Thursday, May 10, 2007

A Cautionary Hiring Tale

In May 2004, Pfizer hired Dr. Dale Thurman as a veterinary pathologist. Thruman claims that prior to hiring, Pfizer's recruiting manager, Ruth Butts, orally told him that under the company's pension plan, he would be eligible for retirement at age 62 with a full pension benefit of $3,100 per month. Relying on that statement, Thurman quit his job in Ohio and moved to Michigan for the position at Pfizer. Shortly after he started working, Pfizer informed Thurman in writing that the pension calculation Butts gave him was incorrect, and the actual benefit amount would be $816 per month, a sizeable difference. And, like any disgruntled employee, he took his dispute to court, suing Pfizer for fraud and misreprentation. Pfizer defended the lawsuit, asserting that because the claims relate to its pension plan, the claims are exclusively governed by ERISA and the state law claims are preempted. The District Court agreed and dismissed the doctor's complaint.

In Thurman v. Pfizer, Inc., however, the Sixth Circuit disagreed, and in the proceed provided some cautionary language for employers in making representations during the hiring process. Critically, because Thurman sought damages based on what he lost by quitting his old job (i.e., lost of stock options, salary, benefits, and moving expenses) and not damages incurred by relying on Butts' representation (i.e., the higher pension benefit), the remedy sought was not plan-related and therefore the state law claims did not implicate ERISA. According to the Sixth Circuit, the claims were garden variety mispresentation claims that were too far attentuated from the Plan to invoke ERISA or its preemption provision:

What we have here is simply a case of a person who left his old employer based on promises made by his new employer. 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 then admonished employers to be more carful in what they tell applicants, and advised that a company will not be able to hide behind ERISA if a misreprentation made during the hiring process causes the applicant to rely to his or her detriment in accpeting the position:

We simply hold that employers who misrepresent certain benefits provided by ERISA-governed plans to prospective employees cannot later use preemption 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. This is a duty created by state law, with which we see little basis for federal law to interfere.