Thomas, Scott W.

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Southern Methodist University

SMU Law ReviewVolume 64 | Issue 2 Article 132011Employment Law - The Third Circuit's HoldingThat Employees' Unsolicited Internal Complaintsare Not Protected under ERISA StopsWhistleblowers in Their TracksScott W. ThomasFollow this and additional works at: https://scholar.smu.edu/smulrThis Case Note is brought to you for free and open access by the Law Journals at SMU Scholar. It has been accepted for inclusion in SMU Law Reviewby an authorized administrator of SMU Scholar. For more information, please visit http://digitalrepository.smu.edu.Recommended CitationScott W. Thomas, Employment Law - The Third Circuit's Holding That Employees' Unsolicited Internal Complaints are Not Protected underERISA Stops Whistleblowers in Their Tracks, 64 SMU L. Rev. 787 (2011)https://scholar.smu.edu/smulr/vol64/iss2/13EMPLOYMENT LAW-THE THIRDCIRCUIT'S HOLDING THAT EMPLOYEES'UNSOLICITED INTERNAL COMPLAINTSARE NOT PROTECTED UNDER ERISASTOPS WHISTLEBLOWERS INTHEIR TRACKSScott W. Thomas*N Edwards v. A.H. Cornell & Son, Inc., the United States Court ofAppeals for the Third Circuit held that the anti-retaliation provisionof the Employee Retirement Income Security Act of 1974 (ERISA)1does not protect employees' unsolicited internal complaints. 2 The circuitsare currently split on whether ERISA's section 510 anti-retaliation provi-sion covers employees' unsolicited internal complaints. 3 The court in Ed-wards erroneously concluded that section 510's language was clear andstrayed from its own precedent of broadly interpreting similar statutoryanti-retaliation provisions.4 As a result, the court disregarded Congress'sintent in passing ERISA and failed to consider the bad public policy thatwill ensue from denying employees protection for their unsolicited inter-nal complaints.In March 2006, A.H. Cornell & Son, Inc. (A.H. Cornell), a commercialand residential construction services company, hired Shirley Edwards(Edwards) as its Director of Human Resources. 5 After three years of* J.D. 2011, Southern Methodist University Dedman School of Law; B.A. 1996, Uni-versity of Texas at Austin. The author would like to thank his wife and parents for theirunending love and support.1. Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1140 (2006).2. Edwards v. A.H. Cornell & Son, Inc., 610 F.3d 217, 225 (3d Cir. 2010), cert. denied,131 S. Ct. 1604 (2011).3. Compare Anderson v. Elec. Data Sys. Corp., 11 F.3d 1311, 1314 (5th Cir. 1994)(holding that "a refusal to commit violations of ERISA and reporting such violations tomanagement" was protected under ERISA section 510), and Hashimoto v. Bank of Haw.,999 F.2d 408, 411 (9th Cir. 1993) (finding ERISA was "clearly meant to protect whistleblowers"), with Nicolaou v. Horizon Media, Inc., 402 F.3d 325, 330 (2d Cir. 2005) (focusingon "whether the circumstances can fairly be deemed to constitute an 'inquiry"'), and Kingv. Marriott Int'l, Inc., 337 F.3d 421, 427 (4th Cir. 2003) (reading section 510's "testified or isabout to testify" language more narrowly and finding section 510 requires "somethingmore formal than written or oral complaints made to a supervisor").4. See Edwards, 610 F.3d at 223-25.5. Id. at 218.SMU LAW REVIEWemployment, Edwards complained to A.H. Cornell's management thatthe company was violating ERISA. 6 Edwards alleged that her supervisorordered her to make false statements to the company's workers' compen-sation carrier about an injured employee who continued collecting work-ers' compensation after returning to work.7 In addition, Edwards allegedthat the company tried to discourage employees from opting into grouphealth coverage by misrepresenting the cost. 8Edwards sued her employer in the United States District Court for theEastern District of Pennsylvania claiming that she was fired for com-plaining to management about her employer's ERISA violations. 9 Thedistrict court dismissed Edwards's suit, finding that her complaints werenot protected under section 510 because they were not given as part of aninquiry. 10 Edwards appealed, and the Secretary of Labor filed a brief asamicus curiae in support of Edwards.'1On appeal, a Third Circuit panel affirmed the district court's dismissalof Edwards's suit, holding that section 510 of ERISA does not protect anemployee's unsolicited internal complaints. 