Fourth Circuit Finds Company Did Not Properly Eliminate ERISA Severance Plan Prior to Mass Layoff

Messer v. Bristol Compressors Int’l, LLC, No. 21-2363, 2023 WL 2759052 (4th Cir. Apr. 3, 2023) involves a class action under the Worker Adjustment and Retraining Notification Act of 1988 (“the WARN Act”). One of the issues the Fourth Circuit decided was whether Defendant Bristol Compressors International, LLC (“BCI”) validly eliminated its ERISA-governed severance plan prior to the termination of Plaintiffs’ employment. Here, the severance plan was contained within BCI’s employee handbook. The plan could be amended or eliminated pursuant to the same procedure that applies to any other portion of the handbook. The handbook may only be modified or amended in writing by the Human Resources department. BCI’s Board of Directors signed a Unanimous Written Consent document which approved the elimination of the severance plan in the handbook. However, no further action was taken to effectuate the elimination of the severance plan. Specifically, HR was not asked by management to implement changes to the employee handbook to eliminate the severance plan. Then, BCI began to lay off employees as it prepared to close its manufacturing facility.

The district court determined that the Board resolution effectively eliminated the severance plan in reliance on Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73 (1995). The district court reasoned that the provisions in the handbook stating that the Company reserved the right to eliminate provisions of the handbook meant that the Board was the ultimate decision-maker and amendments prepared by HR was merely an administrative procedure designed to communicate changes to employees. The Fourth Circuit found that the district court’s reliance on Schoonejongen was misplaced. BCI’s handbook provided who had the power to alter or eliminate the handbook provisions (the Company) and the procedure by which those amendments needed to occur (in writing by the HR department). The Board was required to have HR effectuate its elimination of the severance plan in writing. Because the Board did not follow the written procedure for eliminating the severance plan, the district court erred by finding that BCI was entitled to summary judgment on this issue.