Claims for broken employment promises not preempted by ERISA

ERISA's extensive regulation of pensions preempts many state law claims that an employee might seek to bring against his employer.  A recent case from the Sixth Circuit provides a good discussion of the many types of claims that ERISA preempts, and of the one asserted by the plaintiff that it does not.

Plaintiff alleged that during employment negotiations Pfizer orally promised him a retirement pension of $3,100 per month.  After accepting the job, Pfizer notified him that the correct benefit amount was $816.  He filed a lawsuit seeking two alternative remedies: reliance damages, or the value of what he lost by taking the job, such as stock options from his former employer, and expectation damages, or the difference between what Pfizer promised and what he would actually receive.

The District Court dismissed the complaint, finding that both remedies were preempted by ERISA as seeking from the pension plan benefits that it did not provide.  The Circuit Court reversed the District Court regarding the reliance damages.  It held:

"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 declined the preemption argument because the alleged promises were made before plaintiff, as an employee, became eligible for the plan. The only connection to the pension plan is the damages sought. The Circuit Court held that connection is too remote to preempt the claim at the pleading stage.  The Court offered this counsel to employers:

"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."

Wise counsel, but certainly easier said than done.