Issues in Employment Law
April 2003
Pension plans that have mandatory arbitration clauses cannot have fee-splitting provisions or they will be found to violate ERISA.
ERISA requires a plan to provide participants a reasonable opportunity for a full and fair review of benefits determinations. Review procedures cannot "unduly inhibit[] or hamper[] the initiation or processing of plan claims." 29 C.F.R. §250.503-1(b)(1)(iii) (1999). Please consult regarding your plan's review procedures.
In Bond v. Twin Cities Carpenters Pension Fund (No. 01-3300), the Eighth Circuit Court of Appeals held that a fee-splitting provision for the costs of a mandatory arbitration inhibits those lacking sufficient funds from seeking review, and was thus a violation of ERISA. A plan need not have an arbitration clause, but if it does, the employee cannot be expected to share in the costs.
In certain situations, partners in a firm may be deemed "employers" in terms of sharing profits, yet "employees" for purposes of federal anti-discrimination law.
Federal anti-discrimination law protects employees and not employers. Some individuals however are classified as partner-employers under state partnership law because they share in the profits of the firm, but they are considered to be employees protected under federal anti-discrimination law because they have limited power and serve employee functions. Please consult us with any questions regarding this distinction.
In EEOC v. Sidley Austin (No. 02-1605), the defendant law firm's executive committee voted to demote 32 partners. The demoted partners sued under the ADEA, claiming they were fired as a result of age discrimination. The firm argued that the partners were employers and were thus not protected under the ADEA. The Seventh Circuit Court of Appeals held that the plaintiffs were "employees" for purposes of the ADEA. The court reasoned that although plaintiffs were partners that shared in the firm's profits, they did not select the committee that demoted them, they did not participate in vote that demoted them. Plaintiffs served administrative functions similar to those of executive employers in other corporations and lacked the control normally given to "employers."
