Michael R. Lied

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Former Employees Lose Severance Pay Claim (Thursday, April 11, 2013)

Stora Enso North America Corporation (SENA) owned a paper mill.  NewPage Wisconsin System, Inc. bought SENA in December 2007.  In 2008, NewPage informed employees that it was closing the mill.

More specifically, in early March 2008, Plaintiffs Scott LeFebvre and Melissa Reddinger got letters stating that their employment was being terminated by May 2, and that in exchange for an agreement to release all legal claims, NewPage would provide them with a severance package.

This development was short-lived.  On March 20, 2008, NewPage’s Human Resources Administrator informed LeFebvre the company was no longer accepting release agreements, because the company had decided to keep the plant open until October, to fill customer orders.  This was confirmed a few days later in employee meetings.

By March 25, both LeFebvre and Reddinger signed and submitted the release and separation agreements they had received two weeks earlier.  LeFebvre and Reddinger also quit working at the mill and started new jobs.

When they did not receive any severance pay, LeFebvre and Reddinger requested it from the SENA Severance Pay Plan. The plan administrator concluded that the two had voluntarily quit and denied their requests. LeFebvre and Reddinger each filed suit, but the district court granted the Plan’s motions for summary judgment.  Plaintiffs filed an appeal.

When a welfare benefit plan gives the administrator discretion to interpret the plan provisions or determine eligibility, the court’s review of the denial of benefits asks whether the plan administrator’s decision was arbitrary and capricious.  In contrast, the plaintiffs argued for a de novo standard of review.  The Plan’s stated purpose was to provide severance pay to eligible employees whose employment was involuntarily terminated due to a reduction in force, reorganization, business necessity or economic conditions.  The Plan specifically provided that employees who voluntarily terminated their employment prior to being discharged were not participants in the plan and were not eligible for severance under the Plan.

According to the appeals court, there was no evidence that the decision to keep the mill open a while longer was intended to avoid paying severance to employees like LeFebvre and Reddinger. The company’s business decision to keep the mill open longer did not persuade the court of appeals that it should review the denial of severance benefits de novo.  The plan administrator’s conclusion that neither plaintiff had been involuntarily discharged was not arbitrary and capricious.

LeFebvre and Reddinger also argued that the company breached the duty ERISA fiduciaries have to discharge duties with respect to a plan solely in the interest of the participants and beneficiaries and for the exclusive purpose of providing benefits to participants and their beneficiaries.

In this context, however, the threshold question was whether the person was acting as a fiduciary when taking the action subject to complaint.  

Although NewPage was acting as a fiduciary when it administered the Plan, its decisions about when to close the mill were clearly made as business decisions, not as ones made in an ERISA fiduciary role.

Summary judgment for the Plan was affirmed. 

Reddinger v. Sena Severance Pay Plan, 707 F.3d 702 (7th Cir. 2013).

· Michael R. Lied
· Howard & Howard Attorneys PLLC
· One Technology Plaza, 211 Fulton Street, Suite 600, Peoria, IL 61602
· (309) 999-6311
· MLied@howardandhoward.com