Verizon Had Discretion in Determining Employee Benefit Level

April 5, 2007 ( - The U.S. District Court for the Northern District of West Virginia ruled that Verizon Communications Inc.'s decision to deny enhanced severance benefits to two consultants was not capricious, but was the "product of deliberate and principled reasoning."

U.S. District Judge Irene Kelley said the company’s decision to refuse an enhanced severance package for two employees, while granting it to two others with the same job title was not a result of capricious reasoning, because the two that were offered the more generous package worked at the company longer and had first priority for the benefits.

According to the opinion, the telecommunications company offered an income security plan (ISP) to employees who agreed to leave Verizon when the company decided to downsize its labor force, and in some circumstances, the company offered enhanced ISP benefits to these employees.

Hazel Saunders and Sharon Rogers were employed as consultants at Verizon’s Clarksburg, West Virginia facility when Verizon notified them on June 12, 2003, that it was extending a voluntary separation offer to certain employees and that employees who accepted the offer would be entitled to enhanced ISP benefits, which both plaintiffs applied for.

However, the two were later notified that they were denied the benefits, because more employees with the same job title and higher seniority had applied than was necessary for the workforce reduction.

Saunders and Rogers then filed suit in the U.S. District Court, claiming that the company had violated the Employee Retirement Income Security Act (ERISA) by denying their applications.

Verizon argued that it held the discretion to decide how many employees it considered a “surplus,” and that it only needed to eliminate two positions and five people had applied. The court said there was no provision in the ISP that required Verizon to show the method it used to decide whether there was a surplus of employees and that Verizon did, indeed, have the discretion in that regard.

The case is Saunders v. Verizon Communications Inc.,N.D. W.Va., No. 1:04cv34, 3/28/07