to hourly employees. Despite the absence of a severance pay policy for hourly employees, Simpson Building did, as a matter of practice, pay severance to non-union hourly employees if curtailed as a consequence of a plant shutdown.
Finally, Simpson recognizes that it did not strictly comply with ERISA's procedural reporting and disclosure provisions. However, Defendants maintain such failure is immaterial to a determination of the Plaintiffs' rights since Simpson did not actively conceal its severance policy; Plaintiffs were in fact advised of the severance policy; Simpson consistently responded to any demand for information regarding its severance policy; and the Plaintiffs suffered no detriment by the Defendants' failure to follow ERISA's strict notice requirements.
Additional Assertions of Plaintiffs
Plaintiffs assert that the primary factor in the Defendants' willingness to sell its distribution centers to Hudson involved its desire to avoid a substantial outlay in severance benefits for its employees which it had estimated at from$ 580,000 to $ 600,000. Plaintiffs note that the agreement of sale between Simpson and Hudson did not provide for any obligation on the part of Hudson to offer continued employment to the Simpson employees. Plaintiffs maintain that an inner office memorandum evidenced that Simpson promised Hudson it intended to make full severance benefits to any employee who accepted offers of employment with Hudson, but who were severed through no fault of their own within thirty days of employment with Hudson. Plaintiffs further state the Defendants extended the thirty day period to a ninety day period for the allowance of severance pay.
Plaintiffs dispute Defendants' assertion that the term "curtailment" in the Simpson Management Guide only refers to a permanent elimination of a position with deprives an employee of income. To the contrary, Plaintiffs maintain that they were "curtailed" within the meaning of the Simpson Severance Compensation Policy since it is uncontroverted that the Plaintiffs' function with Simpson was eliminated due to no fault in their job performance and that such a situation specifically falls within the purpose and scope of Simpson's severance policy.
Plaintiffs admit that following the sale, Hudson hired all of the Plaintiffs without any immediate change in their job classification, monthly salary or rates of pay. However, Plaintiffs, George Turner and Kenneth Gerlach, received salary cuts from Hudson on or about March 1, 1985 when their compensation scheme was altered from a straight salary to a salary plus incentive formula.
In addition, the Plaintiffs point out that since the sale to Hudson there has been a reduction in many employee benefits, including a less comprehensive medical, life, and dental insurance plan; a less attractive severance pay policy; and a slight reduction in vacation and holiday time.
Finally, the Plaintiffs contest the Defendants' assertion that the severance pay policy only applies to salaried employees. Plaintiffs maintain that a severance policy is applicable to hourly employees in the same manner that it is applied to those employed on a salaried basis.
Summary Judgment Standard
As the parties suggest, this matter is currently ripe for disposition on summary judgment. Summary judgment may be granted where there are undisputed facts from which only one conclusion may reasonably be drawn. Gans v. Mundy, 762 F.2d 338, 341 (3d Cir.), cert. denied, 474 U.S. 1010, 106 S. Ct. 537, 88 L. Ed. 2d 467 (1985). The parties seem to agree that there is no significant dispute of facts in the instant case, instead there are only disputes as to the weight certain facts are to be given.
Scope of Review
Throughout this proceeding there has been a considerable dispute as to the proper scope of review that we should apply in reviewing Simpson's decision not to afford the Plaintiff's severance pay. Until recently, the clear weight of authority under ERISA was for the courts to apply the arbitrary and capricious standard when considering challenges to an administrators' denial of benefits. Recently, however, our court of appeals changed the standard to be applied in our circuit in a situation as presented here. See Bruch v. Firestone Tire & Rubber Company, 828 F.2d 134 (3d Cir. 1987), reh'g denied, No. 85-1893 (3d Cir. filed Sept. 25, 1987).
In Bruch, the plaintiffs worked for an employer which had as part of its compensation package a termination plan which provided severance pay for employees who were released because of a reduction in work force. The employer sold the division that the plaintiffs worked for to a successor corporation. In doing so, the employer terminated the plaintiffs' employment and they were immediately rehired by the successor corporation. Plaintiffs requested termination pay pursuant to the termination pay plan, arguing that the sale of the division constituted a "reduction in force" within the meaning of the termination plan. The employer, in its capacity as a plan administrator, denied this request by holding that the sale of the division did not constitute a "reduction in force" within the meaning of that term as it is used in the termination pay plan. The district court granted summary judgment for the Defendants on this count by holding that the employer did not act arbitrarily or capriciously in construing the term "reduction in force" to exclude a sale in which the purchaser offers continued employment. The employees appealed that decision.
On appeal, the Third Circuit acknowledged that the arbitrary and capricious standard of review has been applied by most courts in considering challenges to benefit plan administrator's denial of benefits. The Court, however, also found that this standard has not been applied unanimously or without misgivings, and noted that certain cases from the Third, Fifth and Ninth Circuits" . . . reflect[ed] significant dissatisfaction with the arbitrary and capricious standard when the employer can profit from its decision to deny benefits". Id. at 140.
In noting its dissatisfaction with the previous standard, the Court went on to reject the deferential arbitrary and capricious standard in context where the trustee is clearly not disinterested in the amount of severance pay awarded. In citing the new standard to be applied in these situations, the Third Circuit held:
The trust in issue here provides severance benefits, which are a form of wages. The benefits were offered as an inducement to the Plaintiffs, to persuade them to work for Firestone [the employer]. . . .