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Compliance September 27, 2005
Workers Lose Severance Benefits Bid
September 27, 2005 (PLANSPONSOR.com) - A group of
former employees of a Pennsylvania company lost the bid to
gain severance benefits when a federal judge ruled they were
ineligible for such payments.
Reported by Fred Schneyer
US District Judge Yvette Kane of the US District Court for the Middle District of Pennsylvania ruled that the plaintiffs had not proven that the purchase of the firm to which they had just been transferred by their original employer was a “change in control” event triggering their severance eligibility, according to a BNA report.
According to court background, the plaintiffs originally worked for AMP Inc. in Elizabethtown, Pennsylvania. AMP sold the facility to Spectrum in February 1999. In April, Tyco International acquired more than 30% of AMP stock. The plaintiffs were fired by Spectrum in April 2001.
The employees filed applications with AMP for two separate severance plans sponsored by AMP. Both plans – one created in 1991 and the other in 1998 – provided for benefits in the event of a change of control. The plans provided, however, that benefits would not be available if an employee was hired by AMP’s purchaser. Just before the sale of AMP to Spectrum, AMP sent the employees a memorandum indicating that their years of service for AMP would be included in calculation of their benefits if they lost their jobs with Spectrum within two years following a change in control.
AMP denied their applications for severance benefits. The employees sued under the Employee Retirement Income Security Act (ERISA) alleging they were entitled to benefits under both the 1991 and the 1998 plans.
First addressing the employees’ right to benefits under the 1991 plan, Kane ruled the employees were ineligible because the plan did not provide benefits for employees who were offered and accepted employment with Spectrum in connection with the sale of AMP’s Elizabethtown facility.
Also, Kane found that the employees were not entitled to benefits under the 1998 plan because the plan only allowed for benefits in the event that an employee lost his or her job within two years “following” the date of a change of control. According to the court, because the employees became employees of Spectrum prior to AMP’s “change of control,” even if only by a week, they did not qualify for benefits under AMP’s 1998 severance plan.
The case is Aldinger v. AMP Inc., M.D. Pa., No. 1:CV-02-572, 9/1/05.