Pension & Benefits News Sale of corporate owner not “layoff” or “permanent plant shutdown” triggering early retirement benefits
Wednesday, March 3, 2021

Sale of corporate owner not “layoff” or “permanent plant shutdown” triggering early retirement benefits

By Pension and Benefits Editorial Staff

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” that would trigger employees’ rights to Special Early Retirement benefits under a pension plan, according to the U.S. Court of Appeals in Atlanta (CA-11). Accordingly, the court affirmed the summary judgment dismissal of claims for benefits brought under ERISA Sec. 502(a)(1)(B) by workers at the plant.

Hourly workers at the United States Pipe and Foundry Company participated in a pension plan that provided Special Early Retirement (SER) benefits for employees laid off or terminated due to a permanent plant shutdown occurring before their normal retirement age, provided certain age and service requirements were met. The pension plan defined “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 the pipe factory sold its interest in U.S. Pipe to another company. The pipe factory remained operational both before and after the sale, and the employees remained employed in their same jobs.

Under the terms of the purchase agreement, the former parent agreed to freeze and fully vest all benefits and to remain liable for paying those benefits after the sale. In anticipation of the sale, the former parent amended the pension plan to vest benefits and prepare for payment. The amendment provided 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 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.

The employees sued for wrongful denial of benefits under ERISA Sec. 502(a)(1)(B), claiming that they were entitled to SER benefits because the sale caused either a layoff or a 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.

Applying de novo review, the Eleventh Circuit found the benefits denial decision to be correct. The plan’s unambiguous terms required a “layoff” or “permanent plan shutdown” for the employees to qualify for SER benefits. 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.

Key terms. 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.

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 was 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.

The court noted that, even if it had found on de novo review that EBAC’s interpretation of the plan was wrong, it still would uphold the dismissal of the case because EBAC’s interpretation was reasonable under the arbitrary and capricious standard of review. 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. The court also rejected the employees’ claim that they were entitled to equitable relief under ERISA Sec. 502(a)(3). ERISA plaintiffs may not plead in the alternative under ERISA Sec. 502(a)(3) when their appropriate remedy is found under ERISA Sec. 502(a)(1)(B). The equitable relief provision is a catch-all remedial provision, the court explained, providing relief only for injuries that are not otherwise adequately provided for by ERISA.

Source: Hill v. Employee Benefits Administrative Committee of Mueller Group LLC (CA-11).

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More