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Circuits Split over Whether ERISA Section 510 Applies to Retaliation Claims Based on Informal Complaints

Circuits Split over Whether ERISA Section 510 Applies to Retaliation Claims Based on Informal Complaints

ERISA and Life Insurance News
(December 21, 2012)

ERISA’s anti-retaliation provision makes it unlawful for an employer to discharge or discriminate against a plan participant “because he has given information or has testified or is about to testify in any inquiry or proceeding relating to [the Act].” ERISA § 510, 29 U.S.C. § 1140.

An issue that has divided the federal circuit courts is whether the phrase “inquiry or proceeding” limits the protection of § 510 only to persons who testify or provide information in formal proceedings – such as trials and administrative hearings – or whether it extends also to an employee’s informal unsolicited complaint that his employer has violated ERISA.

Six circuit courts have considered the question, some with more analysis than others, and they are split 3-3 on whether § 510 affords a cause of action to plan participants who claim that they suffered retaliation because of informal workplace complaints concerning ERISA violations.

The Second, Third, and Fourth Circuits have held that the term “inquiry or proceeding” refers to formal proceedings, or at least to a request for information – “an inquiry” – from an employee’s supervisors. The Fifth, Seventh, and Ninth Circuits, however, have taken a more expansive view, holding that § 510 applies also to retaliation claims based on informal complaints or questions raised by an employee concerning the administration of an ERISA plan.

Ninth Circuit

The first to address the issue was the Ninth Circuit Court of Appeals. In Hashimoto v. Bank of Hawaii, 999 F.2d 408 (9th Cir. 1993), a bank employee complained to her supervisors that the bank had violated the reporting and disclosure requirements and the fiduciary standards of ERISA. The employee was fired, and she filed a wrongful discharge action, relying solely on a Hawaii whistleblower statute. The district court held that the employee’s state law claim was preempted by ERISA.

The Ninth Circuit agreed, but it re-characterized the claim as one for retaliation under § 510 of ERISA, which the court said could be “fairly construed” to protect a person in the plaintiff’s position, because § 510 was “clearly meant to protect whistle blowers.” Id. at 411.

The court concluded that the statute provided a remedy under the circumstances presented, describing complaints such as the one made by the plaintiff as “[t]he normal first step in giving information or testifying.” Id. Under a more restrictive view of the statute, the court said, “the process of giving information or testifying [would be] interrupted at its start: the anticipatory discharge discourages the whistle blower before the whistle is even blown.” Id. The case was remanded to the district court for trial.

Fifth Circuit

The next year, the Fifth Circuit became the next to address the scope of § 510 – although in very cursory fashion – in Anderson v. Electric Data Systems Corp., 11 F.3d 1311 (5th Cir. 1994).

Similar to the complaint in Hashimoto, the plaintiff sued for wrongful discharge under Texas law, contending that he had been fired because he refused to commit illegal acts involving employer-sponsored pension plans, and because he reported another employee’s ERISA violation. Based on ERISA preemption of the state law claim, the district court granted summary judgment to the employer.

On appeal, the employee did not directly challenge the grant of summary judgment, but instead asked the appellate court to remand his case to state court, arguing that the district court lacked subject matter jurisdiction since his complaint did not allege any violations of ERISA.

Although the plaintiff alleged that his discharge was in response to what was only an informal complaint, the Fifth Circuit held that his claim fell within the protection of ERISA § 510, which “prohibits the discharge or other adverse treatment of any person because he has given information or testimony relating to ERISA.” Id. at 1315. With almost no further discussion of the statute, the court affirmed the district court’s grant of summary judgment to the employer on ERISA preemption grounds.

Fourth Circuit

The issue was next presented nearly a decade later. In King v. Marriott International, Inc., 337 F.3d 421 (4th Cir. 2003), the Fourth Circuit became the first to hold that § 510 does not protect unsolicited informal complaints.

The plaintiff complained to her supervisor and other Marriott officials about the anticipated transfer of funds from an employer-sponsored medical plan into a general corporate reserve account. When she was fired, the plaintiff asserted an anti-retaliation claim under § 510 of ERISA as well as a claim under Maryland law. The district court granted summary judgment to the employer, concluding that the plaintiff had not presented sufficient proof of a causal connection between her complaint and her termination.

On appeal, the Fourth Circuit squarely addressed the question of whether the plaintiff’s unsolicited informal complaint came within the protection of § 510. The court held that it did not, stating:

The most immediate question is the proper scope of the phrase “inquiry or proceeding.” In interpreting a very similar provision of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq., we concluded that the term “proceeding” referred only to administrative or legal proceedings, and not to the making of an intra-company complaint …. In particular, we explained, “testify” and “institute” both connote a formality that does not attend an employee’s oral complaint to his supervisor ….

