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Gilbert v. Burlington Industries Inc.

June 17, 1985

IRVING GILBERT, IRENE PRINCE, DAVID J. FRANK, HERBERT P. KAPLAN, BERNARD H. LARGMAN, DOROTHY MIHALKER, DORA NICOLINI, HERBERT PEPPEL, BERTHA RICHIE, DAVID SCHOENECK, RAQUEL R. SILENSKY, MARIE SILVESTRI, BRENDA TILLMAN HUMPHREYS, B. GAITHER SHAW, JR., NORMAN J. WILLIAMS, 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



Appeal by 36 plaintiffs, former employees of appellee Burlington Industries, and an appeal by the New York State Commissioner of Labor, as intervenor, both from a judgment entered in the United States District Court for the Southern District of New York (Brieant, J.) on October 30, 1984. The judgment dismissed plaintiffs' state law claims for severance pay benefits on the grounds that they were preempted by ERISA and dismissed the intervenor's complaint for the same reason. Affirmed.

Author: Cardamone

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 tha 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.

IFACTS 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. §§ 1001 et seq. (ERISA or Act). The state law claims include causes of action under New York Labor Law § 198-c, North Carolina General Statutes § 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 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

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

B. 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

A. 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 ...


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