DATE POSTED 27. 01. 2011, By

As Corporate Downsizing Is on the Rise, So Is Mishandling of Severance Cases by Attorneys

With every dip in the economy and rise in unemployment, we see a rise in the number of involuntary separations of service (i.e., layoffs). Many workers who have been laid off had an expectation that if they were laid off, they would receive some severance. This expectation could develop several ways. Perhaps the employer issued you a written description of a severance plan that outlined the number of weeks of compensation and benefits you would receive in the event of an involuntary separation of service. Alternatively, maybe there was nothing in writing, but the employer had an established practice of providing severance based on certain guidelines.

As long as there are severance plans in the workplace, there will be an employer that does not pay severance to somebody as previously promised. Contacting a lawyer who is not versed in ERISA and can not tell the difference between an ERISA severance plan and a non-ERISA severance plan could potentially cost you months, or even years, in obtaining your severance.

Though most employers are savvy enough to structure severance plans to be ERISA welfare benefit plans, some mistakenly structure them as pension plans. Under section 3(1)(B) of ERISA, a covered welfare plan is “any plan, fund, or program . . . established or maintained by an employer . . . for the purpose of providing for its participants or their beneficiaries . . . any benefit described in section 186(c) of this title . . . .” Severance is a benefit described in section 186(c).

Under section 3(2), a pension plan is “any plan, fund, or program . . . established or maintained by an employer . . . to the extent that [it] . . . results in a deferral of income by employees for periods extending to the termination of covered employment or beyond.” Whether the plan is a pension or welfare plan is not germane to this post other than to demonstrate the various ways in which the plan could be covered by ERISA.

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