Another Good Reason to Make Sure Your Severance Plan is Subject to ERISA

Almost one year ago, I posted on Severance Plans and ERISA, listing seven specific reasons for an employer/plan sponsor to make its severance plan subject to ERISA. In case you thought I was just making that up, a March 26 decision of the Delaware Superior Court helps illustrate a common situation. In Giradot v. The Chemours Company, the court allowed former employees to continue with their lawsuit against their former employer over severance benefits. The facts appear to be that the employer had offered a severance benefit incentive (sometimes referred to as an “early retirement incentive” or “Open Window Arrangement”)—and then, some months later, offered another, more generous severance incentive program. Former employees who had accepted an offer under the first severance program sued for the better benefit to which they could have been entitled under the second program.   

The lawsuit alleged a violation of the Delaware Wage Payment and Collection Act (which also extended the time limit for filing their claims). If the plans had been made subject to ERISA, this state law claim most likely would have been preempted.

This entry has been created for information and planning purposes. It is not intended to be, nor should it be substituted for, legal advice, which turns on specific facts.