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The Wagner Law Group

The Wagner Law Group, A Professional Corporation, is a nationally recognized ERISA & employee benefits, estate planning, employment, labor & human resources practice. 

 

Established in 1996, The Wagner Law Group has 25 attorneys engaged exclusively in employee benefits, estate planning and employment law. Six of our attorneys are AV rated by Martindale-Hubbell as having very high to preeminent legal abilities and ethical standards. The firm is among the largest ERISA boutiques in the country. Our practice is national in scope, with clients in more than 40 states and several foreign countries.

 

 

 

 

Contact Info

The Wagner Law Group

 

  Integrity | Excellence

  

Boston 

Tel: (617) 357-5200 

Fax: (617) 357-5250 

99 Summer Street 

13th Floor

Boston, MA 02110


Palm Beach Gardens 

Tel: (561) 293-3590
Fax: (561) 293-3591
7108 Fairway Drive
Suite 125
Palm Beach Gardens, FL 33418

   

Tampa

Tel: (813) 603-2959

Fax: (813) 603-2961

101 East Kennedy Boulevard

Suite 2140
Tampa, FL  33602 

 

San Francisco

Tel: (415) 625-0002

Fax: (415) 358-8300

300 Montgomery Street

Suite 600

San Francisco, CA 94104

 

St. Louis

Tel: (314) 236-0065

Fax: (314) 236-5743
100 South 4th Street, Suite 550
St. Louis, MO  63102 

 

www.wagnerlawgroup.com

 

 

 

 

October 27, 2016

 

 Health and Welfare Law Alert

 

 

 

 Court Determines Employer's Severance Plan is Subject to ERISA

 

 

 

The Fifth Circuit Court of Appeals determined, in Gomez v. Ericsson, Inc., that an employer's severance plan was governed by ERISA because it required ongoing administration and allowed the employer to make discretionary decisions on eligibility and benefit amounts.

 

Background. In Gomez, the plaintiff was employed by the defendant for approximately three years before being terminated as a result of a reduction-in-force. In connection with this termination and reduction-in-force, the employer presented the employee with a severance agreement that required him to return all of the employer's property and execute a waiver and release in exchange for receiving severance pay under the terms of the employer's two severance plans.

 

The terms of both severance plans required that the plan administrators calculate benefits and make initial determinations of eligibility, including whether the employee was terminated because of a layoff or reduction-in-force. The plan administrators were further required to determine whether an employee was eligible to participate in one or both of the plans. Finally, eligibility under both plans was conditioned on an employee executing a valid waiver and release of claims agreement.

 

The plaintiff executed and returned the severance agreement to the employer. However, before returning the employer's laptop computer, he proceeded to delete all information from its hard drive, including work-related files. According to the employer, the deleted files were the only source of raw data gleaned during the plaintiff's final project. Therefore, the employer refused to pay the plaintiff severance benefits on the basis that he failed to return company property.

 

District Court Decision. Following the exhaustion of the plans' administrative appeal processes, the plaintiff sued the employer in federal court, claiming that the plans were not governed by ERISA, which would allow him to file a contract claim in state court.

 

At trial, the district court ruled against the plaintiff, finding that the plans were governed by ERISA. In turn, the plaintiff appealed the decision to the Fifth Circuit Court of Appeals.  

 

Fifth Circuit. In addressing the issue of whether the severance plans at issue were covered by ERISA, the Fifth Circuit explained that some severance plans are covered by ERISA. Under Supreme Court precedent, the primary determinant is whether a severance plan requires an ongoing administrative program that might give rise to employer abuse or conflicting regulation of the plan. Thus, a severance plan that requires an ongoing administrative program is covered by ERISA.

 

In reviewing the facts, the Fifth Circuit found that, due to the large size of the plans (i.e., covering more than 10,000 employees), ongoing administrative activity was required by the employer. Moreover, the Fifth Circuit found that eligibility determinations and benefit calculations (involving detailed formulas and offsets) under the plans required ongoing administrative activity by the employer.  As a result, the Fifth Circuit upheld the lower court's determination that ERISA governed the plans and the plaintiff's lawsuit.

 

 

 

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This Newsletter is provided for information purposes by The Wagner Law Group to clients and others who may be interested in the subject matter, and may not be relied upon as specific legal advice.  This material is not to be construed as legal advice or legal opinions on specific facts. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.