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from Spencer’s Benefits Reports: An employer did not violate ERISA when it terminated an employee on disability leave based upon surveillance showing the employee engaging in physical activities beyond his supposed disabilities. This was the decision of the Tenth Circuit U.S. Court of Appeals in Denham v. Sunoco, Inc. (No. 06-5040).
John M. Denham worked at Sunoco’s lubricants refinery in Tulsa, Okla. On May 25, 2000, Mr. Denham began a medical leave of absence due to neck, shoulder, and back ailments, and he began receiving short term disability benefits under Sunoco’s disability income plan. As required by company policy, Mr. Denham periodically reported his medical condition to his supervisor and to Sunoco’s company physician at the Tulsa refinery, Dr. Campbell. Mr. Denham also gave consent for his medical records to be shared with Sunoco.
During the time that Mr. Denham was on disability leave, his supervisor heard comments from other Sunoco employees indicating that Mr. Denham might have been engaging in physical activities apparently incompatible with his disabilities. In order to verify these rumors, Sunoco hired a private investigative agency to look into the matter. Rex Merritt, a local investigator experienced in surveillance work, then followed Mr. Denham and videotaped his activities. Mr. Merritt submitted a videotape to Sunoco’s human resources department showing Mr. Denham working on a truck, making a trip to a local auto-supply store, and unloading 50-pound sacks. On Nov. 15, 2000, Mr. Denham was summoned to Sunoco’s HR department, where the videotape was shown to Mr. Denham, Dr. Campbell, and other HR personnel. After Dr. Campbell concluded that Mr. Denham could not have been performing the activities shown on the videotape with his claimed impairments, Sunoco terminated Mr. Denham’s employment.
In response, Mr. Denham filed suit against Sunoco in Oklahoma state court, alleging wrongful termination. Sunoco removed the case to the U.S. District Court for the Northern District of Oklahoma, arguing that Mr. Denham’s claims were preempted by ERISA. Mr. Denham then amended his complaint to include a claim under ERISA Sec. 510, which prohibits an employer from discharging an employee for the purpose of interfering with the exercise of rights under an employee benefit plan. However, the district court ruled in favor of Sunoco, holding that the company’s termination of Mr. Denham was reasonable and that the reason given was believable. Mr. Denham appealed, but the Tenth Circuit affirmed the district court’s ruling.
On appeal, Mr. Denham argued that Sunoco’s disability plan administrator, and not the Tulsa refinery HR personnel, should have conducted the inquiry into his disability status. In rejecting that argument, the Tenth Circuit stated, “We disagree. First, Mr. Denham points to no provision in the disability plan precluding the type of investigative effort engaged in by the Tulsa HR department, or to any provision in the plan or in the law reserving this type of discrete employment investigation and decision to the plan administrator. Second, Mr. Denham at all times received all the short term and medium term disability payments to which he was entitled during his employment with Sunoco. This action to enforce ERISA’s section 510 anti-discrimination provision is the proper remedy for an allegedly discriminatory termination; Mr. Denham was not denied any procedural or substantive rights under ERISA.”
Alternatively, Mr. Denham argued that Sunoco’s proffered explanation for his termination was not reasonable and believable and thus was a pretext for discrimination under ERISA Sec. 510. However, the Tenth Circuit likewise rejected that argument, concluding, “In reviewing the evidence, the district court found that the investigator, Mr. Merritt, was able to identify Mr. Denham and capture him on the videotape, although it was not clear from the videotape whether it was actually Mr. Denham seen unloading the 50-pound sacks. Mr. Merritt, however, provided Sunoco with an affidavit to accompany the videotape stating that, with the use of binoculars, he could identify Mr. Denham as the person moving the sacks. Sunoco personnel showed the videotape to Dr. Campbell and told him that the person in the tape was Mr. Denham. When he was asked whether a person with Mr. Denham’s disability could perform the activities depicted in the videotape, Dr. Campbell opined that such activity would be unlikely. Based on these facts, the district court concluded that Mr. Denham’s termination was reasonable, and the reasons given to justify it were believable. Mr. Denham, therefore, failed to demonstrate that the proffered reason for termination was pretextual.
“Here, Sunoco had before it (1) reports from other employees regarding Mr. Denham’s activities while collecting short term disability; (2) a videotape indisputably showing Mr. Denham working on his truck and doing errands with no apparent impairment in movement; (3) a signed affidavit from a private investigator identifying Mr. Denham as the person in the videotape lifting 50-pound sacks; and (4) the opinion of the company doctor that a person with Mr. Denham’s impairments could not be engaging in the activity depicted in the videotape. Given these circumstances, we find no error in the district court’s conclusion that Mr. Denham failed to prove pretext because Sunoco’s reason for terminating him was both reasonable and believable.”
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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