By Joe Vincoli
www.jvdf.org

It sounds like a bad joke.  Did you hear the one about the woman who did her job so well, she got fired?  Not funny because it’s a true story.  It happens to ethical employees aka whistleblowers constantly.  Here’s how it could happen to you, if the federal Employee Retirement Income Security Act (ERISA) is not amended.

You’re hired to set up a Human Resources department for a company.  Early on you discover what appears to be a problem with the company’s ERISA regulated health plan.  You know that as a fiduciary of the plan you are required under the law to take action.  You set up a meeting with the CEO to discuss the issue.  The CEO thanks you for doing your job and then fires you.

Naively you believe you are protected because you reported a legitimate ERISA violation.   Out of work and with a termination on your work record, you file suit under state law for wrongful termination.   Your former employer’s legal counsel cites the health plan is subject to ERISA, a federal law and moves jurisdiction to federal court.

The US Department of Labor submits an amicus brief in support of your case.  You get your day in court but you lose.  Why?  Because the federal court where you live holds that you have no protection from termination because in that circuit they narrowly interpret ERISA as only affording protection to people who are ‘testifying or about to testify’ in an administrative proceeding.  Filing an internal report within a company (say to the company’s Compliance Department or to the CEO) does not rise to the level demanded by ERISA.

However, if you had not reported the issue to your employer but had instead had gone directly to the US Department of Labor, (and if you were lucky enough to get someone at the US DOL to act), then you would have been protected.

The logic of this situation would confound many Americans.  Most people blindly believe that if you ‘do the right thing’ and ‘follow the law’ they will be OK.  Unfortunately, not so with the current ERISA law, which seem at odds with being ethical and honoring one’s fiduciary duty.

March 23, 2011:

Last week, the United States Supreme Court declined to review a Third Circuit decision that ERISA § 510 (which makes it illegal to fire an employee “because he has given information or has testified or is about to testify in any inquiry or proceeding relating to [ERISA]“) did not protect an HR director’s unsolicited comments to management.  Specifically, the director claimed she was fired after reporting to supervisors perceived ERISA violations (including the fiduciary breach of misrepresentation) regarding the company’s group health plan. 

 Shirley Edwards v. A.H. Cornell and Son, Inc., 610 F.3d 217 (3d Cir.
2010), cert. den. 2011 WL 767661 (S.Ct. 2011).

In declining to review Edwards, the Supreme Court leaves the Third Circuit aligned with the Second and Fourth Circuits in interpreting ERISA’s whistleblower protections narrowly, saying ERISA § 510 protects witnesses testifying in federal probes or other formal inquiries, not employees like the HR director who merely volunteers, of her own accord, alleged possibility of ERISA violations.

In contrast, the Fifth Circuit, Ninth Circuit, and the U.S. Department of Labor interpret the provision more broadly and conclude ERISA § 510 protects these types of unsolicited comments, even if not subject to a formal outside probe or inquiry.

http://www.jdsupra.com/post/documentViewer.aspx?fid=39bdee92-01d5-465a-a058-b9af90ff7944

Ms. Edwards did what was required under federal law but the court ruled against her.  Case law is full of these ethical ‘do gooders’ who lost their careers, their livelihoods, and worst of all, their belief that if they ‘do the right thing’ and ‘follow the law’ they will be protected by our Government, including the judicial branch.  What Ms. Edwards went through was simply not fair.

I am currently trying to address this loophole in the law that harms ethical employees by working with Senator Richard Burr (R-NC), Kay Hagan (D-NC), and Representative Virginia Foxx (R-5th District).  If you are a fiduciary or a financial manager dealing with your company’s ERISA plan, I encourage you to contact your Congressional representatives and ask them to join in the bi-partisan effort to ‘fix’ ERISA to provide reasonable protection to fiduciaries and others who file internal reports of potential ERISA violations.

The fix to amend ERISA is not hard.  Here’s a proposal by Adam Gartner of Fordham Law Review.  http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=4654&context=flr

First, section 510 should be amended to specifically protect internal whistleblowers. This can be accomplished by rewording the language of the statute to protect any person who gives information “internally or externally” or testifies or is about to testify in any “internal or external” inquiry or proceeding relating to ERISA. Such language
clarifies that the statute’s protections extend beyond formal external complaints.

Second, section 502(a) should be amended to provide a cause of action to an individual who is not a participant, beneficiary, or fiduciary, and who is terminated for reporting ERISA violations. Congress should add a new subsection to the statute permitting a cause of action “by any person for appropriate equitable relief in the case of a violation of” section 510. This approach would provide a cause of action under ERISA to anyone terminated for reporting a violation regardless of the
individual’s status in relation to the plan, and individuals would not have to navigate a multitude of confusing state laws.

CONCLUSION
It is both important and necessary that ERISA protect all individuals who report ERISA violations. The extent of protection should not depend on whether the report is made internally or externally.  As this Note discussed, protecting only external complaints not only conflicts with ERISA’s aims and goals, but is also harmful to the very individuals ERISA is designed to protect. Section 510 should protect all individuals who make complaints internally.

CEO Note:  In these tough economic times, are we really asking employees to make a choice between obeying the law or risk their reputation and financial collapse?  I hope not but the reality is, this is happening in industry and government every day when we allow a whistleblower to be career crushed.  Socially, it’s unacceptable to require a person to perform a legal duty then leave them without recourse from whistleblower retaliation in the work place.

As a matter of public policy, no employee should be harmed for carrying out legal duties or identifying any type of fraud, abuse, mismanagement or dangers to health and safety, nor be subject to court decisions that depend on geography.  The federal law must have the same force and effect nationally.  Those that speak up to protect others should be protected.  The courts must speak with one voice, sending a clear and resounding message that ethical employees are essential to our free society and the law that requires them to act in an ethical manner will also protect them from harm.

I commend the Department of Labor for submitting the amicus in the Edwards case and sincerely hope their new whistleblower office will succeed under new leadership.  Amicus may be found at this site.   88afkyx   More information on whistleblower protections may be found on the Department of Labor website.  comp-whistleblower.htm

I’d also like to commend Mr. Vincoli for his continued work to help strengthen whistleblower protections.  Thanks Joe!

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