Compliance March 22, 2005

Travel or Relocation: Supreme Court Refuses to Hear ERISA Severance Case

March 22, 2005 (PLANSPONSOR.com) - The US Supreme Court has declined to hear an appeal of a decision that an employer acted reasonably in ruling that an employee who had large amounts of travel was not "relocated" and was therefore not entitled to severance benefits.

Reported by

Kip McDaniel

>William Peach of Total Petroleum – which was acquired by Ultramar Diamond Shamrock in 1997 – was required by his employer to travel between Texas and Michigan for several weeks as part of a transition team after the merger. His official termination date was scheduled for September 30, 1998; however, before this, he was traveling between the two states to train Texas employees in Michigan taxation.

>Peach, however, refused to join the transition team because he would have to spend the entire work week in Texas, and he applied for severance benefits. Under the Ultramar plan, an employee was entitled to such benefits if he left the company for “good reason,” which included situations where an employee was asked to relocate. Ultramar, asserting that requiring Peach to travel was not considered a “relocation”, denied the benefits; Peach then sued, alleging a breach of the Employee Retirement Income Security Act (ERISA).

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>The US District Court for the District of Eastern Michigan ruled in favor of the company (See Court: Six Weeks Does Not a Relocation Make ). In this initial case, US District Judge David Lawson found, “Although a six- to eight-week stay in a location over a thousand miles away might reasonably be considered a ‘relocation,’ a requirement of weekly travel that begins on Monday and ends on Friday morning can be distinguished.” Peach appealed the ruling.

>On appeal, the Sixth Circuit Court of Appeals confirmed the ruling, saying that the company did not act arbitrarily and capriciously in asking Peach to travel, and that travel was not considered “relocation” (See Frequent Travel Does Not Equal Relo ).

>Peach attempted to have the case heard by the nation’s highest court; however, the Supreme Court refused to hear the case, according to BNA.