Lawsuit Claims BP Misled Workers Before Pension Benefits Tanked

Lawsuit Claims BP Misled Workers Before Pension Benefits Tanked

For more than three decades Fredric “Fritz” Guenther has worked for oil companies on Alaska’s treacherous North Slope, pulling two week rotations – two weeks on the slope, two weeks back home with his family in Washington state. If there’s an emergency and he’s on the job, it takes Guenther at least eight hours to get back to his family. Up on the slope, he says, the nearest emergency room is at least three and a half hours away. “I’ve seen people die up there waiting on a life flight,” Guenther said.

For Guenther, it was some of the best work he could find straight out of high school and without a college education. The time away has been hard, but Guenther says he and his wife considered it a sacrifice that would pay off in a comfortable retirement. “We chose as a family to pay the dues up front, to get ahead, so that we could retire at 59 with a good income to travel and do the things we want to do,” he told the Houston Press.

Guenther, 56, will not be retiring in three years. He’s one of two BP employees who sued the oil giant in Houston federal court Wednesday, claiming the company misled workers when it changed how their pension benefits were calculated back in 1989. Internal company records filed in court show the company knew as early as 1988 that the switch from a traditional defined benefit plan to a 401(k)-like cash balance plan could hurt pensioners like Guenther. Instead of warning them, Guenther’s lawsuit alleges, BP promised workers that the company would shoulder any risk that came with pegging their retirement benefits to the market.

It was nearly three decades after BP made the switch that, while chatting with a coworker about retirement, Guenther discovered his benefits would be about half of what he’d expected.

That was shocking to Guenther in part because of how hard the company sold him and other workers on the new benefits plan back in 1989. One memo to employees regarding the new plan reads, “BP America is responsible for funding, and bears the full investment risk. And the plan provides a retirement benefit to career employees that is comparable to the fully competitive benefit under the prior formula.”

Yet a 1988 letter to company officials from BP’s pension plans manager acknowledges that workers like Guenther might have to work longer to get the same benefits they’d expected under the old plan: “Over the long term, we feel that retirements should become more age neutral; this would imply that some will be retiring with less than they would have had under the final pay plan, some with more.” It appears that's what happened. While BP has maintained that, on average, the benefits provided to employees have remained about equal to the old plan, that still leaves workers like Guenther who will have to work longer for those benefits.

BP spokesman Brett Clanton emailed us this statement yesterday: "BP greatly values its employees and retirees. We have not been served with this suit but believe the management of the pension program for this group of employees is in compliance with the law."

Guenther’s lawyers estimate there could be as many as 1,000 former or current BP workers in the same boat. In 2011, about 450 of them, including Guenther, filed a complaint with BP’s Office of the Ombudsman, a position created in the wake of the 2005 explosion at BP’s Texas City refinery to better address health, safety and other worker issues. The ombudsman, federal district court judge Stanley Sporkin, investigated their complaints for three years before recommending that BP fix its mistake and give the workers the benefits the company had promised.

Sporkin also wrote in his report:

“What is key here is that in the 1989 “conversion” there were certain risks that the new retirement plan presented. These risks included what would happen if the projected interest rates could not be sustained. This is what, in fact, occurred. The employees simply were not told that the risks associated with a decline in interest rates would be solely born by the employees. Simply put, there would be no allocation of these risks.”

According to Guenther’s lawyers, BP not only dismissed the ombudsman's findings, the company disbanded the office not long after it reviewed the pension complaint. In his September 15, 2014 letter to Guenther and others telling them that no changes will be made to their pension plan benefits, BP America president and CEO John Mingé didn’t even acknowledge that the ombudsman had ruled in the workers’ favor.

Four days later, Sporkin, the ombudsman, sent those workers a letter saying how “disappointed” he was in BP’s decision. He attached a summary of their report to the company. He also urged them to get a lawyer. 

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