An important consideration whenever people are thinking about changing jobs is retirement or pension benefits; what are they leaving behind and/or what will they get in the new position or with the new company? These topics are discussed during the hiring process and representations and promises can be made about benefits. A recent case, Deschamps v. Bridgestone America, shows when the promises and representations made by company representatives can be binding on the company.
Andre Deschamps worked for Bridgestone in Canada in a maintenance position, beginning in 1983. In 1993, he became aware of a better job at Bridgestone's plant in Wilson, North Carolina. One concern he had was whether he would keep his ten years service credit under Bridgestone's pension plan if he took the job in North Carolina. During the interview process, Deschamps was informed by the plant manager, the plant controller and the plant human resources manager that he would keep his ten years service credit if he took the job. All three of these company representatives confirmed that they had made these representations to Deschamps during the hiring process. Based in substantial part on these promises about his pension benefits Deschamps took the job in North Carolina. During the next few years he passed on job opportunities with another company, because of the better pension benefits with Bridgestone.
Over the course of the next many years of employment with Bridgestown, "Deschamps's belief regarding the service date for his pension benefits was confirmed by written materials like benefit summaries and materials made available online." In August 2010, Deschamps was officially informed that he would not get service credit for his first 10 years of employment and that his pension benefits began accruing in 1993. Deschamps tried to straighten it out through internal appeals but met no success. He filed suit making three claims: (1) that Bridgestone was equitably estopped from denying him service credit on his pension dating from 1983; (2) that Bridgestone breached its fiduciary duty to him; and, (3) denying him the first 10 years of service credit violated the anti-cutback provisions under ERISA, the federal law that covers most pension plans.
Deschamps won on all three claims in both the district court and on appeal to the United States Court of Appeals for the Sixth Circuit.
The equitable estoppel claim required Deschamps to show that Bridgestone was aware of the "true facts," which meant that it either intended deception or demonstrated such gross negligence as to amount of constructive fraud. Deschamps accomplished this because: (1) he claimed and the Bridgestone management people involved agreed that it was expressly represented to him that if he took the job in North Carolina he would keep his ten years service credit under the pension plan; (2) he had no reason to doubt this representation because "it was repeated for more than a decade in benefits summaries and online materials"; and, (3) although he had access to pension plan documents that may have shown the representations to be inaccurate, the Sixth Circuit found this document "more than a bit difficult to decipher" because of a variety of ambiguities.
The lesson here: (1) ten years of service credit is a lot of time so the courts had some appreciation for how important it was for Deschamps to get it straightened out; (2) the Bridgestone management people backed Deschamps up and acknowledged that they told him what he claimed they told him; (3) Bridgestone, by way of the "benefits summaries and online materials," acted consistent with Deschamps keeping the ten years service credit for a long time before it tried to backtrack. These type of facts showed gross negligence amounting to constructive fraud.
An employer's fiduciary duties to its employees regarding a pension plan are mixed and do not apply to everything an employer does concerning a pension or retirement plan. For instance, an employer does not have a fiduciary duty when it "makes a business decision, such as reducing the amount of unaccrued plan benefits or terminating a pension plan" or when performing "purely ministerial functions such as processing claims, applying plan eligibility rules, communicating with employees and calculating benefits."
But an employer does act as a fiduciary toward an employee "when conveying information about the Plan's terms and the likely benefits that Deschamps would receive in the future, thus purportedly allowing him to make an informed choice about his continued participation in the plan."
Notice the difference here which is key: Bridgestone had a fiduciary duty to Deschamps when communicating with him about his service credit, which would affect his benefits, as part of his decision-making process about taking or not taking the job in North Carolina. But as a general matter, an employer has no such duty when communicating with its employees about or in calculating benefits. That doesn't seem to make much sense, since that appears to be exactly the type of representations that were made to Deschamps. The Sixth Circuit doesn't explain the difference, which is at least one indication of why having an experienced and knowledgeable employee benefits lawyer is helpful.
The federal district judge, Hon. Kevin H. Sharp, that ruled in Deschamps' favor spoke recently at a National Employment Lawyers Association (NELA) seminar that I attended in Covington. I should also add that two district judges from Cincinnati, Hon. Timothy Black and Hon. Michael Barrett, also took the time to come over and speak to the attendees. Those efforts are much appreciated.
The Sixth Circuit opinion was authored by Judge Julia Gibbons and was joined by Senior Judge Eugene Siler and Judge Deborah Cook.
Lexington, Kentucky employee benefits lawyer Robert Abell represents individuals and employees in employee benefits cases; contact him at 859-254-7076.