Feb. 19, 2013 – Employees of Niagara paper mill won’t get the severance pay they sought, a panel for the U.S. District Court of Appeals for the Seventh Circuit has ruled.
Their employer, Stora Enso North America Corporation, had a policy to give severance to employees who were laid off, or involuntarily terminated. Employees Scott LeFebvre and Melissa Reddinger were going to be laid off because the mill was closing.
They received specific layoff dates, with a letter offering severance pay if they released all legal claims associated with the termination. LeFebvre would receive $64,831; Reddinger $7,227 as a newer employee. The severance agreements said LeFebvre and Reddinger had to execute the agreements within a certain time frame.
Before the time for submission expired, the company stopped accepting severance agreements because the mill was going to stay open another six months. Employees were told that new severance packages would be available at that time.
This put LeFebvre and Reddinger in a bind, because they had already received job offers from other companies but still wanted to receive severance. They chose to stop working on the original mill closure date to start their new jobs. They submitted the original severance agreements and asked for severance, but were denied.
LeFebvre and Reddinger filed suit in the U.S. District Court for the Eastern District of Wisconsin, invoking the Employee Retirement Income Security Act of 1974 (ERISA) and state law theories to recover severance from the company. ERISA sets minimum standards for private pension plans, and gives employees the right to sue for benefits.
But in LeFebvre v. Sena Severance Pay Plan, Nos. 102361 & 102362 (Feb. 19, 2013), the appeals panel affirmed summary judgment in favor of the employer. The panel ruled the plan administrator’s decision to deny severance was not arbitrary and capricious.
“The plaintiffs stopped working in May on their own accord, and their termination was not involuntary,” Judge Anne Claire Williams explained. “As a result, the plan administrator’s decision to deny LeFebvre and Reddinger severance pay was not an arbitrary and capricious denial of benefits under [ERISA].”
The panel also rejected the argument that the company was trying to avoid paying severance to preserve corporate assets, noting that employees who stayed on received bigger severance packages based on length of service, as well as a bonus.
“The evidence in the record supports a conclusion that the company’s only reason for keeping the mill open longer was to fill existing orders and to keep it open to make it more attractive to potential buyers,” Judge Williams wrote.
Finally, the panel discharged the plaintiffs’ state law breach of contract and estoppel claims, ruling that ERISA preempted the state law claims. “Even if ERISA did not preempt the state-law claims, they would not succeed,” the panel noted.
The panel said offers can be revoked at any time before acceptance, and the employer revoked its severance offers before plaintiffs accepted them. Promissory estoppel did not apply, the panel noted, because the plaintiffs “could not have reasonably believed that they would receive severance” when they decided to stop working.