Labor & Employment Law Daily Sale of corporate owner not ‘layoff’ or permanent plant shutdown triggering early retirement benefits for employees who kept jobs at same plant
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Wednesday, August 26, 2020

Sale of corporate owner not ‘layoff’ or permanent plant shutdown triggering early retirement benefits for employees who kept jobs at same plant

By Robert Margolis, J.D.

The court applied de novo review and found the employer correctly interpreted plan documents.

The corporate sale of the owner of a plant, where no employees lost their jobs and the plant remained operative under the new owner, did not constitute either a “layoff” or a “permanent plant shutdown” triggering employees’ rights to Special Early Retirement benefits under a benefit plan requiring one of those events, the Eleventh Circuit held. Accordingly, the court affirmed the summary judgment dismissal of ERISA claims for benefits brought by workers at the plant (Hill v. Employee Benefits Administrative Committee of Mueller Group LLC, August 24, 2020, Marcus, S.).

The employee and 21 other appellants are hourly workers at the employer’s pipe factory. They participate in a pension plan that provides Special Early Retirement (SER) benefits for employees laid off or terminated by a permanent plant shutdown before their normal retirement age who have met certain age and service requirements. The pension plan defines “Termination Date” as “[t]he date of an Eligible Employee’s termination of employment with the Employer.” “Employer” was defined as “United States Pipe and Foundry Company or any successor thereto.”

The employees met the age and service requirements, in that each worked at the plant for at least 18 years and was at least 53 years old. In April 2012, the former parent company of United States Pipe and Foundry Company sold its interest in U.S. Pipe to another company, but the pipe factory remained operational both before and after the sale, and the employees remained employed in their same jobs. In anticipation of the sale, the former parent amended the pension plan to vest benefits and prepare for payment. The amendment, in pertinent part, provides that employees “shall be deemed to experience a Termination Date on the Closing Date” of the parent’s sale of U.S. Pipe to the new owner.

Claims for SER benefits. When the employees (who are hourly employees) learned that some salaried employees were being paid SER benefits after the 2012 sale, they made claims to U.S. Pipe’s Employee Benefits Administrative Committee (EBAC) for SER benefits. EBAC denied the request, concluding that the “termination” effected by the sale was neither a layoff nor a permanent plan shutdown. The Appeals Committee agreed and affirmed.

Lower court proceedings. The employees sued under the Employee Retirement Income Security Act (ERISA), claiming that they are entitled to SER benefits because the sale effected either a layoff or permanent plant shutdown. The district court had dismissed their claims on summary judgment, finding U.S. Pipe’s interpretation of the plan to be reasonable. The Eleventh Circuit agreed and affirmed.

No wrongful denial. The employees’ first claim was for wrongful denial of benefits due them under the terms of their plan,” under 29 U.S.C. § 1132(a)(1)(B) of ERISA. While in the Eleventh Circuit, there is as many as a six-step de novo review process of an employer’s benefits decision, the appellate court here found that it need only look at the first step: “Apply the de novo standard to determine whether the claim administrator’s benefits-denial decision is ‘wrong’ (i.e., the court disagrees with the administrator’s decision); if it is not, then end the inquiry and affirm the decision.” The district court had gone beyond that step because it perceived some inconsistencies between the reasoning of EBAC and the Appeals Committee. The appellate court found it unnecessary to reach that stage, since it found the benefits denial decision to be correct. Since a court’s review is de novo, the reasoning of the plan administrator is irrelevant, so long as the decision is correct, the Eleventh Circuit reasoned.

The court found the decision to be correct. The plan’s unambiguous terms require a “layoff” or “permanent plan shutdown” for the employees to qualify for SER benefits and neither occurred. The employees were not laid off, because they kept the same jobs at the same plant. They were not terminated by a permanent plant shutdown, because the plant they worked at never shut down.

“Laid off.” The court looked at the plain meaning of the key terms. Based on dictionary definitions of the term, the court determined that “laid off” requires at least the temporary loss of one’s job, which did not occur here. That definition is amply supported by case law as well. The court thus rejected the argument that even if the employees kept working at the same plant, they lost their jobs with the prior corporate parent, through no fault of their own. This is not the common understanding of what it means to be “laid off,” the court pointed out.

“Permanent plan shutdown. ” Next, the appellate court looked to the definition of “permanent plan shutdown,” the other occurrence that could trigger SER benefits. Finding dictionary definitions showing that “shutdown” means “cessation or suspension of an operation or activity,” the court agreed with U.S. Pipe that no “shutdown” occurred, since the plant remained operative. Thus, even if the employees had been “terminated,” it was not due to a permanent plan shutdown, the court found. It an implausible reading of what “permanent plant shutdown” means to have it turn on “corporate nomenclature or structure,” rather than whether the plant actually ceased operations, the court explained.

Reasonable interpretation. Even if it found on de novo review that EBAC’s interpretation of the plan was wrong, the court explained it still would uphold the dismissal of the case because EBAC’s interpretation was reasonable, so it would defer to it under the “arbitrary and capricious” standard of review. Further, even if the distinctions the employees made between termination and “layoff” or “permanent plant shutdown” had some persuasive force, it was not unreasonable for EBAC to find otherwise, the court held.

Catch-all inapplicable. Finally, the court rejected the employees’ claim under the catch-all remedial provision for ERISA beneficiaries authorizing “other appropriate equitable relief.” The Eleventh Circuit has held that beneficiaries cannot proceed under that provision when the appropriate remedy is offered by Section 1132(a)(1)(B).

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