12 Section 510 states "[iut shallbe unlawful for any person to discharge, fine, suspend, expel, or discrimi-nate against any person because he has given information or has testifiedor is about to testify in any inquiry or proceeding relating to this [Act].... While acknowledging that Edwards had "given information" bycomplaining to management, the Third Circuit determined that the em-ployee's complaints were not protected under section 510's anti-retalia-tion provision because they were not part of an inquiry or proceeding.14First, the court examined dictionary definitions of "inquiry" and "pro-ceeding" and found that the plain meaning of section 510 was clear and"that the phrase 'inquiry or proceeding' is limited to more formal ac-tions."'1 5 Defining an inquiry as "a request for information," the courtdetermined that Edwards's complaints to management were not part ofan inquiry because she complained voluntarily without her employer re-questing any information from her about the potential ERISA viola-tions.16 Defining a proceeding as "'[t]he regular and orderly progressionof a lawsuit' or the 'procedural means for seeking redress from a tribunal6. Id. at 219.7. Edwards v. A.H. Cornell & Son, Inc., No. 09-CV-1184, 2009 U.S. Dist. LEXIS63720, at *2-3 (E.D. Pa. July 23, 2009), affd, 610 F.3d 217 (3d Cir. 2010), cert. denied, 131S. Ct. 1604 (2011).8. Edwards, 610 F.3d at 219.9. Id. at 218-19.10. Edwards, 2009 U.S. Dist. LEXIS 63720, at *13-14.11. Edwards, 610 F.3d at 219. See generally Brief for the Secretary of Labor as AmicusCuriae in Support of Appellant for Reversal, Edwards v. A.H. Cornell & Son, Inc., 610F.3d 217 (3d. Cir. 2010) (No. 09-3198), 2009 U.S. 3rd Cir. Briefs LEXIS 165 [hereinafterBrief for the Secretary].12. Edwards, 610 F.3d at 225-26 (2-1 decision).13. ERISA, 29 U.S.C. § 1140 (2006).14. Edwards, 610 F.3d at 222-23.15. Id. at 223-24 (quoting King v. Marriott Int'l, Inc., 337 F.3d 421, 427 (4th Cir.2003)).16. Id. at 223 (quoting BLACK'S LAW DICIONARY 864 (9th ed. 2009)).[Vol. 64Employment Lawor agency,"' the court concluded that Edwards's complaints were not partof a proceeding because no formal action had occurred at the time shewas fired. 17Next, the court considered the language of other anti-retaliation stat-utes and rejected Edwards and the Secretary of Labor's argument thatsection 510 should be interpreted broadly.18 The court deemed it unnec-essary to consider Congress's intent because it viewed the statute's lan-guage as unambiguous, stating "had Congress been concerned with such ascenario, Congress could have used broad language mirroring the anti-retaliation provision of Title VII."19 The court also noted that section15(a)(3) of the Fair Labor Standards Act (FLSA) extends protectionmore "broadly to persons that have 'filed any complaint,' without explic-itly stating the level of formality required, ' 20 whereas section 510 of ER-ISA protects only "persons that have 'given information or ... testified'in an inquiry' or proceeding.'"21Finally, the Third Circuit declared that its decision was consistent withits own precedent regarding anti-retaliation statutes.22 The court distin-guished its holding in Passaic Valley Sewerage Commissioners v. UnitedStates Department of Labor23 on the ground that Passaic Valley addressedsection 507(a) of the Clean Water Act (CWA), 24 not section 510 of ER-ISA.25 In Passaic Valley, the Third Circuit found that the term "proceed-ing" within section 507(a) of the CWA was ambiguous and could"reasonably be invoked to encompass a range of complaint activity ofvarying degrees of formal legal status."'26In dissent, Judge Cowen argued that section 510's language is ambigu-ous and the majority's interpretation is contrary to Congress's intent. 27The dissent noted that "Congress viewed [section 510] as a crucial part ofERISA because, without it, employers would be able to circumvent theprovision of promised benefits. '28 The dissent also suggested that themajority's "inquiry" standard may be unworkable because it would bedifficult to distinguish between an internal workplace complaint that wasmerely an initial step of an investigation and a protected statement thatwas made as part of an inquiry.29 Hypothetically, the dissent asked, if "anemployee.., complains to her superior, the superior asks some follow-up17. Id. (quoting BLACK'S LAW DICIIONARY 1324 (9th ed. 2009)).18. Id. at 223-24.19. Id. at 224.20. Id. (quoting Fair Labor Standards Act, 29 U.S.C. § 215(a)(3) (2006)).21. Id. at 224-25 (quoting ERISA, 29 U.S.C. § 1140 (2006)).22. Id. at 224.23. Passaic Valley Sewerage Comm'rs v. U.S. Dep't of Labor, 992 F.2d 474, 477 (3d.Cir. 1993).24. Clean Water Act, 33 U.S.C. § 1251 (2006).25. Edwards, 610 F.3d at 225.26. Passaic Valley, 992 F.2d at 478.27. Edwards, 610 F.3d at 226 (2-1 decision) (Cowen, J., dissenting).28. Id. at 226-27 (quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 143(1990)).29. Id. at 227-28.20111SMU LAW REVIEWquestions, and the employee responds,.., why should such responses beprotected while ... an employer is essentially permitted ... to fire anemployee immediately after she makes an informal complaint instead ofconducting an investigation . . . ?3Although section 510's language differs slightly from other anti-retalia-tion