Employer's severance policy may well be an ERISA plan, holds the Second Circuit

Okun v. Montefiore Med. Ctr., No. 13-3928-cv (2d Cir. July 17, 2015).

ERISA, the federal law governing employer-provided pensions and benefit plans, covers “employee welfare benefit plans,” among other things. A lot depends on how broadly you read that term. If an employer-provided benefit counts as a “plan,” ERISA’s regulatory requirements apply. ERISA’s broad preemption provision applies, too.

The question here is whether Montefiore Medical Center’s severance policy counts as a plan. That policy provides that when full-time physicians are terminated, they’re entitled to either twelve months’ notice ahead of time or six months of severance pay—except when they’re fired “for cause.” The plaintiff, Dr. Alexander Okun, was fired “for cause,” but he says that this firing was a mere pretext to interfere with his rights under the severance policy. He brought an action under ERISA for benefits due under the severance policy. The district court dismissed the action on the pleadings, ruling that the severance policy didn’t count as a plan under ERISA. 

The Second Circuit reverses, holding that Okun has adequately alleged that the policy counts as an ERISA-governed plan. To support this conclusion, the court points to two things. First, the policy requires administrators to exercise discretion and individualized judgment—a good example is this case, where administrators had to determine whether Okun was fired “for cause.” Second, Montefiore’s severance policy, which has been around in one form or another since 1987, represents an ongoing commitment to its employees. While Montefiore can modify that policy unilaterally, that’s true of a lot ERISA plans.