Mealey's (July 11, 2016, 10:53 AM EDT) -- NEW ORLEANS — A panel of the Fifth Circuit U.S. Court of Appeals on July 8 affirmed that the Employee Retirement Income Security Act governs a case in which a laid-off employee was denied severance compensation for failing to return all company property as required by a severance agreement (Mark Gomez v. Ericsson Inc., No. 15-41479, 5th Cir.; 2016 U.S. App. LEXIS 12604).
(Opinion available. Document #54-160713-073Z.)
The panel affirmed a ruling by U.S. Judge Robert William Schroeder III of the Eastern District of Texas against Mark Gomez and in favor of his former employer, Ericsson Inc., finding that the company had not abused its discretion in denying severance pay.
Ericsson laid off Gomez, who was eligible for severance compensation if he complied with the terms of a release and severance agreement. Ericsson determined that Gomez did not comply with a provision requiring the return of all Ericsson property because work files were missing on the company laptop he returned.
2 Questions
The Fifth Circuit panel said it was required to answer two questions: Does ERISA govern this dispute and, if so, did Ericsson abuse its discretion in concluding that Gomez was not eligible for severance pay?
Under the terms of the settlement agreement, Gomez was required to waive certain claims against Ericsson and return Ericsson property in his possession. In exchange for doing so, Ericsson promised Gomez severance pay under the terms of both its Standard Severance Plan and Top Contributor Enhanced Severance Plan of 2010. The plans provide lump-sum payments funded by Ericsson’s general assets.
Gomez returned Ericsson’s physical equipment, but before returning the company laptop, he wiped the hard drive of all files, including ones related to work. Gomez contends that he did this because of safety concerns about the storage of unspecified personal information and confidential Ericsson data on the unencrypted laptop. Ericsson says the erased work files mattered because they were the only copies of the raw data supporting Gomez’s final deliverables. As a result, Ericsson denied Gomez any severance benefits.
In response, Gomez provided Ericsson with a copy of his personal hard drive in hopes that it would contain the files, but he conceded that the files may not be there. Ericsson’s technology staff found that the hard drive did not contain the deleted files, some of which it determined Gomez had manually deleted. Ericsson again denied benefits. Gomez then unsuccessfully pursued administrative appeals as outlined by the plans.
Federal Lawsuit
Gomez next filed suit, asserting an ERISA claim. Despite filing that federal claim in a federal forum, Gomez alternatively sought declaratory relief that ERISA did not govern the dispute over the severance plans. If Gomez obtained a ruling that ERISA did not govern, his plan was to file a contract claim in state court.
Judge Schroeder ruled against him, concluding that ERISA governed the case. He later granted summary judgment in favor of Ericsson, ruling that it had not abused its discretion in denying severance pay.
In an opinion written by Circuit Judge Gregg Costa, the appeals panel said the existence or nonexistence of an “ongoing administrative program” is the key determinant of whether severance plans are governed by ERISA. Even for plans that result in only a lump-sum payment, that administrative scheme can be found in a number of other features that require discretion: the eligibility determination; calculations of the payment amount; the provision of additional services beyond the severance payment; and the establishment of procedures for handling claims and appeals, Judge Costa wrote, citing the U.S. Supreme Court decision in Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 9, 107 S. Ct. 2211, 96 L. Ed. 2d 1 (1987).
“We agree with the district court that such administrative activity is abundant when it comes to Ericsson’s Plans,” Judge Costa wrote. “The Plans are ongoing on a large scale. They cover over 10,000 employees across the nation.
“Aside from demonstrating the need for uniform regulation that ERISA provides, this size means they are a far cry from ‘single event’ plans. . . . Even if a small percentage of covered employees qualified for severance at some point in their careers — and again, the reasons include not just layoffs but resigning in lieu of transfers to positions in different locations or with lower pay — that would result in hundreds of different events that the Plans have to administer.”
Abuse Of Discretion
Reviewing Ericsson’s decision for an abuse of discretion, Judge Costa wrote that the standard in Stone v. UNOCAL Termination Allowance Plan (570 F.3d 252, 257 [5th Cir. 2009]), combined with the “summary judgment posture” of Judge Schroeder’s ruling, requires Gomez to identify a genuine dispute of material fact that Ericsson’s denial of severance benefits was arbitrary or capricious. The panel considered only Gomez’s argument that the plans just condition severance pay on the signing of a “satisfactory waiver and release of claims” and do not mention a return of company property.
“There is some force to Gomez’s argument, but there is sufficient ambiguity in the Plans to support Ericsson’s interpretation that the return of property condition is not inconsistent with their terms,” Judge Costa wrote. “For one thing, release agreements often contain provisions beyond the mere release of legal claims.
“But even if the ‘waiver and release of claims’ is as limited as Gomez claims, the Standard Plan states only that releasing claims is a necessary condition of receiving severance pay; it does not state that it is a sufficient one. . . . Given the absence of language entitling Gomez to severance pay based solely on the release of legal claims, it is not inconsistent with the Plan to impose other conditions reasonably related to the termination of the employment relationship. . . .
“A provision requiring the return of property at the end of one’s employment is reasonable and common. It is an expected part of a satisfactory departure from one’s employer. And it is in line with the overall terms of the Plans that are aimed at providing severance to those who depart the company on good terms through no fault of their own. The district court therefore did not err in ruling as a matter of law that the Plan allowed Ericsson to deny benefits on the ground that Gomez failed to meet the return of property condition.”
Circuit Judge Jerry Edwin Smith and Senior Circuit Judge Rhesa Barksdale concurred.
Counsel
Gomez is represented by Brian Paul Sanford and David Bryan Norris of The Sanford Firm. Ericsson is represented by Michael Harman Bell of Ogletree, Deakins, Nash, Smoak & Stewart. All are in Dallas.
(Additional documents available: Appellant brief. Document #54-160713-074B. Appellee brief. Document #54-160713-075B.)...