A federal court in New York decertified a class former sales representatives who claimed that Defendant Linvatec Corp. violated ERISA when it denied severance benefits after the division where the representatives worked was outsourced. Thompson v. Linvatec Corp., No. 6:06-CV-00404 (N.D.N.Y. 6/22/2010). After reviewing the plan documents, the court narrowed the original class definition of "former Linvatec employees who were involuntarily terminated in 2003 and did not receive severance benefits" to only include employees who were not offered employment after being terminated. The court then found that 70 of the 75 sales representatives that were separated accepted offers to work as independent contractors/sales representatives for the outsourced sales division, and agreed with Linvatec that this constituted an “offer of employment” sufficient to disqualify the representatives from severance benefits under the terms of the unfunded severance plan. Therefore, the court found that the remaining 5 named plaintiffs did not meet the numerosity requirement for class certification and dismissed their individual claims on summary judgment.

The bottome line: This case reaffirms that employers are afforded discretion to interpret their own ERISA plan documents, which is particularly important in today’s economic climate.  Without such discretion, employers could be forced to assert their right to terminate such unfunded benefit plans.