A veterinarian who was fired after she complained about her employer’s failure to deposit withheld contributions into her retirement account in a timely manner, but subsequently refused the employer’s offer of reinstatement, could not sue for breach of fiduciary duty and retaliation under ERISA, a U.S. District Court judge in Massachusetts has ruled.

Contending that the employee was terminated for the manner in which she complained and not the fact that she complained, the defendant employer argued that because relief under ERISA is equitable in nature and the plaintiff employee had been made whole, there was nothing further for her to recover.

Judge Richard G. Stearns agreed.

“There was nothing impossible or impractical about reinstatement at the time the offer was made to [the plaintiff],” Stearns wrote, granting summary judgment to the employer.

“She was offered a return to the same position with the same salary and benefits that she had enjoyed prior to the termination. … Nothing in the record suggests any ‘continuing hostility between the plaintiff and the employer …’ that would have made the prospect of a successful return to work impractical,” Stearns said, quoting the U.S. Supreme Court’s 2001 decision in Pollard v. E.I. Du Pont de Nemours & Co.

Stearns also found that the employee’s state-law retaliation and Wage Act claims were preempted by ERISA.

The 20-page decision is Usiak Altshuler v. Animal Hospitals, Ltd., et al.

Road map for violations?

John J. McGivney of Rubin & Rudman in Boston represented the defendant employer. He said the decision “will make ERISA seem less mysterious and more accessible to practitioners who maybe haven’t dealt much with this area of the law.”

But plaintiff’s counsel James A.W. Shaw of Boston’s Segal Roitman said the decision gives employers “a road map” for avoiding liability when violating ERISA.

“The decision tells employers that if you have an employee who claims a breach of fiduciary duty for misappropriating pension contributions and that employee is fired, you can offer reinstatement knowing that it’s virtually certain that the employee will decline the offer because he or she knows they’ll likely be victimized again by the same thing they complained about,” he said. “The worse an employer is, the more likely it’ll be that the employee declines reinstatement.”

That creates a situation in which no remedy is available to right a wrongful termination, said Shaw, whose client has not yet decided whether to appeal. “We see that as extremely problematic. It’s both a legal error and very much against public policy.”

Elizabeth A. Rodgers of Rodgers, Powers & Schwartz in Boston represents employees in similar cases. She said the ruling is a reminder that ERISA “is a weak reed and needs to be reformed because of [its] limited equitable relief, its failure to explicitly include back pay [as a remedy in cases like this] and [its] preemption of state law remedies, which are far more comprehensive.”

While the court did not need to decide whether back pay for individual victims of ERISA violations constitutes purely legal damages unavailable under ERISA, or whether it constitutes equitable restitution available under ERISA as the 6th U.S. Circuit Court of Appeals has held, plaintiffs’ attorneys should be wary of relying on ERISA, Rodgers said.

At the same time, “employers’ lawyers are encouraged to pay in full and reinstate employees who courageously complain of misappropriation of withheld pension payments, and to take affirmative steps to prevent retaliation,” she said.

Michael Clarkson, an employment lawyer at Ogletree, Deakins, Nash, Smoak & Stewart in Boston, described the ruling as a “remarkably practical decision.”

Though the court found a genuine dispute of fact on the issue of liability, Clarkson said, it did the right thing in finding that an unconditional pre-suit offer of reinstatement, along with full and unconditional IRA payments, effectively denied the plaintiff an ERISA remedy.

“It is refreshing from an employer’s perspective to see the court reject the sort of ’gotcha’ litigation employed by the plaintiff here,” he said.

Untimely deposits

Plaintiff Jennifer Usiak, a veterinarian, became a full-time employee of defendant Animal Hospital of Lynnfield in June 2007.

In April 2009, the plaintiff elected to participate in a Simple IRA retirement plan sponsored by AHL, choosing to contribute $250 biweekly to her plan account through paycheck withholdings. Defendant Christopher Meehl, AHL’s owner, served as the plan administrator.

Under the plan’s terms, the employer was required to deposit contributions into employee plan accounts within 30 days of the month in which employee deductions were made.

In early 2011, the plaintiff discovered that AHL had deposited only 65 percent of the money withheld from her pay in 2010, and that contributions for September, October and November were overdue.

