This is the first of two columns discussing U.S. Supreme Court decisions from the 2014-2015 term in the area of labor and employment law of significance for employers. This month we review rulings pertaining to an employer's fiduciary duty to monitor plan investments, judicial review of the Equal Employment Opportunity Commission's efforts at conciliation prior to litigation, compensation for time spent waiting to undergo security screenings, and whether an administrative agency's changes to its interpretive rules are subject to notice-and-comment rulemaking under the Administrative Procedure Act.

Fiduciary Duty

In Tibble v. Edison International, 135 SCt 1823 (2015), the Supreme Court unanimously held on May 18, 2015, that the six-year statute of limitations for fiduciary duty claims under the Employee Retirement Income Security Act (ERISA) does not bar a claim brought more than six years after a plan investment was selected, if the claim alleges the fiduciary failed to prudently monitor the investment within the limitations period. Although the court explicitly declined to define the parameters of the duty to monitor plan investments, this ruling will make it easier for plan participants to challenge plan fiduciaries' retention of investment options within 401(k) plans.

ERISA imposes on plan fiduciaries a duty of prudence that requires a fiduciary to “discharge his duties with respect to a plan… with the care, skill, prudence, and diligence” that a prudent person would use under similar circumstances. 29 USC §1104(a)(1)(B). Tibble involved beneficiaries of the Edison International 401(k) Savings Plan who brought suit against Edison International and other plan officials in 2007, seeking to recover damages from losses to the plan. The beneficiaries claimed defendants acted imprudently when investing in retail-class mutual funds when materially identical lower priced institutional-class funds were available.

The U.S. Court of Appeals for the Ninth Circuit found plaintiffs' concerns raised in 2007 over investments made in 1999 untimely under the statutory bar contained in Section 1113 of ERISA. Section 1113 states in relevant part that a breach of fiduciary duty complaint is timely if filed no more than six years after the date of the last action by the fiduciary which constituted a part of the breach or violation. 29 USC §1113. The Ninth Circuit rejected plaintiffs' argument that their claims remained timely because defendants committed a continuing breach of fiduciary duty for so long as the challenged investments remained as options within the plan. The Ninth Circuit reasoned plaintiffs had not successfully shown “a change in circumstances that might trigger an obligation to review and to change investments within the 6-year statutory period.”