Compliance October 14, 2005

Severance Denied for Refusal to Sign Agreement

October 14, 2005 (PLANSPONSOR.com) - The US District Court for the Northern District of Texas has ruled in favor of an employer who denied a terminated employee severance benefits when he refused to sign a noncompetition agreement.
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BNA reports that, in granting summary judgment to Sabre Inc., the court found that the company did not act arbitrarily and capriciously when it conditioned Ninan Chacko’s right to severance pay on the condition of his signing a release and noncompetition agreement.

As of the date Chacko was informed that his position at the company was being involuntarily terminated at a future date, the company’s severance plan provided for 26 weeks of salary to be paid in a lump sum, conditioned upon the execution of an agreement and general release of all claims.   Two days after the notification, however, Sabre amended the plan to provide for benefits to either be paid in a lump sum or over an eight month period.   The plan was also amended to require signing a noncompetition agreement as a condition for receiving severance benefits, according to BNA.

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Chacko refused to sign the agreement and was denied benefits.   Chacko filed a lawsuit claiming the denial of benefits was arbitrary and capricious in violation of the Employee Retirement  Income Security Act (ERISA), and that Sabre discriminated against him in violation of ERISA Section 510.

The court found that, as a welfare plan, the severance plan could be amended at any time before Chacko’s benefits became vested.   In addition, the court determined that ERISA does not prevent plan sponsors from “discriminating” in the creation, alteration, or termination of employee benefits, saying in the opinion, “Since Chacko was not entitled to any ERISA benefits at the time the plan was amended, it is flawed to suggest that the amendment itself was discriminatory.”

The opinion was in re: Chacko v. Sabre Inc., N.D. Tex., No. 4:04-CV-886-A, 10/5/05.

Benefits October 13, 2005

Employers Maintain Level of Work Life Assistance

October 13, 2005 (PLANSPONSOR.com) - In spite of the volatility of the economy, employers haven't cut back on work-life programs, practices, and policies.
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Moreover, the Families and Work Life Institute’s 2005 National Study of Employers (NSE) found slight cutbacks that were a function of the amount employers pay toward the benefits that cost them money, such as health insurance, disability insurance, and retirement plans.

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Employers report that it is for business reasons that they maintain support for employees managing work and personal life balances. Forty seven percent say they offer work-life assistance to recruit and retain valuable employees. Another 25% say they use work-life benefits to enhance or improve productivity. Thirty nine percent of respondents in the study cited helping employees and their families as a reason for maintaining work-life programs.

The NSE found a couple of cases where the flexibility employers offer their employees has increased. In comparing a previous study in 1998, the NSE found that 24% of employers in that year allowed employees to change their starting and quitting times on a daily basis, while 31% of employers in 2005 do so.

Other work-life enhancements found by the study include:

  • Fathers are allowed longer leaves for the birth of their child: 14.5 weeks in 2004, compared to 13.1 weeks in 1998.
  • More employers offer Employee Assistance Program (EAP) assistance geared toward parents of teens: 0% in 1998, 5% in 2005.
  • Thirty four percent of employers offer information regarding elder care assistance to their employees, compared to 23% in 1998.
  • More employers provide health insurance for domestic partners: 21% in 2005, 14% in 1998.

Work-life cutbacks revealed by the survey include:

  • Fewer employers offer defined benefit pension plans in 2005 (41%) than in 1998 (48%).
  • Fewer employers contributed to employees’ retirement plans: 81% in 2005, compared to 91% in 1998.
  • Fewer companies offer full pay for new mothers on leave: 27% in 1998, 18% in 2005.
  • Thirty seven percent of employers reported shifting more health care costs to employees in the last two years.
  • Fewer employers (7%) pay for family health care in 2005 than did in 1998 (12%).

In addition, the study found that it was the smaller employers who tended to offer the most as far as work-life benefits.

A copy of the study is here .

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