How Benefits Discrimination Can Lead to Class Action Lawsuits

Generally to proceed as a class action, a case must meet all of the following criteria: (1) the class is numerous enough to warrant proceeding as a class action; (2) there are questions common to the class; (3) the claims of the class representatives are typical of the claims of the class; and (4) the representatives will fairly and adequately protect the interests of the class. In the employment context, an employer will often engage in a pattern or practice that is discriminatory against not only one individual, but also an entire class of similarly situated individuals.

One form of employment discrimination that rears its ugly head from time to time is benefits discrimination. When it happens, it often presents an opportunity for a class action lawsuit to proceed. To establish a prima facie case of benefits discrimination under the Employee Retirement Income Security Act (ERISA), the plaintiffs must demonstrate that the employee engaged in prohibited conduct, taken for the purpose of interfering with the attainment of any right to which the employee has or may become entitled. Three cases from across the country illustrate how a benefits discrimination class action works.

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1. Health Benefits Discrimination

In the first case the district court judge certified a class defined as:

According to the Judge, in that case, "Plaintiffs presented evidence that [the company´s] Human Resources (HR) department viewed [the company´s] aging workforce as a problem because it believed that medical costs increased with older employees." (Vaszlavik, et al. v. StorageTek, 183 F.R.D. at 267.) According to the lawsuit, the employer thus elected to deal with the problem by laying off older workers in order to save on anticipated medical costs. The employer denied liability and the case settled before a determination on the merits was ever made.

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2. Retirement Benefits Discrimination

In the second case, Gavalik v. Continental Can Co., 812 F.2d 834 (3^rd Cir. 1987), the employer had established a "cap liability avoidance program" in order reduce its anticipated costs. The plan was to identify unfunded pension liabilities so as to avoid future vesting. The plan included computerized tracking of age and service and triggered a "red flag" report to management. The United States Court of Appeals for the Third Circuit found that this liability avoidance scheme constituted a violation of the ERISA. The court´s order was so strong that, upon being designated as a member of that class, each class member was entitled to some relief from the illegal scheme unless the company could prove that as to any particular individual class member´s request for relief, the individual was not entitled because the individual would have been without work at the same time in any event.

In the third case, the district judge found that the employer had established a "recall avoidance policy." Like the liability avoidance program in the second case, the recall avoidance policy was based on a desire to prevent triggering pension eligibility. The district judge, who heard all of the evidence, was apparently so astounded by the company´s recall avoidance policy that he stated:

As the costs of employment benefits continue to soar, keep an eye out for employer practices that take aim at eliminating a sector of its workforce because of the use or anticipated use of employment benefits.

Benezra & Culver, L.L.C. has had class actions certified in age and benefits discrimination. Other class actions brought by the law firm have resulted in settlements prior to the class action question being ruled upon.

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