No Rehire, No ERISA Violation

February 22, 2002 ( - Not rehiring workers to avoid higher pension liabilities doesn't violate federal laws governing pensions, a federal appeals court ruled in a case involving Mack Trucks, Inc.

The US Court of Appeals for the Third Circuit agreed with a lower court federal judge in Philadelphia that decisions about whether to hire workers don’t fall under ERISA prohibitions and rejected claims by 78 former Mack Truck employees, a Legal Intelligencer report said.

The workers alleged in their lawsuit that the company violated Section 510 of ERISA by refusing to bring them back after they were laid off in 1987 to avoid the added pension expenses.

 “Unlike a discharge or other workplace harassment, a failure to hire does not amount to a circumvention of promised benefits because job applicants who have yet to be hired have not been promised any benefits,” wrote US Circuit Judge Jane Roth. The appeals decision upheld a December 2000 ruling by US District judge Franklin S. Van Antwerpen of the Eastern District of Pennsylvania in Philadelphia.

Pension Concerns
Although Mack Trucks originally rehired some laid off employees, company officials said they soon realized the rehired workers would get richer pensions than those without Mack Truck histories.

Former employees who had not vested under the plan would receive credit for past service and would become vested in less than the five years new hires had to wait. And former employees were more likely to become eligible for early retirement before age 62.

 As a result, in July 1997 Mack decided to stop hiring former employees.  Van Antwerpen found that the plaintiffs whose pension benefits had not vested at the time they sued had no standing to sue under ERISA.

The case is Becker versus Mack Trucks, Inc.