Court Finds Refusal To Pay Layoff Benefits Due To Firing Not an ERISA Violation

July 24, 2003 ( - Firing an employee for violating company policies prior to a scheduled layoff and subsequently refusing to pay out a previously agreed upon severance package did not violate ERISA.

>Chief District Judge Paul Barbadoro of the US District Court for the District of New Hampshire ruled that an employee who had previously agreed to participate in General Electric Co.’s downsizing program had no vested right to layoff benefits since she was dismissed before being let go.   Further, Barbadoro, in issuing summary judgment in favor of GE, could find no evidence that the employee was fired for any malicious reasons by the company in an effort to circumvent the agreed upon layoff benefits, according to Washington-based legal publisher BNA.

Case History

>Gloria Mercier, a 24 year veteran with GE, signed on in December 2000 to participate in the company’s scheduled layoff relating to a decision to transfer its Somersworth, New Hampshire operations to other locations, a downsizing that was slated for April 2001.   However, prior to the agreed upon layoff date, Mercier was terminated for repeated failure to comply with company policies. Specifically, Mercier had a “particularly egregious” history of tardiness and unauthorized absences from work, the court said.

>When GE refused to pay Mercier layoff benefits, she sued alleging ERISA violations in denying the benefits.

>GE contended, and the court agreed, that Mercier was fired because she repeatedly violated company rules and thus was not entitled to any severance benefits.   With this ruling the court rejected arguments that the company was promissorily estopped from denying her layoff benefits. “Mercier’s estoppel claim fails because she did not participate in GE’s layoff plan. Instead, she was fired for cause before she could participate,” the court said.

The case is Mercier v. General Electric Co., D. N.H., No. CV-03-125-B, 7/11/03.