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Don’t make promises the company might not keep

by on
in Employee Benefits Program,HR Management,Human Resources

Issue: Courts will make your company follow through on oral promises you make about benefits.

Risk: You or an ill-informed manager could inadvertently force your company to provide benefits it can't afford.

Action: Inform your managers about what can happen if they pass along faulty benefits information.

Like most companies, yours probably has made cost-cutting changes to its benefits program. Imagine what would happen if your company was prevented from making those changes, and cutting those costs, because of something you or a manager told employees.

Recent case: A manufacturing company's HR director held meetings encouraging workers to take early retirement. Employees were told they'd receive health benefits for the rest of their lives and that the benefits would never change.

Some workers took early retirement based on those assurances. But, in fact, the benefits did change and, in some cases, were terminated. Furious retirees sued under the Employee Retirement Income Security Act (ERISA), claiming they were led astray. A federal appeals court agreed, ruling that the HR rep's erroneous statements were enough to bind the company to its verbal promise of lifetime retiree medical benefits. (James v. Pirelli Armstrong Tire Corp., No. 02a0318p, 6th Cir.)

Advice: Never give employees the impression that your benefits program will never change. And be very careful when explaining benefit changes to employees; never gloss over the painful parts. Reason: ERISA places the burden squarely on you to provide truthful and accurate information.

To help control the flow of benefits information, limit the number of managers authorized to provide benefit information. Tell managers that if they can't definitively answer a question, they should send the employee to you.

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