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Severance Benefits Must Be Paid for Any Termination, Even if No Income Is Lost
Description Appeals court held that employees were due severance benefits when their employer sold a part of its operations to another company, which rehired all workers without change in income or benefits. Since their former employment had been terminated, they were due severance pay.
Topic Employment Law
Key Words Retirement Benefits; ERISA; Termination
C A S E   S U M M A R Y
Facts Eagle sold its Plastics Division to Cambridge, which immediately reemployed all of Plastics' at-will employees without any interruption in work. Eagle's separation policy provided severance benefits to its employees. Some employees sued Eagle contending that the sale of Plastics meant they had been terminated and so were due severance benefits. Eagle contended that they had not been terminated since they suffered no loss of income or benefits. The district court agreed that severance benefits were for employees who lost employment. Employees appealed.
Decision Reversed. An ERISA claim for separation benefits is a claim to enforce a contract. The employees were "terminated" when their employer sold their division to the acquiring company. Even though they were immediately reemployed, the employees were entitled to benefits under their ERISA plan. The plan only required termination for the severance benefits to be triggered; they were terminated by their old employer, so they are due the benefits.
Citation Anstett v. Eagle-Picher Industries, Inc., 203 F.3d 501 (7th Cir., 2000)

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