On Jan. 6, 2011, the plaintiff spoke with AHL’s bookkeeper about the missing deposits. The bookkeeper told her he had been pressing Meehl to make timelier deposits into the retirement accounts.

When the plaintiff approached Meehl, he apologized for being late with the deposits, explaining that the recession had hurt AHL’s business, that his primary concern had been protecting employees’ jobs, and that he would work with the bookkeeper to bring the accounts up to date. But he also said he could not guarantee all future deposits would be made on time.

On Jan. 17, 2011, the plaintiff withdrew from the AHL retirement plan.

When she learned at the beginning of February that AHL still had not made her November and December 2010 deposits, the plaintiff confronted Meehl and told him it was illegal to withhold the contributions. Meehl blamed his tardiness on heavy snowstorms that prevented the bookkeeper from performing his services.

The plaintiff apparently rejected Meehl’s explanation and likened him to Bernie Madoff, the infamous Wall Street Ponzi schemer. A subsequent encounter that day resulted in a heated exchange.

By Feb. 4, 2011, AHL had made all outstanding deposits to the plaintiff’s IRA account as well as an interest payment. A week later, Meehl hand-delivered a termination letter to the plaintiff, which stated that it was clear she no longer trusted him and his management and that the comparison to Madoff was “too grievous an insult” for them to maintain a successful working relationship.

AHL also paid the plaintiff for all the time she had worked prior to the termination and reimbursed her for accrued leave time.

On Feb. 28, 2011, the plaintiff’s attorney wrote to AHL threatening a federal suit if the “unlawful” termination was not redressed.

Meehl responded by offering to reinstate the plaintiff and promising to do all he could to foster a smooth return. AHL also voluntarily deposited $7,689 into her checking account to compensate her for missed work time.

The plaintiff rejected the offer and filed suit in U.S. District Court alleging breach of fiduciary duty and retaliation in violation of ERISA as well as assorted state-law claims.

The defendant filed for summary judgment.

No ERISA remedy

Addressing the plaintiff’s fiduciary claim, Stearns noted that there was no dispute that the defendant had breached its fiduciary duty by detaining account deposits and using employee ERISA contributions to defray its operating costs.

“The issue, rather, is one of appropriate remedy,” the judge said. “Relief under ERISA is equitable in nature.”

Given that all the money owed the plaintiff had been deposited into her plan account, making the account whole, there was nothing further she could recover, Stearns said.

Turning to the plaintiff’s retaliation claim, Stearns acknowledged that she had presented a “potent showing of direct evidence” considering the termination letter’s clear statement that she was terminated for complaining about the untimely IRA deposits.

“While defendants argue that the termination had less to do with the substance of the complaint than with the offensive and insubordinate manner in which [the plaintiff] made it … the court must draw all inferences in [the plaintiff’s] favor [at the summary judgment stage],” he said.

But even assuming liability, the judge continued, the plaintiff was not entitled to relief on her retaliation claim.

“Again, ERISA provides only equitable relief,” Stearns said. “Defendants assert that under [the Supreme Court’s 2002 decision in Great-West Life & Annuity Ins. Co. v. Knudson], back pay and front pay are not equitable remedies, and [the plaintiff] has refused AHL’s offer of reinstatement, which was her only available remedy. … While it is true that front pay may be awarded in lieu of reinstatement, this is done only in instances in which an employee’s reinstatement is impractical or impossible.”

But in this case, the judge said, reinstatement was neither impractical nor impossible.

The plaintiff was offered a return to the same position with the same salary and benefits as before, and AHL would seek no apology or release of claims from the plaintiff as a condition of reinstatement. Accordingly, awarding front pay would be inequitable, Stearns said.

With respect to back pay, the judge noted that only one case, from the 6th Circuit, had allowed back pay as an ERISA remedy, but he expressed doubt that the ruling remained viable in light of subsequent Supreme Court caselaw.

However, even if back pay were available as a possible ERISA remedy, the plaintiff would not be entitled to recover it since she had already accepted reimbursement of her full salary between the time of her termination and the time of her rejection of the reinstatement offer, Stearns said.

Accordingly, he granted summary judgment on both claims, further finding that her state-law claims were preempted by ERISA.