Eighth Circuit Holds One-Person Severance Agreement Cannot be ERISA Plan

August 20, 2011
In a dispute over severance benefits under an employment agreement, the U.S. Court of Appeals for the Eighth Circuit recently held that an ?Ç£individual contract providing severance benefits to a single executive employee?Ç¥?ácould not be a?áwelfare plan subject to ERISA.?á Dakota, Minnesota & Eastern Railroad Corp. v. Schieffer, No. 10-2484 (8th Cir. Aug. 11, 2011).?á The court reasoned that the use of plural?áwords in ERISA?ÇÖs definition of ?Ç£employee welfare benefit plan?Ç¥ indicated that Congress intended ?Ç£that a covered ?Çÿplan?ÇÖ is one that provides welfare benefits to more than one person.?Ç¥?á It is unclear whether the Eighth Circuit would apply the same ?Ç£plural words?Ç¥ reasoning to the definition of ?Ç£employee pension benefit plan?Ç¥ under ERISA.?á The Eighth Circuit?ÇÖs decision is surprising because it appears to conflict with long-standing decisions by the Fourth, Seventh, and Eleventh Circuits.?á See, e.g., Biggers v. Wittek Indus., 4 F.3d 291, 297 (4th Cir. 1993) (holding that an individual severance arrangement was subject to ERISA and noting that the court was?á?Ç£not aware of any requirement that a plan must cover more than one employee in order to be controlled by ERISA.?Ç¥).?á Those courts looked to the general rule under Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987) for determining whether a plan exists, focusing on whether the arrangement necessitated an ?Ç£administrative scheme?Ç¥ (for example, ongoing payments as opposed to a lump sum).?á Whether a severance arrangement is subject to ERISA could affect,?áamong other things, jurisdiction, applicable law, the standard of review for a denial of benefits, and the employee?ÇÖs right to a jury trial.
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