Okun v. Montefiore Med. Ctr. – July 2015 (Summary)

ERISA

Okun v. Montefiore Med. Ctr., No. 13-3928-cv (2d Cir. July 17, 2015)

The United States Court of Appeals for the Second Circuit vacated and remanded a judgment by a lower court dismissing a physician’s claim for severance benefits because a medical center’s severance policy did not constitute a “plan, fund, or program” under ERISA. The policy provided that all full-time physicians “employed before August 1, 1996 who are terminated for other than cause” are entitled to either 12 months’ notice or six months’ severance pay. Eligible employees with more than 15 years’ service were also entitled to automatic review of the amount of severance pay by the CEO.

This litigation arose from the termination of a physician who had been employed at the medical center for 23 years. After giving notice to his supervisor that he would be taking a job elsewhere in four months, the physician was fired “for cause.” The medical center claimed that the physician was fired because of what he said at a meeting. However, the physician argued that his “for cause” termination was a pretext for the medical center to interfere with his right to severance payments under the policy and ERISA.

The Second Circuit reasoned that the policy was covered by ERISA because it represented a multi-decade commitment to provide severance benefits to a broad class of employees under a wide variety of circumstances. Also, because the policy has been in effect in one form or another since 1987, the medical center demonstrated an “ongoing commitment” to providing severance benefits.