ERISA doesn't pre-empt misrepresentation lawsuit

CINCINNATI—An employee who gave up certain benefits when he switched jobs based on his new employer's misrepresentation of his monthly pension can seek damages without his lawsuit being pre-empted by the Employee Retirement Income Security Act, said a federal appellate court.

According to the May 8 decision by the 6th U.S. Circuit Court of Appeals in Dr. Dale Thurman vs. Pfizer Inc., Dr. Thurman, a veterinary pathologist, was told if he joined New York-based Pfizer Inc., he would receive about $3,100 a month in a pension allowance.

Relying on Pfizer's promised benefits, Dr. Thurman left his former job in Ohio for the Pfizer position in Michigan, giving up his previous job's higher wages and stock options and incurring moving expenses. But he was told shortly afterwards that the pension information he had received was incorrect, and that he would receive only $816 in monthly benefits.

Dr. Thurman filed suit against Pfizer, seeking damages in the form of the benefits he had relinquished by leaving his former job, and rescission of his participation in the pension plan.

A lower court ruled against him, saying his claim was pre-empted by ERISA. But the appellate court disagreed.

"What we have here is simply a case of a person who left his old employer based on promises made by his new employer," said the three-judge panel's unanimous decision.

"These promises could have concerned anything—for example, an increase in wages, more vacation days, or free parking. Here, these promises just so happened to concern retirement benefits. We see no reason to bind employers to some promises used to induce acceptance of an employment offer, but give them a 'get out of jail free card' when their promises concern the scope of a plan governed by ERISA."

The court added its decision does not change how plan administrator's actions are regulated. "We simply hold that employers who misrepresent certain benefits provided by ERISA-governed plans to prospective employees cannot later use pre-emption as an end-run around liability for fraudulent or innocent misrepresentations.

"If adhering to promises regarding ERISA-governed plans proves too cumbersome for employers, then during the recruitment process, those employers must simply be more careful before informing potential employees of the ERISA-governed benefits to which they might be entitled," said the opinion, which remanded the case for further proceedings.