Court Rejects Severance Pay Claim of Employee Terminated for Refusing Transfer

The D.C. Circuit Court of Appeals (the "D.C. Circuit"), in Peck. v. SELEX Systems Integration, Inc., has affirmed a district court's judgment that a terminated employee was not eligible for severance pay after he refused to accept a transfer from his marketing position in D.C. to a quality-control position in Kansas.

Background

The employee was employed in an executive marketing position with the employer when he was informed that he was being removed from that position for poor performance. As an alternative, the employer offered to transfer the employee to Kansas to work as a quality control executive, a position for which he had significant experience. The employee rejected the employer's offer of transfer, even after the employer explained that his refusal to accept the quality control position would be cause for his termination. Accordingly, the employer terminated the employee after his final refusal of the transfer offer.

The employer's severance plan provided that benefits were available to eligible full-time employees "whose employment terminated due to a lack of work, elimination of position, or change of control." The plan further provided that employees who were terminated for cause were ineligible for severance pay.

After being terminated, the employee filed a claim for benefits under the employer's severance plan. The employer denied the employee's claim because of the "circumstances of the termination of [his] employment" (i.e., he was terminated for cause and not one of the three reasons enumerated in the severance plan).

The employee subsequently sued the employer in federal district court, claiming that its decision to deny his claim for severance benefits violated ERISA. The district court dismissed the employee's claim for severance pay, reasoning that the evidence confirmed that he was terminated because he refused the accept the transfer to Kansas and not because the employer was eliminating the marketing position. In turn, the employee filed an appeal with the D.C. Circuit.

D.C. Circuit

In reviewing the matter, the D.C. Circuit observed that the employee's claim for severance benefits was based solely on the premise that the employer had eliminated his marketing position. The court noted, however, that the employee did not contest the district court's determination that he was terminated for refusing the transfer as opposed to the elimination of his position. Moreover, the court found that the employer's termination letter to the employee confirmed that its reason for terminating him was because he had refused the transfer to Kansas. Accordingly, the D.C. Circuit affirmed the district court's judgment in favor of the employer on the employee's severance pay claim.