I like to call my shots when I can. So for instance, I am on record as saying Gunnar Henderson will win an MVP award within five years, the Orioles will win the World Series this year and that neither Bill Belichick nor anyone on his coaching tree will ever win a playoff game now that Tom Brady is retired (okay, I admit it, this last one is a “hot take” included simply in the hope of generating “clicks,” although in my defense I do note that I am the only ERISA lawyer ever quoted by Peter King in MMQB). Today I want to call a different shot, which has to do with social inflation, the increasing risk to employers of being held liable on individual employee claims of varying types and the growing dollar value of such claims.
I have written and spoken in the past on the question of social inflation and the – at least anecdotally or impressionistically – astronomical increase in jury awards in the tort context. Others have argued for a number of underlying factors, but I believe one overrides them all, namely a broad shift in social norms around wealth and, in particular, the increasing prevalence of its ostentatious display. As I have written before, I have become convinced, from my work on the insurance and bad faith aftershocks of large jury awards, that jurors have begun rejecting traditional, more conservative measurements of economic and related injury that both kept awards down and were heavily relied on by defense lawyers, in response to the increasing wealth they see paraded all around them. Years ago, a friend who moved to Massachusetts from upstate New York commented – with some but not complete exaggeration – that every third car on the Mass Pike on his morning commute was a Porsche SUV. Members of future jury pools see that dynamic too, and many more displays of wealth just like it. Given that social environment, it is not surprising that traditional formulations of damages, pitched for generations by defense lawyers in closing arguments, that placed a high six figure or low seven figure number on damages in wrongful death or significant personal injury cases are not being accepted anymore by jurors.
A similar dynamic is beginning (and this is where I am calling my shot) to display itself in the context of individual, one-off type disputes in the employment context. Section 510 of ERISA bars retaliation or similar employment actions against employees who exercise their rights under ERISA. For years, such claims –speaking impressionistically with regard to the universe of such disputes – lacked legs. As both a lawyer for plan sponsors and administrators, as well as for executives and other employees, it was always clear to me that such claims were the red headed stepchildren of ERISA and related cases. Indeed, in the First Circuit’s leading decision on deferred compensation, the Court effectively downgraded one part of the dispute from a deferred comp argument to the separate realm of a Section 510 claim. Recent decisions, such as this one, suggest that this dynamic is well on its way to changing, and that recovery under Section 510 is a risk that plan sponsors and their lawyers now have to take seriously at all times.
Two similar jury verdicts relating to executives and professionals returned by Massachusetts juries in recent weeks suggest the same, both brought in by very good plaintiffs’ lawyers who happen to be friends of mine. In one, Chuck Rodman of Rodman Employment Law and his team obtained a multimillion dollar jury verdict on behalf of a doctor who was retaliated against for whistleblowing and in the other, Matt Fogelman of Fogelman Law obtained a multimillion dollar jury verdict for a university administrator who was discriminated and retaliated against.
I don’t think these are isolated incidents but instead reflect a shift, similar to the impact of social inflation on tort verdicts, in the way juries are coming to view the power dynamic between employers and employees. The media coverage of executives who think that employees, in a full employment environment, have become either “arrogant” or “lazy” or both, and similar stories are the social inflation in this context, and I believe are leading juries to no longer give employers the benefit of the doubt in these types of cases.
My point today isn’t just to call my shot in this regard or to either praise or criticize this development, but instead to point out that employers and plan sponsors need to be aware that this is happening and temper their approaches, both in and out of court, accordingly. Any lawyer who doesn’t take this risk seriously when counseling employers and plan sponsors isn’t paying attention. Likewise, any lawyer for executives or other employees with ERISA claims who doesn’t look closely at these possible avenues to recovery also isn’t paying close enough attention.