While Denise Lessard was on disability leave, the company she worked for was sold. All employees were automatically employed by the acquiring firm as long as they were "actively employed" on the day of the sale. Workers on disability leave could become employees of the new company if they returned to active employment.
But Lessard couldn't return to work and sued both companies forunder the Employee Retirement Income Security Act (ERISA). An appeals court let her case proceed, saying both companies interfered with the rights of disabled workers when they extended benefits only to "actively employed" workers.
The fact that both companies agreed to the policy didn't make it any more legal. "Parties acting in concert can't get away with what they couldn't do separately," the court said. (Lessard v. Applied Risk, No. 01-15648, 9th Cir., 2002)
Advice: This company got some bad advice. Whenever a merger, sale or acquisition is in the works, the eligibility provisions of any benefit plan should be a top consideration. Knowledgeable legal counsel is a must.
Remember, ERISA makes it illegal to discriminate against an employee or beneficiary for exercising his rights under a benefit plan. In this case, the sale agreement discriminated against employees who were on disability, workers' comp and other forms of leave. The judge called this a "ploy to dump workers on long-term disability," adding that "the lawyers who papered this transaction should have advised against it, and the clients should have heeded the warning."
For details on your requirements under ERISA, go to www.dol.gov/dol/topic/health-plans/erisa.htm.