Court Finds Severance Plans Not ERISA Governed

December 28, 2010 ( – A federal judge in Massachusetts has ruled that Alcatel-Lucent USA did not breach its Employee Retirement Income Security Act (ERISA) fiduciary duties through its severance plan disclosures to four workers.

U.S. District Judge Patti B. Saris of the U.S. District Court for the District of Massachusetts ruled that the severance program was not part of an ERISA-governed plan.

Saris found that severance benefits under the Lucent Career Transition Option Program (LCTOP) and a separate union-negotiated agreement were not ERISA governed because both were one-time cash benefits that did not require ongoing administration. Saris also pointed out, however, that the two severance plans amended the company’s ERISA-governed pension plan.

The employees alleged in their ERISA lawsuit that Alcatel-Lucent breached its ERISA fiduciary duties by not telling them that they would have received a greater amount of LCTOP benefits if they were involuntarily terminated by the company instead of voluntarily leaving the company.

The lawsuit was filed in 2008 by a group of former employees of Lucent’s Merrimack Valley Works manufacturing facility in North Andover, Massachusetts who had been represented by the Communications Workers of America (CWA). According to the lawsuit, the company began a workforce reduction in 2000 and 2001. To help convince workers to leave the company of their own accord, Lucent offered the LCTOP, a lump-sum payment of $30,500. Lucent later worked out an agreement with the CWA setting up two additional levels of benefits under the LCTOP – an “enhanced LCTOP” that increased the maximum lump-sum payment to $40,000 and a second new level giving benefits to involuntarily laid-off workers.  According to the ruling, it was the second level of benefits aimed at those who were involuntarily laid off that provided the greatest amount of benefits.

The court found that even if Alcatel-Lucent breached its fiduciary duties, the breach did not harm the four plaintiffs who left the company voluntarily because they would have done so under the LCTOP regardless of any enhancements that were given to employees who were involuntarily terminated by the company.

The case is Arivella v. Alcatel-Lucent, D. Mass., No. 08-CV-01398-PBS.