You Don’t Always Have to Lose Your Job to Receive Severance Benefits

There appears to be a widespread assumption among employees and executives in Chicago and the rest of Illinois that severance plan benefits are only available if a worker loses his or her job. While this is often the case, it is not always the case. What event or events trigger an entitlement to severance plan benefits truly depends on what the plan says triggers such entitlement. Often, plans condition eligibility for severance plan benefits upon an involuntary termination of service. In addition, many plans state such termination cannot be for “cause.” Again, what defines “cause” can vary from plan to plan, and is almost always found in a written plan document if the plan is covered by ERISA.

Some plans, however, provide more generous eligibility for severance benefits, which take into account some measure of a reduction in earnings. Such is the case with one severance plan which covered former Kos Pharmaceutical employees who became employees of local pharmaceutical giant, Abbott Laboratories. The Kos/Abbott plan referenced provides for benefits even if a covered employee terminates his or her own employment for “Good Reason.” Adair v. Abbott Severance Plan for Employees of Kos Pharmaceuticals, 2011 U.S. Dist. LEXIS 18696, at *2-3 (D.N.J. Feb. 24, 2011). The plan defines “good reason” as involving a 10% reduction in the participant’s base salary, or any “material reduction” in the total cash compensation the participant is “eligible to earn.” Alternatively, “good reason” can include a demotion or certain reductions in job responsibilities. Abbott’s interpretation of this language has been the subject of controversy in recent cases. Id.; Veltri v. Abbott Severance Pay Plan for Employees of Kos Pharmaceuticals, 2010 U.S. Dist. LEXIS 5374 (D.N.J. Jan. 25, 2010).

If you think you may be entitled to severance benefits even though you have not lost your job, consult an attorney well versed in ERISA.