The airline deregulation act provides, among other things, that airline employees, who are furloughed or terminated for reasons other than for cause, have the right of first hire with any other air carrier which is hiring additional employees. The purpose of this provision is to protect airline employees from the adverse effects of deregulation.
In Bowdry v. Untied Airlines, Inc., 58 F.3d 1483 (10th Cir. 1995), there was a dispute over what triggers an employer's obligation to give a job applicant first hiring status.
United maintained that the applicant must specifically notify the employer that he/she is eligible for first hiring rights and is asserting his/her rights. The plaintiffs maintained that it is the employer's obligation to determine whether the applicant is eligible for first hiring status.
The Court rejected both arguments and determined that the employer's obligation to give the applicant first hiring status will depend on whether the employer knew or should have known that the applicant is eligible for such status. The employer's knowledge will vary depending on what information was presented to the airline. For example, a job application may state that he/she was discharged from another airline due to a reduction in force. That information, according to the court, would be sufficient to trigger the employer's duty to give the applicant first hiring status.
This past spring, the United States Supreme Court issued a landmark decision expanding employer liability under ERISA. In Varity v. Howe, 116 S. Ct.1065 (1996), the Supreme Court ruled that an employer which makes intentional misrepresentations regarding the scope, coverage and duration of its benefits program can be held liable for the losses sustained by individuals who rely on the employer's statements.
The Court, however, did not address whether negligent or unintentional misrepresentations will also subject an employer to liability. In light of Varity, it is reasonable to assume that the courts will extend liability to negligent and unintentional misstatements upon which employees rely.
The Varity decision broadcasts a clear warning signal to employers. Human resources personnel should be well versed in the areas of pension and health administration. Misstatements due to lack of knowledge and familiarity with the intricacies of a benefit plan will expose the employer to substantial liability. For example, a misstatement that a person's elective surgery is covered by the health plan will expose the employer for medical expenses incurred by an employee in reliance on the misstatement.
In light of Varity, Employers should make only factually accurate and easily verifiable statements to employees and should maintain accurate contemporaneously prepared memoranda statements made to employees in response to benefit coverage inquiries. Employers must also avoid making opinions regarding the viability of a benefit plan or statements that are predictive in nature.
The court in TWA v. Sinicropi, 887 F. Supp. 595 (S.D.N.Y. 1995), aff'd, 84 F.3d 116 (2d Cir.), cert. pending, U.S. (1996), ruled that the Railroad Labor Act pre-empts use of ERISA's standard of review in determining pension eligibility issues for persons covered by a collective bargaining agreement.
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