765 F.2d 320 (2nd Cir. 1985), 902, Gilbert v. Burlington Industries, Inc.

Docket Nº902, 943, 953, Dockets 84-7824, 84-7908 and 84-7914.
Citation765 F.2d 320
Party Name6 Employee Benefits Ca 1865 Irving GILBERT, Irene Prince, David J. Frank, Herbert P. Kaplan, Bernard H. Largman, Phillip R. Mullins, Dora Nicolini, Herbert Peppel, Bertha Richie, David Schoeneck, Raquel R. Silensky, Marie Silvestri, Brenda Tillman Humphreys, B. Gaither Shaw, Jr., Michael Loschenko, Robert E. Ahrens, Benjamin F. Blye, Jr., David H.
Case DateJune 17, 1985
CourtUnited States Courts of Appeals, Court of Appeals for the Second Circuit

Page 320

765 F.2d 320 (2nd Cir. 1985)

6 Employee Benefits Ca 1865

Irving GILBERT, Irene Prince, David J. Frank, Herbert P.

Kaplan, Bernard H. Largman, Phillip R. Mullins, Dora

Nicolini, Herbert Peppel, Bertha Richie, David Schoeneck,

Raquel R. Silensky, Marie Silvestri, Brenda Tillman

Humphreys, B. Gaither Shaw, Jr., Michael Loschenko, Robert

E. Ahrens, Benjamin F. Blye, Jr., David H. Brunt, Jack R.

Carpenter, Kenneth E. Eckard, Ronald F. Gauthier, Louis

Gorelick, Jeremy Harris, Ronald H. Hicks, Robert D.

Huddleston, Thomas R. Jerome, Gaston D. Lopez, Dorothy

Novak, Anthony J. Petronis, Bernard Porvin, Charles A.

Powers, Saul Roth, James A. Sbarboro, John Sells, James M.

Stutts, and Gordon L. Van Dusen, Plaintiffs-Appellants,

Lillian Roberts, as Commissioner of Labor of the State of

New York, Plaintiff- Intervenor-Appellant,

v.

BURLINGTON INDUSTRIES, INC., Defendant-Appellee.

Nos. 902, 943, 953, Dockets 84-7824, 84-7908 and 84-7914.

United States Court of Appeals, Second Circuit

June 17, 1985

Argued March 11, 1985.

Page 321

[Copyrighted Material Omitted]

Page 322

Victor Rabinowitz, New York City (Emily Bass, Terry Gross, Rabinowitz, Boudin, Standard, Krinsky & Lieberman, P.C., New York City, of counsel), for plaintiffs-appellants.

Jane Lauer Barker, Deputy Bureau Chief, New York City (Robert Abrams, Atty. Gen. of the State of New York, Robert Hermann, Sol. Gen., O. Peter Sherwood, Deputy Sol. Gen., Carlin Meyer, Asst. Atty. Gen. in Charge of Labor Bureau, New York City, of counsel), for plaintiff-intervenor-appellant.

Daniel Riesel, New York City (Lawrence R. Sandak, Sive, Paget & Riesel, P.C., New York City, of counsel), for defendant-appellee.

Lacy H. Thornburg, N.C. Atty. Gen., Tiare B. Smiley, Asst. Atty. Gen., Dept. of Justice, Raleigh, N.C., John C. Brooks, N.C. Com'r of Labor, Thomas A. Harris, Director, Wage and Hour Div., N.C. Dept. of Labor, Raleigh, N.C., filed a brief, for amici curiae for the States of Alaska, Conn., Hawaii, Ill., Md., Mont., N.C., Okl., Vt., Wis., and the District of Columbia.

Before TIMBERS, CARDAMONE and PIERCE, Circuit Judges.

CARDAMONE, Circuit Judge.

We review on this appeal an employer's severance pay policy to decide whether it is an ERISA plan that preempts a state from ordering an employer to pay benefits to departing employees. By the terms of the employer's manual, eligibility to receive severance pay was limited to those employees "involuntarily terminated" from the company, i.e., separated from the employer's payroll and not later reemployed by the company. Eligibility for benefits thus was to be determined by the discontinuity of an employee's employment--its severance--and not by the duration of unemployment, however fleeting that might be. Here, there was a purchase of one of the company's operating divisions as a going concern; plaintiffs are employees of that division. For plaintiffs this was not a temporary leave-taking, but a permanent parting-of-the-ways with their former employer. For the reasons discussed below, we hold that the employer's severance pay plan is an employee benefit plan under ERISA and that the state is preempted from granting benefits to plaintiffs. Plaintiffs must seek relief from what they consider to be an arbitrary denial of their severance benefits under federal, not state, law.

