ERISA-Sixth Circuit Rules That Union’s Release Of Claims Is Valid, So That Plaintiffs’ Claim For Severance Pay Is Denied

In Otson v. Arkema, Inc., No. 09-1383 (6th Circuit 2010), the plaintiffs were six former employees of the defendant, Arkema, Inc. (“Arkema”). The plaintiffs sued Arkema, complaining that it denied them severance pay in violation of ERISA. The district court granted summary judgment in favor of Arkema, finding that a release of the plaintiffs’ ERISA claim by their union barred the plaintiffs’ suit. The Sixth Circuit agreed, and affirmed the district court’s ruling.

The plaintiffs were unionized employees, represented by United Steelworkers, Local 2-591 (the “Union”). Arkema had offered a severance package to eligible workers, including the plaintiffs, with the intention of eliminating 46 bargaining-unit positions. Due to a dispute over the calculation of pension benefits, the plaintiffs did not agree to separate from their employment prior to the deadline for accepting the package. Arkema later sold the plant at which the plaintiffs worked. Within a few weeks of the sale, in exchange for settling various pending grievances and arbitrations, the Union agreed to release Arkema from various claims, including any arising out of ERISA violations (the “Release”). It was at this point–after the sale of the plant and the Union’s release of claims against Arkema–that the plaintiffs sought to accept the severance package. Arkema refused to give the plaintiffs the severance pay available under the package, and the plaintiffs brought suit under ERISA seeking the severance pay.

The issue was whether the Release barred the plaintiffs’ ERISA claim for severance pay. The plaintiffs first argued that a union may not waive ERISA claims as a matter of law. However, the Court would not entertain this argument, because it was not raised in the district court. The plaintiffs next argued that the Release did not clearly state whether it binds only the Union, or both the Union and its members. However, the Court found that, by its language, the Release bound both the Union and its members. Finally, the plaintiffs alleged that the Release fails to comply with the federal requirement that a waiver of statutorily protected rights be “clear and unmistakable.” The Court disagreed, finding that the Release specifically referred to ERISA violations. Thus, the Court ruled that the Release barred plaintiffs’ ERISA claim.

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