In the instant case, as well, the use of the phrase “testified or is about to testify” does suggest that the phrase “inquiries or proceedings” referenced in section 510 is limited to the legal or administrative, or at least to something more formal than written or oral complaints made to a supervisor. The phrase “given information” does no more than insure that even the provision of non-testimonial information (such as incriminating documents) in an inquiry or proceeding would be covered.

337 F.3d at 427 (citations omitted).

Because there was no allegation that the plaintiff had testified, or was about to testify, or that he had provided information in connection with any legal or administrative proceeding, the court concluded that § 510 did not apply and that ERISA did not provide a cause of action. In doing so, the Fourth Circuit distinguished Hashimoto and Anderson and found them to be unpersuasive.

Second Circuit

Two years later, in Nicolaou v. Horizon Media, Inc., 402 F.3d 325 (2d Cir. 2005), the Second Circuit also held that § 510 does not protect unsolicited informal complaints. The key to the decision was not the lack of a formal proceeding, however, but the fact that the plaintiff’s complaint was unsolicited, rather than having been made in response to an “inquiry” by the employer.

Thus, the Second Circuit disagreed with the Fourth Circuit that a “formal” inquiry, in the context of a trial or administrative hearing, was required before an employee could invoke the protection of § 510. The court agreed, however, that § 510 requires more than merely giving information. Rather, the information must be given in response to an inquiry from the employee’s supervisors.

In Nicolaou, the plaintiff was discharged after she complained about underfunding of an employer-sponsored 401(k) plan. The plaintiff had taken her complaint to an attorney for her employer, who apparently undertook an investigation, and then met with the company’s president, Koenigsberg, apparently at the attorney’s request.

The plaintiff sued her former employer, asserting claims under both ERISA § 510 and the Fair Labor Standards Act. The district court dismissed the § 510 claim, concluding that the allegations of the complaint were insufficient to state a claim under § 510 because they did not establish the existence of “a formal, external inquiry.” 2003 U.S. Dist. LEXIS 18341, at *7.

The Second Circuit reversed, stating that “[w]hile ‘proceeding’ refers to the progression of a lawsuit or other business before a court, agency, or other official body, ‘inquiry’ refers broadly to any request for information.” 402 F.3d at 329. “[T]he proper focus,” the court said, “is not on the formality or informality of the circumstances under which an individual gives information, but rather on whether the circumstances can fairly be deemed to constitute an ‘inquiry.’” Id. at 330.

The court concluded:

Certainly, if [the plaintiff] can demonstrate that she was contacted to meet with Koenigsberg in order to give information about the alleged underfunding of the Plan, her actions would fall within the protection of Section 510. Thus, the district court erred in concluding that, as a matter of law, [the plaintiff’s] allegations could not survive a motion to dismiss because they do not establish the existence of a “formal, external inquiry.” The meeting with Koenigsberg was something less than a formal proceeding, but we believe it was sufficient to constitute an “inquiry” within the meaning of Section 510.

Id. (citation omitted). The case was remanded so that the plaintiff could file an amended complaint.

Third Circuit

The next appellate court to consider the issue was the Third Circuit in Edwards v. A.H. Cornell & Son, Inc., 610 F.3d 217 (3d Cir. 2010), cert. denied, 131 S.Ct. 1604 (2011). As the Fourth and Second Circuits had done, the court held that § 510 of ERISA does not protect unsolicited complaints by an employee.

The plaintiff brought an anti-retaliation claim under § 510 and a common law wrongful discharge claim, contending that she was fired because she complained to management about company violations of ERISA. The district court held that the complaint failed to state a claim under § 510, because the employee’s complaints to management were not part of an inquiry or proceeding.

The Third Circuit agreed, stating:

An “inquiry” is generally defined as “[a] request for information.” Here, Edwards does not allege that anyone approached her requesting information regarding a potential ERISA violation. Rather, she made her complaint voluntarily, of her own accord. Under these circumstances, the information that Edwards relayed to management was not part of an inquiry under the term’s plain meaning. …

Neither is Edwards’s conduct encompassed by the term “proceeding.” A “proceeding” is commonly defined as “[t]he regular and orderly progression of a lawsuit” or the “procedural means for seeking redress from a tribunal or agency.” Here, there is no suggestion that any such formal action has occurred.

