes an interpretation of section 510 that is faithful both to the plain text of the statute and to congressional purpose and intent. This interpretation protects employees who make unsolicited, informal complaints to management about potential ERISA violations. It is superior to existing judicial approaches on two different levels: (1) as a matter of statutory interpretation, it best represents a synthesis of the textual method of interpretation with legislative purpose and intent; and (2) as a practical matter, it avoids perverse incentives that have frustrated the goals of ERISA.

INTRODUCTION 1289

1. ERISA: AN OVERVIEW 1291

2. JUDICIAL CONFUSION IN INTERPRETING SECTION 510 1294

   1. The Broad Approach: Informal, Unsolicited Complaints to Management Are Within the Scope of Section 510 1294

   2. The Narrow Approach: Unsolicited, Informal Complaints to

      Management Fall Outside the Scope of Section 510 1298

3. A PRAGMATIC INTERPRETATION OF SECTION 510 1309

   1. Textual Analysis of Section 510 1309

   2. Statutory Interpretation in the Retaliation Context 1313

   3. Staying True to Congressional Intent 1316

4. PRACTICAL ADVANTAGES OF A BROAD INTERPRETATION OF

   SECTION 510 1322

   1. Inadequacy of State Law 1322

   2. Implications of Preemption of State Law 1325

   3. Reversing the Perversion of Incentives 1327

CONCLUSION 1329

INTRODUCTION

Shirley Edwards was the human resources director at A.H. Cornell & Son, Inc., a family-owned business that provides commercial and residential construction services.1 As part of her job, Edwards administered the company’s employee benefit plans.2 During the course of her employment, Edwards allegedly discovered several violations of the Employee Retirement Income Security Act of 1974 (ERISA).3 Edwards believed that her supervisor, Melissa Closterman, who was in charge of the day-to-day operations of the company, had implemented a scheme to save the company money at the expense of its employees by discouraging employees from participating in the company’s group health insurance plan.4 Specifically, Edwards alleged that Closterman was intentionally overstating the amount employees would have to contribute to participate in the plan and was withholding information from the company’s employees about the benefits the plan provided.5

Upon discovering these potential ERISA violations, Edwards claimed that she approached Closterman and Scott Cornell, one of the company’s executives, and told them “she ‘objected to participating in a scheme to commit criminal fraud as to Defendants’ disability insurance carrier, worker’s

compensation insurance carrier, and health insurance carrier.’”6 Edwards was

fired shortly after.7

Edwards filed suit in the United States District Court for the Eastern District of Pennsylvania for unlawful retaliation in violation of section 510 of ERISA.8 The district court held that section 5109 did not reach unsolicited, informal complaints to management concerning ERISA violations, such as the concerns Edwards expressed to Closterman and Cornell.10 On appeal, the Third

1. Edwards v. A.H. Cornell & Son, Inc., 610 F.3d 217, 218 (3d Cir. 2010), cert. denied, 131 S. Ct. 1604

   (2011).

2. See Edwards v. A.H. Cornell & Son, Inc., No. 09-cv-1184, 2009 WL 2215074, at *1 (E.D. Pa. July 23, 2009), aff’d, 610 F.3d 217, cert. denied, 131 S. Ct. 1604.

3. Id.

4. Id.

5. First Amended Civil Action Complaint at 5, Edwards, 2009 WL 2215074 (No. 09-cv-1184).

6 Edwards, 2009 WL 2215074, at *1.

1. Id.

2. Id. at *2.

3. This Comment uses section 510 generally to refer only to the antiretaliation provision of section 510,

see Employee Retirement Income Security Act of 1974, Pub L. No. 93-406, § 510, 88 Stat. 829, 895 (codified as amended at 29 U.S.C. § 1140 (2006)), unless otherwise noted.

10 Edwards, 2009 WL 2215074, at *4.

Circuit affirmed.11 Ms. Edwards was out of a job and without a remedy under federal law.

