Sixth Circuit puts mandatory arbitration of certain ERISA benefit claims to the test in Hawkins v. Cintas Corporation decision

Benefits and ERISA attorney discusses shifting use of arbitration provisions in 401(k) plan claims

Media Contact: Barbara M. Fornasiero, EAFocus Communications;; 248.260.8466 

Royal Oak, Mich.—June 2,  2022—Although arbitration agreements are frequently required in the world of employee-employer relations, national employee benefits and ERISA attorney J.J. Conway of Michigan-based J.J. Conway Law pointed to a recent decision by the Court of Appeals for the Sixth Circuit which is shedding light on who is actually bound in this working relationship.

“In a typical arbitration agreement, employees are required to arbitrate any of their individual employment and related claims against their employer. They waive the right to a jury trial and access to the civil court system, and the right to bring class action litigation or to seek arbitration on a class-wide basis,” Conway said.  “But in a recent case, Hawkins v. Cintas Corporation, the limits of those arbitration agreements were put to the test in a putative class action over mismanagement of the employer’s 401(k) plan—and the employees prevailed.”

Conway said the ruling is consistent with the way federal courts have interpreted the Employee Retirement Income Security Act of 1974 (ERISA) in allowing two types of claims: 1.) a plan member may bring claims individually to enforce various rights and to recover benefits owed; and 2.) a plan member may bring claims, on a derivative basis, in the plan member’s own name, with the relief being owed to the employee benefit plan as a whole. While there are exceptions, courts have consistently dismissed individual plan members’ claims whenever they blur the lines of these two paths and attempt to seek individual relief for claims ordinarily reserved for the plan.

“What is interesting, though, is the rise of arbitration in ERISA cases, which was relatively uncommon for decades since federally-created judicial standards of review tended to favor plan sponsors and fiduciaries,” Conway said. “The use of arbitration agreements to resolve these benefits disputes is multiplying as hundreds of employers have been sued on the theory that their plans were overpaying for advisory and investment services from financial firms.”

In Hawkins v. Cintas Corporation, a unanimous court held that the legal dividing line for individual and plan-based claims carries over into its interpretation of arbitration agreements.  The court held that an individual plan member cannot bind the plan as a whole to resolve its claims in arbitration, but also that employers cannot use arbitration agreements to thwart class action litigation where the claims seek relief for the plan.

Conway indicated the court used interesting phraseology in the Hawkins’ case—describing the nature and rights of the employee benefits plan as an ‘abstract entity.’  

“This unique and almost philosophical concept also explains why the court found it is difficult for an employer to require that plan-based claims be arbitrated,” he said. “An employee benefit plan is a dynamic, ever-changing entity as employees come and go, and experience life changes–especially at a large company like Cintas.”

For example, the plan members enrolled in a plan on the day that a fellow plan member signs an agreement to arbitrate may likely be different at the time a lawsuit is filed, so it follows that the employee may not have had the authority to bind those plan members. ERISA also allows for other entities to bring litigation, including plan fiduciaries and the Secretary of Labor. With so many different parties having standing to sue, it is difficult to argue that a lone employee can bind all of these interested parties in arbitration of their claims.

Ultimately, the Hawkins court affirmed the finding of the district court, holding that §502(a)(2) claims are not covered by the arbitration provisions in the plaintiff’s respective employment agreements and that the plan’s consent is required for arbitration.

“Still, Hawkins may not settle the debate entirely. As the Court acknowledged, ‘a different sort of claim may change the analysis,’” Conway concluded. 

About J.J. Conway Law

J.J. Conway Law was founded by John Joseph (J.J.) Conway in 1999 to work with individuals seeking full access to the employee benefits they have earned. The firm has been involved with nationally significant employee benefit, disability and pension cases, including class action lawsuits for such landmark decisions as requiring Michigan private insurers to cover autism health treatments for children through age 18 and protecting the pension rights of City of Detroit employees, police and firefighters as well as Wayne County employees by holding their trustees accountable for investment decisions. The firm’s motto is “Conquer Tomorrow®” and is dedicated to making tomorrow easier for their clients across the United States.  Learn more on the firm’s website.