610 F.3d at 223 (citations omitted) (quoting Black’s Law Dictionary 864, 1324 (9th ed. 2009)).

The court adopted the Fourth Circuit’s construction of the phrase “inquiry or proceeding,” stating:

As the King court noted, even beyond the plain meaning of “inquiry” and “proceeding,” the phrase “testified or is about to testify” implies that the phrase “inquiry or proceeding” is limited to more formal actions. Not all anti-retaliation statutes are so limited. In drafting [§ 510], Congress could have used broad language similar to that present in the anti-retaliation provision in Section 704(a) of Title VII, which extends broad protection to employees that have “opposed any practice made an unlawful employment practice by [Title VII.].” Congress declined to do so, and, like the court in King, we find this choice to be persuasive.

Id. (citations omitted). The court also specifically rejected the more expansive view of § 510 adopted by the Ninth and Fifth Circuits, stating:

[W]e agree with the Fourth Circuit that the Ninth and Fifth Circuit opinions in Hasimoto and Anderson, respectively, are not compelling. Neither court examined the statutory language of Section 510 in detail: the Fifth Circuit gave the issue cursory treatment, and the Ninth Circuit appeared to focus its analysis on the adoption of a “fair interpretation ….”

Id. (citations omitted).

Seventh Circuit

In the most recent examination of the issue, the Seventh Circuit took a more expansive view of § 510, joining the Ninth and Fifth Circuits in holding that it provides a cause of action for retaliation based on an employee’s unsolicited informal complaint. George v. Junior Achievement of Central Indiana, Inc., 694 F.3d 812 (7th Cir. 2012).

George was a vice president of Junior Achievement. When he discovered that money withheld from his pay had not been deposited into his retirement account and his health savings account, he complained to company executives. He also contacted the U.S. Department of Labor, but did not file a written complaint.

After George raised the issue with two members of the company’s board of directors, he received checks for the missing funds plus interest, but Junior Achievement later terminated his employment several months before his anticipated retirement date.

In a lawsuit against Junior Achievement, George alleged that his questions about the failure to deposit funds into his retirement and health savings accounts led to his firing, in violation of ERISA’s anti-retaliation provision. Junior Achievement argued that § 510 did not apply, because George had simply raised the issue informally, not in the context of a formal inquiry. The district court agreed and entered summary judgment for the employer. 2011 U.S. Dist. LEXIS 111846 (S.D. Ind. Sept. 28, 2011).

Describing ERISA’s anti-retaliation provision as “a mess of unpunctuated conjunctions and prepositions,” 694 F.3d at 814, the Seventh Circuit resolved the ambiguous text in favor of protecting the employee, rejecting the employer’s argument that § 510 did not apply because there had been no “inquiry” within the meaning of the statute.

“The phrase ‘has given information or has testified or is about to testify’ provides context that helps us understand ‘inquiry,’” the court said. “The clause ‘has given information’ covers every kind of communication, while ‘has testified or is about to testify’ denotes a type of communication in a more formal setting, such as a trial or administrative hearing.” Id.

Thus, “[t]he latter language implies a level of formality – but not necessarily formality in ‘giv[ing] information,’” the court said. “A natural inference from the fact that the statute refers to ‘giv[ing] information’ in addition to testifying is that ‘giv[ing] information’ covers informal communications – and, if informal communications are covered, ‘inquiry’ cannot be limited to formal proceedings.” Id.

The court observed that while an “inquiry” could refer to something official, “such as the investigation that the Department of Labor conducts before deciding whether to file suit under ERISA,” it also could mean “nothing more than a question.” Id. at 815.

The Seventh Circuit concluded that “the best reading of § 510 is one that divides the world into the informal sphere of giving information in or in response to inquiries and the formal sphere of testifying in proceedings. This means that an employee’s grievance is within § 510’s scope whether or not the employer solicited information.” Id. at 817.

The court added, however, that the anti-retaliation provision should not be read to cover “trivial bellyaches – the statute requires the retaliation to be ‘because’ of a protected activity,” and “the grievance must be a plausible one, though not necessarily one on which the employee is correct.” Id.

In George’s case, he notified his employer of a potential breach of its fiduciary duties and asked what would be done to remedy the breach. “Those conversations involved an ‘inquiry,’ as we understand that word,” the court said, “because Junior Achievement responded to them rather than ignoring them.” Id.

The case was remanded to the district court to “decide whether there is some other ground on which this case may be resolved short of trial, or whether a trial on causation is necessary.” Id.


There is a split among the six circuit courts of appeals that have considered whether § 510 of ERISA protects employees from retaliation in response to an employee’s informal questions or complaints.

The Seventh Circuit has joined the Fifth and Ninth Circuits in holding that informal inquiries initiated by an employee are covered. The Second Circuit has held that § 510 applies if information is provided in response to an inquiry initiated by the employer, while the Third and Fourth Circuits have concluded that the phrase “inquiry or proceeding” requires a formal trial or administrative proceeding.

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H. Sanders Carter
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