A company's detailed paper trail saved it from a lawsuit and subsequent appeal by former union employees who felt they were denied promised retirement benefits, a court has ruled.
The U.S. Court of Appeals for the Third Circuit decided in favor of Union Labor Life Co. and Amalgamated Life Insurance Co. because "there were several subsequent communications (to employees) making it clear that no defined benefit plan participation was offered until 2010."
The defendants said numerous notices were sent in 2004, when Union Labor Life outsourced its claims administration services to Amalgamated Life, showing that employees would be able to keep their jobs but would not be offered pension benefits under the transaction. Before the transaction occurred, the plaintiffs worked for ULLICO and were covered by a collective bargaining agreement, which included participation in the company's defined benefit pension plan.
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In March 2004, ULLICO's union workers were sent letters offering them employment with ALICO but saying that the offer included permanent changes to their salary, benefits and other terms and conditions of employment that they experienced with ULLICO.
The following week, ALICO sent a notice to these same employees with a Q&A about their benefits. It said that there was a three-year eligibility period for these union employees to join the ALICO staff pension plan. It also distributed a document providing an overview of employment benefits that refers to a 401(k) savings plan but does not mention a defined benefit pension plan. Nobody asked about participation in a DB plan when they received their offers of employment, the appeals decision noted.
In May 2004, after the employees moved from ULLICO to ALICO, the group's new union floated the idea of a pension plan during collective bargaining negotiations. The company said in response that it could not afford to provide those benefits to them.
In October 2010, when the plaintiffs were laid off, they sued ULLICO, ALICO and their union, alleging that they improperly had been denied benefits under ALICO's defined benefit pension plan.
They said in their suit that the companies violated the Employee Retirement Income Security Act and that they would not have continued employment with ALICO if they knew they would not be able to participate in a defined benefit pension plan.
A district court granted ALICO's motion for summary judgment as to the plaintiffs' ERISA claims and the former employees appealed that decision, but ultimately lost.
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