Pfizer Dealt Setback in Severance Benefit Court Battle

June 12, 2009 (PLANSPONSOR.com) - A federal judge in New Jersey ruled against Pfizer in a dispute over severance benefits arising out of the deal for it to acquire rival Pharmacia.

U.S. District Judge Stanley R. Chesler of the U.S. District Court for the District of New Jersey asserted that Pfizer improperly denied $158,250 in benefits to former Pharmacia Corp. Director Vasantha Nair when Nair was stripped of her job responsibilities. Chesler rejected Pfizer's argument that Nair maintained the same job title and compensation and did not suffer a demotion as a result of the deal; a demotion is often a triggering event to pay benefits.

The court claimed Pfizer had ignored plan language unambiguously requiring consideration of how the responsibilities of Nair's job with Pfizer would rank on Pharmacia's job banding system, the court said. According to the court, Nair presented ample evidence that the level of responsibility of her job with Pfizer effectively made that job a demotion in that the position was closer to a manager and had no oversight of other employees.

According to the ruling, Nair worked as the director of global management development for Pharmacia when the company was acquired by Pfizer in 2003. Nair's job with Pharmacia was classified as a compensation band D3 position, which, Chesler noted, was above compensation bands for managers.

Although Nair's position was eliminated by Pfizer, she remained employed by the company and retained the same title and compensation as a band D3 Pharmacia employee, the court said. Upon becoming a Pfizer employee, Nair said she accepted a temporary position that consisted of technical assignments on a computer rather than oversight of a work area.

Nair left the company in October 2003 and began working for a competing pharmaceutical firm. She then applied for benefits under Pfizer's separation plan, under which employees whose job ended due to a change in control were entitled to benefits. The plan said that a termination due to a change in control included, among other things, termination that resulted from a rejection of a job offer that was not a comparable position.

According to the ruling, Pfizer's separation plan administrative committee rejected Nair's application for separation benefits on the basis that she did not fulfill the plan provisions. In its denial letter, the committee included plan language defining "comparable position." Nair then filed suit.

The case is Nair v. Pfizer Inc., D.N.J., No. 07-5203 (SRC).

Fred Schneyer
editors@plansponsor.com