I

FACTS AND PROCEEDINGS BELOW

Plaintiffs, 36 former employees of Burlington Industries, a textile manufacturer, have brought suit against Burlington claiming that severance pay is owed them upon termination of their employment. In their complaint plaintiffs assert eleven claims, seven seek relief under state law and four under the Employee Retirement Income Security Act of 1974, 29 U.S.C. Secs. 1001 et seq. (ERISA or Act). The state law claims include causes of action under New York Labor Law Sec. 198-c, North Carolina General Statutes Sec. 95-25, and common law theories of fraud, unjust enrichment, promissory estoppel, quantum meruit, and breach of contract. Prior to the commencement of this action, a number of the present plaintiffs filed claims with the New York State Department of Labor and obtained an order from the Commissioner of Labor that directed Burlington to pay them severance benefits. When Burlington appealed this ruling to the State Industrial Board of Appeals and sought a stay of the Commissioner's order, plaintiffs commenced the instant federal action in which the State Commissioner was later granted leave to intervene as a party plaintiff.

This appeal is from a judgment, entered in the United States District Court for the Southern District of New York (Brieant, J.) on October 30, 1984, which dismissed plaintiffs' state law claims on the grounds of preemption, dismissed the complaint made by the New York State Commissioner of Labor as intervenor for the same reason, and enjoined the Commissioner from enforcing

Page 323

compliance orders she had issued against Burlington. Plaintiffs' four claims that seek relief under ERISA were not dismissed.

Although plaintiffs worked in 16 different states, they all reported to Burlington's merchandising headquarters in New York. In 1982 Burlington sold its operation as a going concern to Kayser-Roth. The employees continued to do the same work as they had before the sale. In order to ensure that its employees would accept employment with Kayser-Roth, Burlington agreed not to retain employees Kayser-Roth wished to hire, and also agreed not to rehire them for at least six months after the sale. Plaintiffs contend that they were employed by Kayser-Roth at a lower rate of compensation, while Burlington argues that the benefit package paid its former employees was comparable to their previous earnings.

Burlington's severance pay policy was contained in a manual that was not distributed to employees. The policy reads, in relevant part:

I. Company Policy

  1. General--The Company makes payroll severance payments and vacation severance payments to eligible salaried employees who are terminated from the Company.

  2. Payments--Payroll severance payments are based upon tables contained in this policy. Vacation severance payments are based upon a person's length of continuous service with the Company less vacation taken or adjusted as defined by this policy.

    II. Application of Policy

  3. Payroll Severance--All regular full-time salaried employees who meet eligibility requirements are paid payroll severance based upon continuous service as shown in Exhibit A or Exhibit B.

    1. Eligibility--Employees are eligible to receive payroll severance if they are regular full-time salaried employees who are involuntarily terminated from the Company. Eligibility requirements are:

    a. Job Elimination--This category consists of terminations due to circumstances such as elimination or modification of operations or other job elimination due to bona fide organizational changes (emphasis added).

    * * *

    A summary description of the severance policy was contained in an employee handbook, which read:

    The Company provides severance pay to full time employees who involuntarily leave the company. Pay ranges from two weeks to 12 months, based on the employee's age and length of continuous service with the company. Fraud or other behavior deemed to be willful could disqualify an employee from receiving severance benefits (emphasis added).

    The granting or denial of severance pay was automatic upon termination. Plaintiffs allege that Burlington never sought to comply with ERISA respecting its severance pay policy. That is, they claim that: it never published or filed an annual report, a financial statement, a plan description or a statement of plan modifications; it did not designate a fiduciary for the plan or inform employees of their rights under ERISA and the plan; there was no established claims procedure; and, apart from the company's "open door" grievance policy, there was no established appeals procedure. The first time Burlington filed the required annual ERISA disclosure report regarding severance pay was after plaintiffs filed claims with the New York State Department of Labor.

    Shortly before the sale to Kayser-Roth, Burlington's employees were informed that they were deemed ineligible for severance benefits, whether or not they accepted a position with Kayser-Roth. Although plaintiffs were never unemployed, as they immediately accepted positions with Kayser-Roth, they claimed they were entitled to severance pay under the plain language of the company's policy. When Burlington refused to make severance payments, ten

    Page 324

    of the present plaintiffs asserted before the State Department of Labor that they were entitled to severance pay, and the Commissioner issued orders under the New York Labor Law requiring Burlington to pay such benefits. Burlington petitioned the State Industrial Board of Appeals to review the Commissioner's decision. Before scheduled hearings could be held, plaintiffs commenced the instant action in the district court asserting claims under state law, and alternatively, under ERISA. The Commissioner intervened demanding that Burlington pay severance benefits in accordance with Sec. 198-c of the New York Labor Law, which makes it a misdemeanor not to pay wages or wage supplements due employees. N.Y.Lab.Law Sec. 198-c (McKinney Supp.1984-1985).

    In its well-considered opinion, the district court held that Burlington's severance pay policy was an ERISA plan, under either 29 U.S.C. Sec. 1002(1)(A) or Sec. 1002(1)(B). It found that an ERISA plan did not need to have assets separate from the general assets of the employer, that a severance pay plan did not need to be established as a Taft-Hartley trust under Sec. 1002(1)(B) and that, in any event, severance pay was the same as unemployment benefits and a severance policy was consequently a "welfare plan" under Sec. 1002(1)(A). The...

