Fidelity Investments lists many 401(k) fund choices from which companies offer their employees to choose, but a new federal lawsuit filed Aug. 4 in the Western District of New York could change those choices in a dramatic way.
The surprising lawsuit, which was just called “novel” by an expert, may well have implications beyond the employer involved in this initial case.
Let’s cut to the chase on the current legal situation and then get to some background.
“A Thermo Fisher Scientific Inc. employee filed a novel federal lawsuit arguing that employers must offer fossil-fuel-free retirement investment options as a religious accommodation, creating a new legal test for environmental, social and governance investing,” wrote James Van Bramer on Plansponsor.
The lawsuit tests how strictly businesses must accommodate workers’ religious beliefs under a 2023 U.S. Supreme Court ruling that requires approval of such requests unless they cause significant financial hardship.
Attorneys argue a win could pave the way for millions of workers to tailor their employer retirement plans to their moral or religious values, such as climate-conscious investing.
Fidelity offers ESG 401(k) funds
Fidelity gives employers options for their workers who are interested in these investing opportunities, but only a fraction of employers currently offer them as 401(k) choices.
In the case of a successful lawsuit, these funds may suddenly jolt to larger significance.
Sustainable investing offers another way to evaluate companies.
“Sustainable investing offers another way to evaluate companies,” Fidelity writes. “Our active sustainable investment portfolios focus on key factors that our research shows drive financial results. This includes assessing financially-material environmental, social, and governance factors.”
These funds include:
- Fidelity Healthy Future Fund (FAPHX): Invests in companies working to improve life expectancy, enhance people’s lives, and decrease negative environmental impacts.
- Fidelity Climate Action Fund (FCAEX): Invests in companies that are working to remove, reduce, or mitigate the effects of climate change.
- Fidelity Water Sustainability Fund (FLOWX): Invests in companies helping to deliver safe, reliable, and easily accessible water.
- Fidelity Environmental Bond Fund (FFEBX): Invests in the debt of companies and projects that are recognizing, disclosing, and reducing environmental risk
- Fidelity Environment & Alternative Energy Fund (FSLEX): Focuses on alternative and renewable energy, energy efficiency, pollution control, water infrastructure, waste and recycling technologies, or other environmental support services.
(Source: Fidelity Investments)
Supreme Court decision on Groff v. DeJoy
The legal background here hinges on the U.S. Supreme Court decision involving Gerald Groff vs. then Postmaster General Louis DeJoy.
“Petitioner Gerald Groff is an Evangelical Christian who believes for religious reasons that Sunday should be devoted to worship and rest,” according to the Supreme Court. “In 2012, Groff took a mail delivery job with the United States Postal Service. Groff’s position generally did not involve Sunday work, but that changed after USPS agreed to begin facilitating Sunday deliveries for Amazon.”
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The legal ruling in that case decided that Groff’s religious beliefs should be recognized and observed as a matter of law.
“In April 2023, the Supreme Court clarified what constitutes undue hardship, ruling that an employer denying a religious accommodation needed to demonstrate that granting it would result in ‘substantial increased costs,'” wrote Brian Roewe for National Catholic Reporter.
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The current lawsuit on 401(k) options
Thermo Fisher employee Andrew Hartley is suing the firm after it rejected his request for a religious accommodation: a fossil-fuel-free option for his 401(k).
Hartley, saying he is a devout United Methodist, argues that his faith mandates caring for the Earth and forbids profiting from industries that produce greenhouse gas emissions and exacerbate climate change.
“Dr. Hartley believes that investing his retirement money in ecologically and socially destructive fossil fuel companies violates his religious beliefs, including his belief that it is deeply immoral to personally profit from and hold an ownership stake in the fossil fuel companies that are contributing to the climate crisis,” the lawsuit states, according to Roewe.
In the legal complaint, Hartley formally requested a 401(k) fund free of fossil fuel investments as a religious accommodation in October 2024 and listed some options he had considered.
Thermo Fisher allegedly dismissed the request, asserting that it did not satisfy the legal requirements for a faith-based accommodation.
“Hartley currently invests for his retirement on his own while using the company 401(k) plan in a limited way,” Roewe wrote.
“A spokesman for Thermo Fisher said the company does not comment on pending litigation,” he added.
Major financial services firms beyond Fidelity, such as Charles Schwab and Vanguard, also offer ESG options, which may well provide employees with more opportunities in light of the pending legal decision and the publicity it may generate.
Related: AARP warns Americans on 401(k), IRA costly mistakes