provisions, the dissent argued that the court should neverthelesstreat similar provisions in similar remedial federal statutes consistently.31The dissent pointed out that the majority's interpretation is inconsistentwith the court's prior holding in Passaic Valley, where the court held thatthe term "proceeding" was ambiguous in an analogous anti-retaliationprovision of the CWA.32 The dissent propounded that section 510 shouldactually be construed more broadly than similar anti-retaliation provi-sions in the CWA or FLSA because section 510 protects inquiries ratherthan merely proceedings (as in the CWA and FLSA) and protects em-ployees who give information rather than merely those who testify.33 Infact, in Nicolaou v. Horizon Media, Inc.-the case relied on by the major-ity-the Second Circuit found that the language of section 510 is broaderthan section 15(a)(3) of FLSA.34 Yet, the majority in Edwards came tothe opposite conclusion in finding that FLSA extends protection morebroadly than section 510.35The majority's holding in Edwards that section 510's language wasclear and unambiguous is inconsistent with the court's broad interpreta-tion of anti-retaliation provisions in other remedial statutes.36 In Brockv. Richardson, the Third Circuit did not use a dictionary to interpret asimilarly worded anti-retaliation provision in the FLSA;37 instead, thecourt "indicated a willingness to go beyond the bare language of the [stat-ute] itself,"' 38 stating that "courts interpreting the [FLSA's] anti-retalia-tion provision have looked to its animating spirit in applying it toactivities that might not have been explicitly covered by the language." '39Likewise, in Passaic Valley, the Third Circuit did not rely on a dictionaryto define the term "proceeding" as it did in Edwards; instead, the courtlooked at the statute's purpose and legislative history and found that theterm "proceeding" could "encompass a range of complaint activity."'4030. Id. at 228.31. Id.32. Id. at 229.33. Id. at 230 (comparing the language of section 507(a) of the CWA, 33 U.S.C.§ 1367(a) (2006), with the language of section 510 of ERISA, 29 U.S.C. § 1140 (2006)).34. Id. at 230-31 (quoting Nicolaou v. Horizon Media, Inc., 402 F.3d 325, 328 (2d Cir.2005)).35. Id. at 224-25 (majority opinion); see also supra notes 19-20.36. See Edwards, 610 F.3d at 228-31 (Cowen, J., dissenting).37. FLSA, 29 U.S.C. § 215(a)(3) (2006) (under the FLSA, it is unlawful "to discharge... any employee because such employee has filed any complaint or instituted or caused tobe instituted any proceeding under or related to this [Act]").38. Edwards, 610 F.3d at 230 (Cowen, J., dissenting).39. Brock v. Richardson, 812 F.2d 121, 124 (3d Cir. 1987).40. Compare Passaic Valley Sewerage Comm'rs v. U.S. Dep't of Labor, 992 F.2d 474,478 (3d. Cir. 1993), with Edwards, 610 F.3d at 223.[Vol. 64Employment LawThe court in Passaic Valley found that the term "proceeding" was ambig-uous in section 507(a) of the CWA. 41 Section 507(a) states that "[n]operson shall fire ... any employee ... by reason of the fact that suchemployee ... has filed, instituted, or caused to be filed or instituted anyproceeding under this chapter, or has testified or is about to testify in anyproceeding resulting from the administration or enforcement of the[CWA] ., 42 As the Secretary of Labor noted in the amicus brief, the courtin Passaic Valley found that the CWA protects unsolicited internal com-plaints where the statute "facially protects only filing, instituting or givingtestimony in 'any proceeding;"' thus, section 510 of ERISA, which "ex-pressly covers . . . all 'information' given in 'any inquiry,"' should alsoprotect employees' unsolicited complaints.43Because the majority did not follow its own precedent and incorrectlyconcluded that section 510's language was clear, the court failed to prop-erly address Congress's intent in passing ERISA.44 "Section 510's legisla-tive history demonstrates Congress's intent that the provision be liberallyconstrued... 'to provide.., broad remedies for redressing or preventingviolations [of ERISA]."' 45 ERISA's leading sponsor, "Senator Javits,during the debates on the passage of ERISA, characterized section 510 as'provid[ing] a remedy for any person fired such as is provided for a per-son discriminated against because of race or sex, for example.'" 