Ford Didn't Interfere with Benefits by Classifying Visteon Employees as Rehires

March 12, 2010 ( – A federal appeals court has ruled that Ford Motor Company did not interfere with the retirement plan benefits of employees reacquired from two previously spun-off production facilities by classifying them as rehired rather than reinstated.

The 6th U.S. Circuit Court of Appeals said the employees failed to establish an expectation of future pension benefits. The appellate court agreed with a lower court finding that a 1991 Ford Policy Directive divested all transferred employees of reinstatement rights, therefore the plaintiffs, once transferred to Visteon in 2000, lost any expectation of future pension benefits.

The court agreed with Ford that without such expectation, the plaintiffs could not show that their classification by Ford as rehired (with the resulting loss of service credit for the Visteon years) amounted to an adverse action.

According to the court opinion, the plaintiffs worked for Ford as salaried employees until 2000 when Ford transferred its interest in Visteon Corporation, an automotive parts manufacturer where they worked, to its stockholders and divested itself of Visteon’s operations. Ford and Visteon executed an Employee Transition Agreement which required that Ford retain liability for plaintiffs’ pension benefits insofar as they accrued prior to the transfer and that Visteon establish a “substantially comparable” retirement plan.

Also under the Agreement, Ford amended its Group Retirement Plan so that each plaintiff’s combined years of Ford and Visteon service counted toward early retirement eligibility, but each plaintiff’s monthly benefit amount remained distinct from that calculation, based instead, in part, on the employee’s Visteon salary.

More than three years after the spin-off, Ford again amended the Group Retirement Plan to exclude any employee hired or rehired after January 1, 2004, from participation and created a new defined contribution pension plan. When Ford evaluated options for reacquiring Visteon in 2005, it created three plausible models for employee transfer: return Visteon salaried employees to Ford as new hires without regard to prior service and enroll them in the new defined contribution plan; return Visteon salaried employees to Ford as new hires without regard to prior service, but using combined Ford/Visteon service to determine eligibility for, but not the amount of, retirement benefits; and return Visteon salaried employees to Ford as reinstated Ford employees with full Group Retirement Plan participation.

Ford chose the second of the three models, which meant that the plaintiffs, though still eligible for early retirement based on combined years of Ford/Visteon service, could receive only a portion of the monthly benefit amount to which never-transferred employees were entitled. The plaintiffs sued, contending that Ford classified them as rehired rather than reinstated in order to interfere with their acquisition of benefits in violation of § 510 of the Employee Retirement Income Security Act (ERISA), and seeking an order requiring Ford to provide them pension benefits based on their combined years of service at Ford and Visteon.

The case is Ensley v. Ford Motor co., 6th Cir., No. 09-1470, unpublished 3/10/10.