Larkin Watson had a chronic heart condition and missed many days of work. His supervisor suggested he reduce his hours from full- to part-time status, which he did. But when his health deteriorated further, he left work. He then learned that he wasn't covered by the company's long-term disability (LTD) policy because he was a part-timer. If he had applied for benefits before he stopped working full time, he could have been covered.
Watson sued the company and plan administrator under the Employee Retirement Security Act (ERISA) for failing to inform him that a switch to part-time status would cause him to surrender benefits that he might need someday.
The case boiled down to a question: Is a company obligated to inform an employee, even if he doesn't ask, of how a particular plan decision will affect him personally?
Both a district court and an appeals court said "no." Although benefit-plan fiduciaries have well-defined obligations to provide general information about the plan to all covered employees, employers have no obligation to go out of their way to give specific, unsolicited advice on using benefits.
The court said the employer didn't actively conceal its policy. To the contrary, it held an annual benefit fair during open enrollment in which benefit vendors answered employee questions. Plus, new employees regularly re-ceived a checklist of benefits for which they were eligible.
The court said Watson "simply slipped through the cracks in this system" when he switched from part time to full time. That was unfortunate, but it wasn't done in bad faith or fraud. (Watson v. Deaconess Waltham Hospital, No. 01-2133, 1st Cir., 2002)
Advice: Even though this employer won, the decision
certainly doesn't give you the right to clam up when explaining benefits to workers. Just the opposite, make sure employees get accurate answers to their benefit questions. Sending a benefit explanation letter when employees' change full- and part-time status, as this company started doing after the lawsuit, is a good start.
This company won only after dragging the case through the appellate court system, an expensive exercise. And a small change in facts (say, if the HR department knew more about his illness and need for leave) could have created a "fiduciary duty" for the employer to disclose more information. The court noted other cases in which a company had a responsibility to give benefit information that the worker didn't specifically request.
Bottom line: You have a duty to give additional benefits in- formation if there is some reason that you should have known that failing to convey the information would be harmful.
- How to Fire an Employee the Legal Way: 6 Termination Guidelines
- Research, diligence, documentation key to making good-Faith FLSA classifications
- Beyond the basics, which holidays will we observe next year?
- New Benefit: Bike Commuters Get Reimbursement Incentives
- Track HR decisions to show discipline wasn't harassment