46 "It isintended that coverage under the Act be construed liberally to providethe maximum degree of protection to working men and women coveredby private retirement programs. ' 47 Had the court properly weighed Con-gress's intent and liberally construed section 510, the court likely wouldhave held that Edwards's unsolicited internal complaints were protectedunder section 510 of ERISA.48The Third Circuit's narrow construction of ERISA's anti-retaliationprovision discourages employees from bringing potential ERISA viola-tions to their employer's attention and will likely lead to bad policy.4941. Passaic Valley, 992 F.2d at 478.42. CWA, 33 U.S.C. § 1367(a) (2006).43. Brief for the Secretary, supra note 11, at 22-23.44. See Edwards, 610 F.3d at 227 (Cowen, J., dissenting); see also IUE AFL-CIO Pen-sion Fund v. Barker & Williamson, Inc., 788 F.2d 118, 127 (3d Cir. 1986) ("[A] court neednot rely on the literal language of ERISA in interpreting its provisions, but may also lookto the intent of the statute.") (citation omitted).45. Brief for the Secretary, supra note 11, at 11 (quoting S. REP. No. 93-127, at 35(1973)).46. Id. (quoting 119 CONG. REC. 30044 (1973)). Senator Javits's comment suggests anintention that protection under ERISA should reach broadly like the protection againstdiscrimination provided by Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e etseq.47. S. REP. No. 93-127, at 4 (1974), reprinted in 1974 U.S.C.C.A.N. 4838, 4854.48. See Edwards, 610 F.3d at 224 (acknowledging that if section 510 were ambiguous,the court would "construe the provision in favor of plan participants").49. See Brief for the Secretary, supra note 11, at 30-31 (citing Disabled in Action ofPa. v. Se. Pa. Transp. Auth., 539 F.3d 199, 210 (3d Cir. 2008) (arguing that a narrow readingof section 510 should be avoided because it would lead to absurd results and defy commonsense)).2011]SMU LAW REVIEWUnder the Third Circuit's reading of section 510, employers can ignoreemployees' complaints rather than initiate an inquiry or proceeding, orthey can simply fire employees before they are able to begin a formalproceeding.50 The Ninth Circuit has stated that "[t]he normal first step ingiving information or testifying ... would be to present the problem firstto the responsible managers of the ERISA plan."151 If an employee is"discharged for raising the problem, the process of giving information ortestifying is interrupted at its start: the anticipatory discharge discouragesthe whistle blower before the whistle is blown."5 2The problem with the Third Circuit's decision in Edwards is the court'sreliance on dictionary definitions in interpreting section 510 of ERISAwithout considering Congress's intent.5 3 The outcome of the case essen-tially turned on the court's decision that section 510's language is not am-biguous-the court even acknowledged that if the provision wereambiguous, it would have been construed in favor of the employee-butthe court relied on a dictionary to show that the statute's language isclear.5 4 The court's prior interpretation of similar anti-retaliation provi-sions and the current split of authority on the issue indicate that section510's language is not absolutely clear.Once the court erroneously decided that section 510's language is clear,it disregarded Congress's intent in passing ERISA and failed to ade-quately address the impact that the court's decision will have on publicpolicy. The Third Circuit's holding undermines the efficacy of section 510because employers can either ignore whistleblowers or fire them for mak-ing unsolicited internal complaints. Potential whistleblowers will bestopped in their tracks before they can give information or testify. Manyemployees would prefer to first report ERISA violations to their supervi-sors rather than voice their complaints through a formal inquiry or pro-ceeding. By essentially requiring employees to go immediately to thecourthouse for protection, the Third Circuit deters employees from re-porting ERISA violations. Employees may elect to remain silent andeven assist in their company's fraud rather than risk retaliation from theiremployers. The court in Edwards should have construed section 510broadly, as it did with similarly worded anti-retaliation provisions in otherstatutes, and should have effectuated Congress's intent and furthered thepolicy goals of ERISA by holding that employees' unsolicited internalcomplaints are protected under section 510 of ERISA.5550. See id. at 29-31 (arguing that allowing companies to investigate and correct ER-ISA violations is more cost effective than requiring employees to file complaints throughlitigation or adversarial proceedings).51. Hashimoto v. Bank of Haw., 999 F.2d 408, 411 (9th Cir. 1993).52. Id.53. See Edwards, 610 F.3d at 223.54. Id. at 223-24.55. See Brief for the Secretary, supra note 11, at 32.[Vol. 64

Employment Law - The Third Circuit\u27s Holding That Employees\u27 Unsolicited Internal Complaints are Not Protected under ERISA Stops Whistleblowers in Their Tracks

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Employment Law - The Third Circuit\u27s Holding That Employees\u27 Unsolicited Internal Complaints are Not Protected under ERISA Stops Whistleblowers in Their Tracks

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