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Can the Employer Be Liable for Providing Wrong Information - Part 2

Posted by David P. Martin | Apr 25, 2024 | 0 Comments

Our last post discussed whether an employer providing false information caused an actionable claim under state law. An example was provided where it was actionable. However, if federal law applies can a claim arise? 

It is possible but there are several factors that must be met. Under 29 U.S.C. § 1104(a)(1)(A)-(B) ERISA requires a fiduciary to discharge duties with respect to a plan “solely in the interest of the participants and beneficiaries . . . for the exclusive purpose of . . . providing benefits to participants and their beneficiaries . . . with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims”. 

In Ervast v. Flexible Products Co., 346 F.3d 1007, 1016 n.10 (11th Cir. 2003) the court interpreted these duties to include the duty to tell the truth as well as speak when the circumstances require this. “[A]n ERISA participant has a right to information and that a failure-to-inform claim may lie against an ERISA administrator. See Krohn v. Huron Mem'l Hosp.,173 F.3d 542, 548-51 (6th Cir. 1999) (an ERISA fiduciary with knowledge of a beneficiary's status and situation has an affirmative duty to communicate material facts to the beneficiary which will allow for an informed decision); Bixler v. Central Pennsylvania Teamsters Health Welfare Fund,12 F.3d 1292, 1300-01 (3rd Cir. 1993) (an ERISA fiduciary's duty to provide "complete and accurate information to its beneficiaries" "entails not only a negative duty not to misinform, but also an affirmative duty to inform when the trustee knows that silence might be harmful."). Thus, if a fiduciary misrepresents a plan's terms that may be actionable under ERISA. See Jones v. Am. Gen. Life and Acc. Ins. Co., 370 F.3d 1065 (11th Cir. 20 04).

So, the first factor is that the misrepresentation must be made by a fiduciary who is discharging fiduciary duties. If the employer is a plan administrator and is responsible for providing information regarding the plan this first factor is likely met.

Second, there must be a misrepresentation.  In Jones at 1071-72 the court notes the allegation “that Independent Life and American General breached their fiduciary obligations … by engaging in a systematic pattern of misrepresentation that caused the Appellants to believe that their insurance benefit would not be changed during their retirement. According to their complaint, "Independent Life employees were routinely told by the company's management that if they stayed with the company until they were eligible for retirement, they would receive free, lifetime life insurance coverage … ." 

However, despite a false employer statements, if the summary plan description provided to employees is clear and demonstrates the falsity of the statement, there may not be relief. See, Klaas v. Allstate Ins. Co., No. 20-14104 (11th Cir. Dec. 28, 2021)"Because the SPDs unambiguously gave Allstate the right to terminate the retiree life insurance, the Turner retirees have no right to these benefits and therefore cannot recover them under § 502(a)(1)(B)."

The final factor is that there must be no remedy allowed under the plan. In other words, benefits must be properly denied under the plan.  §1132(a)(3) affords a remedy but only if there is no other remedy under the statute.  See Jones v. Am. Gen. Life and Acc. Ins. Co., 370 F.3d 1065, 1074 (11th Cir. 20 04) ("We hold that . . . participants in an ERISA-governed plan that rely to their detriment on a fiduciary's representations of the plan's terms may state a claim for 'appropriate equitable relief' under Section 502(a)(3) if they have no adequate remedy elsewhere in ERISA's statutory framework."). (Emphasis added).

So again it is possible to have another claim with your case if a misrepresentation was made concerning benefits when evaluating your employment claim. Best wishes for a great year!

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David P. Martin

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