A recent decision upholding the denial of severance benefits to an employee who retired after exhausting medical leave demonstrates the importance of a well-drafted severance plan.
The employee in this case was granted six months of paid medical leave because of a health condition that made it difficult for her to meet the demands of her job. Still unable to work when the leave expired, the employee elected to take early retirement. Claiming she had been told she would be eligible for severance, the employee then requested severance benefits, only to be informed that the circumstances of her retirement did not satisfy the eligibility requirements of the company severance plan.
On appeal, the plan administrator’s denial of severance was upheld by the plan’s review committee, resulting in the employee’s lawsuit against the company. Granting summary judgment to the employer, the U.S. District Court for the Southern District of Indiana found that the employee was not eligible for benefits under the terms of the company severance plan.
To receive benefits under the plan, the separation from employment must be for one of two qualifying reasons. The dispute centered on whether the employee’s inability to perform her duties satisfied the “workplace efficiency enhancement” definition for severance eligibility. In finding for the employer, the court focused on the “clear language” of the definition in the plan. Finding that “it is not enough” that the employee was not meeting job performance expectations, the court quoted from the plan in holding that the employee must also have been “involuntarily [s]eparat[ed] from [s]ervice because of” that failure to meet expectations. The court pointed to the employee’s admission that she had voluntarily accepted early retirement, and noted there is no evidence that the company made her working conditions “so intolerable that [she was]forced into an involuntary resignation.” The court also rejected her claim that she should still receive severance “based on purported representations from [her supervisor] that if she retired, she would be eligible for severance,” because the alleged misrepresentation of her rights was not made in writing, as required for such a claim under the Employee Retirement Income Security Act of 1974. (Karr v. Dow Agrosciences LLC, S.D. Ind. 2012)