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Give employees advance notice of severance plans, waivers

by on
in Employee Benefits Program,Human Resources

Don't spring severance-plan details on employees right before a layoff.

The Employee Retirement Income Security Act (ERISA) says you must give employees advance notice of their rights to an employer-sponsored benefit plan and any limits placed on it. Courts won't look kindly on companies that drop in a conditional waiver at the last minute.

This doesn't mean you can't change your benefit plan. You can alter benefit plans as long as: Your plan reserves the right to make changes, the change conforms to the written plan and you provide notice of the amendment to participants within 210 days after the end of the plan year.

Finally, this isn't the place for generalities. Make sure that your plan includes very specific terms in a release, and check to ensure that those terms are mentioned in the benefit plan.

Recent case: About a week before he was terminated, David Cirulis was, for the first time, given a copy of his company's severance plan, along with a waiver of legal claims he was supposed to sign.

The company warned Cirulis that he'd earn no severance unless he signed the waiver, but he refused to sign. When the company withheld his severance benefits, he sued under ERISA, arguing that the firm had acted arbitrarily in linking his benefits to signing the release.

A federal appeals court sided with Cirulis, saying he should have been given advance notice of the severance plan obligations. Although the company's severance plan did mention that a release would need to be signed prior to releasing benefits, it didn't mention the release conditions. (Cirulis v. UNUM Corp. Severance Plan, No. 01-3362, 10th Cir., 2003)

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