Why employers should mediate ERISA claims

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Employers involved in an ERISA dispute can face a long road of litigation, and the time and expenses that go along with it. Many ERISA claims filed by former employees have a very low chance of success but that does not eliminate the need for the employer to put in the time and money to fight the claim. In many cases, ERISA mediation can be a benefit to the employer.

The primary benefits of mediation are that disputes can be resolved faster than litigation, mediation can save time and money, and mediation puts control into the hands of the parties to come up with their own solution.

In most ERISA cases, the employee or former employee has to “exhaust all administrative remedies” before they can file a lawsuit in civil court. By that time, the individual's claim has generally been denied, and any appeals have also failed. If the individual then files a lawsuit, the employer could already be prepared to enter settlement talks.

A civil lawsuit after a denial of ERISA benefits may not come as a surprise to the employer, and the employer should have a good idea of what relief the plaintiff is seeking, the basis for the dispute, and the strengths and weaknesses of both sides. Additionally, because of the limited discovery involved in ERISA lawsuits, the employer has the information necessary to evaluate the case.

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With the relevant information already in hand, there is little reason to extend litigation further than necessary. Even if the law and the facts are on the side of the employer, going through the stages of litigation could take months, and this requires document preparation, filings, motions, and court appearances.

Even if the employer has no intention of offering anything, mediation may allow the aggrieved party to vent their frustrations “face-to-face,” which may be all that they really require. A defendant employer acknowledges the employee's frustration along with a clear position that the employer cannot offer anything may be the quickest way to put the dispute to rest.

When the employee has some chance of success, mediation may be even more beneficial for the employer. Mediation can help reduce the chances of the plaintiff being awarded a higher payout, and avoid payment of the defendant's legal fees. A carefully mediated negotiation can allow both parties to walk away content with the outcome, without the unknown outcome that can result from a trial.

A unique aspect of mediation over litigation is that it allows the parties involved to come up with their own solution to the dispute. A mediation agreement is not limited to a money award. If the employer and employee agree, a mediation agreement can include coverage, a one-time-payment, reinstatement, payment of medical bills, or any other solution the parties can come up with. With the parties in charge of the resolution, they are not left to the limited scope of relief offered by the court.

In the end, employers should welcome mediation over litigation.

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Law and regulation Workforce management ERISA Retirement planning Retirement benefits