An Employer Cannot Avoid Its Obligation to Contribute to an Employee-at-Will's Pension Plan by Terminating the Employee.

Authors

Carol Jendrzey

Abstract

In McClendon v. Ingersoll-Rand Co., the Texas Supreme Court held an employer cannot avoid its obligation to contribute to an employee-at-will’s pension plan by terminating the employee. A minority of jurisdictions recognize an implied contract exception to the employment-at-will doctrine allowing termination only with cause. In these jurisdictions, employers who raise the defense of statute of frauds because there is no written employment contract may be defeated by the terms of employment articulated in employee handbooks and manuals. Though both the legislatures and the courts recognize a public policy interest in protecting employee pension plans, the United States Supreme Court holds that the Employee Retirement Income Security Act (“ERISA”) preempts any state common law action relating to the protection of employee pension benefits.

The court in McClendon recognized that changes in employer-employee relationships, and concomitant changes in public policy mandate modification of the employment-at-will doctrine. Therefore, gradual changes to the longstanding employment-at-will doctrine should be anticipated to meet the changes in the employment relationship. At first blush, both federal and state courts’ zealous protection of the employee appear to be a duplication of effort. ERISA might preempt the Texas Supreme Court’s effort to allow a cause of action for the termination of employees by creating an exception to the employment-at-will doctrine relating to pension benefits. This new exception must be narrowly construed by Texas courts to relate only to the issue of wrongful discharge and not to interference with the employee’s pension benefits. This narrow interpretation should avoid encroachment on ERISA. Only then will innocent parties not be misled and find their claim and forum preempted by ERISA.

Publisher

St. Mary's University School of Law

Recommended Citation

Carol Jendrzey, An Employer Cannot Avoid Its Obligation to Contribute to an Employee-at-Will's Pension Plan by Terminating the Employee., 22 St. Mary's L.J. (1990).
Available at: https://commons.stmarytx.edu/thestmaryslawjournal/vol22/iss1/7