from the April 2012 LERA LEL Newsletter
It might seem that ERISA covers all workplace benefits. However, that is not the case, as a recent case from Puerto Rico shows. Rodriguez-Rosario v. Syntex (F.P.), Inc., Case No.11-1376 (D.P.R. Feb. 9, 2012)
The employees in this case sued their employer for breaking its promise to pay increased benefits as if they stayed on the job until the plant closed. The employer claimed that the employees claims under the severance plan were governed by ERISA.
The court held that ERISA did not govern the plan because ERISA does not cover one-time events, such as a plant closing. In addition, the severance plan did not require continuous administrative and financial obligations and also lacked management discretion as to the eligibility of participants. “A benefit which involves a ‘one-shot, take-it-or-leave-it incentive’ reduces the need for ERISA supervision”. In addition, the plan lacked management discretion as to the eligibility of participants. When there is no need to exercise discretion as to plan participants’ eligibility, there is less need for ERISA protections.
Here, the plan had only three straightforward requirements in order to qualify for severance benefits: employees need only: (1) be terminated due to the closing of operation; (2) sign an Agreement and Release and Payment Option Form, and (3) remain with the company until they are terminated. As a result, the plan was not an ERISA plan, so ERISA did not apply to its administration.
