Federal Court: E-Mail Didn't Create ERISA-Governed Benefit Plan

February 8, 2005 (PLANSPONSOR.com) - An e-mail to an employee offering severance benefits of six months salary did not create an Employee Retirement Income Security Act (ERISA) severance plan, a federal court has ruled.

>Senior Judge William Nickerson of the US District Court for the District of Maryland has ruled that that an employee’s allegations of a breach of contract and violation of wage laws under state statutes are not preempted by ERISA, saying that any assertion that the e-mail created such a employee benefit plan would be beyond reasonable.

>The case revolves around James Emery, who was hired by mortgage lender Bay Capital Corp., and who during employment negotiations was promised six months worth of severance pay if he was terminated for anything except fraud or misrepresentation. When he was fired one year later for neither of these reasons, Bay Capital refused to pay the severance benefits. Emery sued the company, alleging a breach of contract and violation of state wage laws. Bay Capital then removed the case to the federal level and then asked for the case to be dismissed.

>In his ruling, Nickerson ruled that the e-mail promise did not create an employee benefit plan under ERISA, basing its decision of the Supreme Court ruling in Fort Halifax v. Coyne, which said that the court must find an ongoing program to conclude that there is an employee benefits plan.

>Nickerson rejected Bay Capital’s assertion that the e-mail met the requirements laid out in Fort Halifax v. Coyne, asserting that simply paying Emery’s salary for six months after termination would not require the establishment of a separate plan under ERISA. He also said that if Emery was found to be entitled to severance pay, the company would only have to write a single check or a number of checks, which would not require that a new administrative setup be created.

>The ruling is available  here .