Compliance January 4, 2006

Severance Denied for Employee who Resigned Before Reorg

January 4, 2006 (PLANSPONSOR.com) - The US District Court for the District of New Jersey has ruled that an employee who resigned after learning of AT&T Capital Corp's decision to reorganize his department is not entitled to severance benefits.
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The court rejected the claim that the attorney for AT&T was constructively discharged by the decision to reorganize their legal department, noting that, although his duties would have changed, his salary would not have.

In addition, the court also determined that AT&T’s successor Newcourt Credit Group, Inc. did not act arbitrarily and capriciously in violation of the Employee Retirement Income Security Act when it denied severance benefits to the former employee.

A month after the employee resigned the reorganization plan was dropped based on the planned acquisition of the company by Newcourt.   Six years after resigning, the employee filed a request for benefits under AT&T’s severance plan.   Newcourt determined his termination was voluntary and denied benefits.

The case is Fontana v. Newcourt Credit Group Inc., D.N.J., No. 03-5830 (WGB), unpublished 12/29/05.

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