Had Edwards lived and worked in Texas or California, however, the federal courts would have allowed her to proceed with her action under federal law.12 The circuit courts of appeals are divided as to whether unsolicited, informal complaints to management concerning potential ERISA violations fall within the scope of section 510.13 In spite of this long-standing circuit split, the U.S. Supreme Court has yet to resolve the issue. The academic literature is similarly sparse in terms of analyses of the scope of section 510. Although several

commentators have discussed the circuit split that is the subject of this Comment, these commentators have largely focused on describing the various methods of statutory interpretation courts have used to interpret section 510,14 or have proposed legislative solutions to broaden the scope of section 510.15

1. Edwards v. A.H. Cornell & Son, Inc., 610 F.3d 217, 225–26 (2010), cert. denied, 131 S. Ct. 1604

   (2011).

2. See infra Part II.A.

3. See infra Part II.

4. See, e.g., Malena Kinsman, Comment, Can You Hear Me? Will the Diminishing Scope of ERISA’s Anti-Retaliation Provision Drown the Cries of Whistleblowers?, 115 PENN ST. L. REV. 685 (2011)

   (summarizing the circuit split and discussing the method of statutory interpretation used by each circuit); Michael C. Ross, Comment, Blow the Whistle at Your Own Risk: ERISA’s Retaliation Provision and the Dilemma of the “Unsolicited Internal Complaint,” 56 ST. LOUIS U. L.J. 331 (2011) (summarizing the circuit split, discussing the method of statutory interpretation used by each circuit, and analyzing the current composition of the U.S. Supreme Court to determine how it might decide the scope of section 510).

5. See, e.g., Adam B. Gartner, Note, Protecting the ERISA Whistleblower: The Reach of Section 510 of

   ERISA, 80 FORDHAM L. REV. 235 (2011) (analyzing the circuit split and proposing an amendment to section 510); Erik Rome, Note, Recognizing Those Left Unprotected by ERISA’s Section 510 Loophole: Congress Must Act to Protect These Employees, 21 KAN. J.L. & PUB. POL’Y 194 (2011) (same). One commentator has taken a different approach. See Jessica Barclay-Strobel, Comment, Shooting the Messenger: How Enforcement of FLSA and ERISA Is Thwarted by Courts’ Interpretations of the Statutes’ Antiretaliation and Remedies Provisions, 58 UCLA L. REV. 521 (2010). Barclay-Strobel proposes a broad interpretation of the antiretaliation provision of the Fair Labor Standards Act (FLSA) and “argues that an expansion of FLSA will lead to a similar expansion of ERISA.” Id. at 527. Fundamentally, Barclay-Strobel assumes that judicial interpretations of the antiretaliation provision of the FLSA will inform judicial interpretations of section 510. See id. (“Given that courts rely on their circuit’s interpretation of FLSA’s antiretaliation provision to inform the scope of ERISA’s provision, a resolution of the FLSA circuit split will lead to the same result under ERISA.”). This assumption ignores the reality that none of the circuits that have decided the scope of section 510, except the Fourth Circuit, have relied on their circuit’s interpretation of the FLSA. See infra Part II. In fact, the Third Circuit has explicitly rejected Barclay-Strobel’s assumption. See Edwards, 610 F.3d at 225 (“[T]he conclusion that internal complaints are protected under the FLSA does not require a parallel conclusion under ERISA’s distinct statutory language.”). It also fails to account for textual differences between section 510 and the antiretaliation provision of the FLSA, and for the fact that circuit courts of appeals have reached different conclusions as to whether section 510 or the antiretaliation provision of the FLSA is broader. Compare Nicolaou v. Horizon Media, Inc., 402 F.3d 325, 328 (2d Cir. 2005) (per curiam) (rejecting the district court’s analysis interpreting the scope of section 510 by relying on circuit precedent interpreting the scope of the

   This Comment provides a roadmap for courts to follow to interpret section 510, as it exists now, to encompass unsolicited, informal complaints to management concerning potential ERISA violations. Part I explains in broad terms the purpose of ERISA and how section 510 fits into ERISA’s regulatory framework. Part II explains judicial treatment of section 510 and details the shortcomings of existing attempts to interpret its scope. Part III proposes an interpretation of section 510 that is faithful to both the statutory text and congressional intent and purpose. Part IV discusses the practical implications of a broad reading of the scope of section 510 and argues in favor of adopting such an interpretation.

   
   

   1. ERISA: AN OVERVIEW

      
      

      This Part provides an overview of ERISA and explains some of its enforcement...