Court Dismisses Claims of Benefits Interference Against Hershey

March 19, 2007 ( - The U.S. District Court for the Middle District of Pennsylvania dismissed claims The Hershey Company wrongfully denied benefits to a former employee whom it turned down for participation in a voluntary severance plan saying his employment was critical to company operations.

In its opinion the court noted under terms of the 2005 Enhanced Mutual Separation Plan (EMSP) the team of Hershey executives appointed to review applications for participation could deny participation if it “determin[ed] that the termination of employment of such employee [would] have an adverse affect on the [Hershey] Company’s ongoing business operations.” The district court ruled Timothy Rea did not show Hershey discriminated against him in denying his application for plan participation.

Since Rea’s claim he was wrongfully denied participation in the EMSP was dismissed, it followed that his claims for accelerated benefits under other plans reliant upon EMSP participation were also dismissed. Rea argued he was still due the accelerated benefits under the Key Employee Incentive Plan and Annual Incentive Plan since the plans were not governed by the Employee Retirement Income Security Act (ERISA). However, the court pointed out that the accelerated benefits were directly related to his participation in the EMSP, which was an ERISA-governed plan.

When Hershey adopted the EMSP in July 2005, Rea was Director of Food and Beverage Enhancers and Special Trade Channels at the company. The EMSP provided that employees who entered a separation agreement with the company would receive separation pay consisting of three weeks of base pay for each year of employment; participation in Hershey’s retirement plan for the duration of the separation period; full vesting of all stock options granted to the employee through the Key Employee Incentive Plan and, pursuant to the Annual Incentive Plan, payment of Hershey’s annual bonus for 2005 and payment of a prorated portion of the 2006 annual bonus.

Upon providing notice of his decision to terminate employment with the company, Rea submitted the separation as well as an acceptance form signed by his manager. The executive team designated to review his application to the early severance plan denied his participation due to “critical business needs.” The letter of denial said the company would like Rea to continue in his position.

After an appeal of the decision was denied, Rea filed a lawsuit against Hershey alleging his application was rejected because Hershey knew he had accepted a position with another company and would terminate his employment regardless of participation in the EMSP. The lawsuit alleged Rea’s EMSP application was wrongfully rejected and the executive team intentionally interfered with his ERISA rights. The suit also alleged that by improperly denying his application, Hershey breached a contract for his receipt of benefits under the non-ERISA plans.

The case is Rea v. Hershey Co. 2005 Enhanced Mutual Separation Plan, M.D. Pa., No. 1:CV-06-1920, 3/12/07.