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168 practice notes
  • 270 B.R. 188 (D.Del. 2001), 01-39, In re Harnischfeger Industries, Inc.
    • United States
    • Federal Cases United States District Courts 3th Circuit District of Delaware
    • December 5, 2001
    ...failure to set aside funds for the 1996 severance policy prevent it from being an ERISA plan. See Gilbert v. Burlington Indus., Inc., 765 F.2d 320, 325 (2d As previously noted, DWD's answering brief proceeds from the assumption that the court will deem its requests to admit as conclusively ......
  • 3 F.Supp.2d 223 (N.D.N.Y. 1998), 96-CV-933, Cavallo v. Utica-Watertown Health Ins. Co., Inc.
    • United States
    • Federal Cases United States District Courts 2nd Circuit Northern District of New York
    • April 30, 1998
    ...and convoluting the facts and law in order to establish some nonexistent standard. 10 For example, in Gilbert v. Burlington Indus., Inc., 765 F.2d 320, 328-29 (2d Cir. 1985), Page 232 aff'd, 477 U.S. 901, 106 S.Ct. 3267, 91 L.Ed.2d 558 (1986), the fiduciary had an informal severance pay pol......
  • 637 F.Supp. 657 (E.D.Mich. 1986), 84-CV-3010, Aquin v. Bendix Corp.
    • United States
    • Federal Cases United States District Courts 6th Circuit
    • May 30, 1986
    ...that the Committee has acted regularly and requires a higher level of judicial scrutiny. See also Gilbert v. Burlington Indus., Inc., 765 F.2d 320, 328-29 (2d Cir.1985); Jung v. FMC Corp., 755 F.2d 708, 711-12 (9th Cir.1985); Blau v. Del Monte, 748 F.2d 1348, 1353 (9th Cir.1984), cert. deni......
  • 641 F.Supp. 467 (S.D.N.Y. 1986), 82 Civ. 1167, DeAngelis v. Warner Lambert Co.
    • United States
    • Federal Cases United States District Courts 2nd Circuit Southern District of New York
    • August 4, 1986
    ...appropriate only when the procedural dereliction works a substantive harm on the participants. See Gilbert v. Burlington Industries, Inc., 765 F.2d 320, 328 (2d Cir.1985), aff'd, --- U.S. ----, 106 S.Ct. 3267, 91 L.Ed.2d 558 (1986) (per curiam) (No. 85-460); Ellenburg v. Brockway, Inc., 763......
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168 cases
  • 270 B.R. 188 (D.Del. 2001), 01-39, In re Harnischfeger Industries, Inc.
    • United States
    • Federal Cases United States District Courts 3th Circuit District of Delaware
    • December 5, 2001
    ...failure to set aside funds for the 1996 severance policy prevent it from being an ERISA plan. See Gilbert v. Burlington Indus., Inc., 765 F.2d 320, 325 (2d As previously noted, DWD's answering brief proceeds from the assumption that the court will deem its requests to admit as conclusively ......
  • 3 F.Supp.2d 223 (N.D.N.Y. 1998), 96-CV-933, Cavallo v. Utica-Watertown Health Ins. Co., Inc.
    • United States
    • Federal Cases United States District Courts 2nd Circuit Northern District of New York
    • April 30, 1998
    ...and convoluting the facts and law in order to establish some nonexistent standard. 10 For example, in Gilbert v. Burlington Indus., Inc., 765 F.2d 320, 328-29 (2d Cir. 1985), Page 232 aff'd, 477 U.S. 901, 106 S.Ct. 3267, 91 L.Ed.2d 558 (1986), the fiduciary had an informal severance pay pol......
  • 637 F.Supp. 657 (E.D.Mich. 1986), 84-CV-3010, Aquin v. Bendix Corp.
    • United States
    • Federal Cases United States District Courts 6th Circuit
    • May 30, 1986
    ...that the Committee has acted regularly and requires a higher level of judicial scrutiny. See also Gilbert v. Burlington Indus., Inc., 765 F.2d 320, 328-29 (2d Cir.1985); Jung v. FMC Corp., 755 F.2d 708, 711-12 (9th Cir.1985); Blau v. Del Monte, 748 F.2d 1348, 1353 (9th Cir.1984), cert. deni......
  • 641 F.Supp. 467 (S.D.N.Y. 1986), 82 Civ. 1167, DeAngelis v. Warner Lambert Co.
    • United States
    • Federal Cases United States District Courts 2nd Circuit Southern District of New York
    • August 4, 1986
    ...appropriate only when the procedural dereliction works a substantive harm on the participants. See Gilbert v. Burlington Industries, Inc., 765 F.2d 320, 328 (2d Cir.1985), aff'd, --- U.S. ----, 106 S.Ct. 3267, 91 L.Ed.2d 558 (1986) (per curiam) (No. 85-460); Ellenburg v. Brockway, Inc., 763......
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