Apr 29, 2017

Proving Unlawful Interference Under ERISA's Section 510


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11/17/2008
Brian S. King
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A recent case from the Tenth Circuit illustrates the interplay between ERISA’s unlawful interference with employee benefits remedy and discrimination provisions of other federal statutes. The case Trujillo v. PacifiCorp, ___ F.3d ___, 2008 U.S. App. LEXIS 9807 (10th Cir. 2008), involves William and Debra Trujillo and their son Charlie’s cancer.

Both the Trujillos worked for PacifiCorp in Wyoming, William for over 25 years and Debra for 8 years. Charlie had struggled with cancer for some period of time and suffered a relapse on May 30, 2003. His physicians recommended immediate, aggressive, experimental treatments. In six weeks his bills exceeded $62,000. The Trujillos’ supervisors were aware of the bills as Charlie was receiving treatment.

PacifiCorp’s medical benefits were provided through a self-funded plan. Evidence was presented to the trial court to establish that the company and its managers were acutely aware of, and worked hard to contain, increasing healthcare costs at PacifiCorp. The company specifically tracked claims of over $50,000. Charlie’s fell into that category.

About two weeks after Charlie’s relapse, PacifiCorp initiated an investigation into whether the Trujillos had engaged in time theft. The company gathered information that it claimed demonstrated both William and Debra had falsified their records of coming and going to work. PacifiCorp then terminated both William and Debra based on this misconduct. Once they were terminated, PacifiCorp alleged that it had not obligation to continue to offer Charlie health benefits.

The Trujillos filed suit and asserted two claims: one for violation of the Americans with Disabilities Act and the second for violation of Section 510 of ERISA which prohibits interference with a person’s right to employee benefits. The district court granted PacifiCorp’s motion for summary judgment on both claims. The Trujillos appealed. The Tenth Circuit reversed the district court dismissal.

Most of the decision analyzes whether the Trujillos submitted sufficient evidence under the ADA to establish a prima facie case of discrimination under the McDonnell Douglas framework to shift to PacifiCorp the burden of demonstrating that its actions in terminating the Trujillos were carried out for a legitimate, non-discriminatory reason. The court was troubled by the close relationship in time between Charlie’s relapse and prescription for aggressive and expensive medical treatment and the company’s investigation into the Trujillos time clock actions. In addition, the court noted that other employees engaged in time clock violations were dealt with using incremental, graduated disciplinary measures. Conversely, PacifiCorp had summarily terminated both William and Debra. Together with the information presented by the Trujillos about PacifiCorp’s sensitivity to the expenses of its health benefits plan, the Tenth Circuit felt that the Trujillos should have been allowed to present their case to a jury.

Two things stick out about the case for me. The first is that the great majority of the opinion deals with the analysis of discriminatory conduct under the ADA rather than ERISA. Only in the last two paragraphs does the court address the Section 510 analysis under ERISA. And in so doing, it basically incorporates the ADA analysis in reversing the dismissal of the ERISA claim. This confirms that the approach to a Section 510 claim under ERISA is no different than the approach to any other statutory anti-discrimination protection under the federal code.

Second, it is odd that there is no discussion of COBRA continuation coverage in the decision. COBRA makes clear that terminating the Trujillos' employment alone would not terminate Charlie’s coverage under the health benefits plan. William, Debra, and Charlie would all have the right under COBRA to elect continuation coverage under the Plan for up to at least 18 months after termination. Only if both William and Debra were terminated for gross misconduct would Charlie be deprived of the right to elect continuation coverage. It does not appear that the Trujillos were asserting the right to COBRA coverage at all or that the gross misconduct exception to that coverage was an issue in the case.  That's odd.



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