In recent months, we have seen an increase in severed employees filing claims for wrongful discharge under a variety of theories.  It is easy to forget that ERISA also contains a possible remedy under Section 510.  Section 510 provides that it unlawful for an employer to discharge an
ERISA plan participant for the purpose of interfering with the attainment of any right
to which such participant may become entitled under the plan.

Such was the case in Pendelton v. QuikTrip, decided by the 8th Circuit on June 9, 2009.  Pendelton told his employer that he was leaving but agreed to postpone his departure while transitioning his work.  During the transition, he disparaged a co-worker and was terminated by his employer.  He sued for wrongful discharge, alleging that his termination was a 510 violation because he was terminated to avoid certain benefits under the severance plan, including stock option benefits.  The Court disagreed, reasoning that he was not entitled to the benefits claimed in the first place, so his termination could not have been to avoid payment of benefits to which he was entitled.

I think this case is important because it reminds us of the standard that has to be set in section 510 claims.  The common view is that a claim under this section is viable if the plaintiff can allege simply they were fire because they made a claim for benefits.  They tend to overlook that for claim to survive, there had to first be a right to obtain the benefits.  It is not enough to say "I was terminated because I asked."  It must be "I was terminated because I asked for what I was entitled to."

I also think that it is very important for employers and plan sponsors who are downsizing to evaluate the benefits severed employees are entitled to upon termination and provide those benefits correctly.  If employees have made a claim for benefits to which they were entitled in the past, the employer should make sure that these benefits were provided.  If they have made a claim for benefits to which they were not entitled, make sure proper notice and appeal rights are provided.  But don't assume the claim will simply go away if the employee is terminated.