(1993). In other words, courts have held that a plan or statute requires the establishment and maintenance of a separate and ongoing administrative scheme only if the plan administrator must determine employee eligibility based on subjective criteria.
For example, in Pane v. RCA, Corp., 868 F.2d 631 (3rd cir. 1989), the Third Circuit affirmed the district court's ruling that a severance plan set up to retain company executives during a merger was an ERISA plan. The lower court relied on the fact that, under the severance plan, the employee was entitled to benefits only if he or she was terminated for reasons other than for cause. Thus, "the circumstances of each employee's termination [had to] be analyzed in light of [certain] criteria, and an ongoing administrative system constituting an ERISA plan existed." Pane, 667 F. Supp. 168, 171.
Similarly, in Bogue v. Ampex Corp., 976 F.2d 1319 (9th Cir. 1992), cert. denied, 123 L. Ed. 2d 471, 113 S. Ct. 1847 (1993), the Ninth Circuit held that a seventeen month "executive parachute" program was an ERISA plan because payment was only provided if the company employer were sold and the buyer failed to offer the executive " substantially equivalent employment." Because the program administrator was required to determine, in his or her judgment, whether a covered employee's new job was "substantially equivalent" to his old job, the Court held that the program required "a case-by-case, discretionary application of its terms." Id. at 1323. In other words, unlike application of the statute in Fort Halifax, there was simply "no way to carry out that obligation with the unthinking, one-time, nondiscretionary application of the plan administrators[.]" Id. ; see also Gray, 809 F. Supp. at 166-67 (Massachusetts severance pay statute preempted by ERISA because, as in Pane, plan administrator had to decide whether employee's termination was involuntary in order to determine eligibility for benefits);
Conversely, in Fontenot v. NL Industries, Inc., 953 F.2d 960, 961-63 (5th Cir. 1992), the Fifth Circuit held that a "golden parachute" program providing severance pay for executives who were terminated within two years of a change of control was not an ERISA plan because eligibility for the program was based on objective criteria. Thus, the Court held that for the employer to make payments under the plan, it was not required to establish a separate and ongoing administrative scheme. The Court reached this conclusion despite the fact that the severance pay plan provided for a three year continuation of certain benefits to the eligible executives. The Court distinguished Pane on the basis that the circumstances of each employee's eligibility in Pane had to be analyzed in terms of certain subjective criteria which did require the establishment of an administrative scheme.
Since Pane, the Third Circuit has once more been called upon to consider whether a severance pay plan was an ERISA-governed employee welfare benefit plan. In Angst v. Mack Trucks, Inc., 969 F.2d 1530 (3d Cir. 1992), the Court determined that ERISA did not preempt claims for breach of a buyout plan under which the employer agreed to provide departing employees with a lump-sum cash payment and a year of continued benefits in exchange for their voluntary departure. The buyout plan was expressly limited to seventy-seven (77) employees, but a total 144 members applied for benefits. Because the plan was so limited, eligibility was based exclusively on seniority. Several of the 144 members who did not meet the seniority cutoff brought the action in federal court. In holding that the plan was not governed by ERISA, the Court distinguished its earlier decision in Pane stating that "Pane involved a plan which required the creation of an administrative apparatus that would analyze each employees' situation in light of particular criteria." Id. at 1539. In Angst no such discretionary analysis of eligibility was required -- the seventy-seven most senior members were included, and the rest were not.
In a case where the severance pay plan was similar to PECO's Plan, the district court held that the plan was not preempted by ERISA. McLemore v. United States Fidelity & Guaranty Company, 829 F. Supp. 192 (S.D. Miss. 1993). The plan in McLemore provided lump-sum payments to employees who were on the payroll for more than twenty (20) hours per week as of the date of their termination. The payments were based on the number of years the employees had worked with the company. Also, the plan provided for the continuation of certain other employee benefits, including medical insurance, dental insurance, pensions, and savings and investment plan participation. The defendant argued that an ongoing administrative scheme was required because the plan administrator was required to calculate the employees' eligibility, years of service, whether or not they had any unused vacation days, floating holidays or personal days, and based on the foregoing, determine the amount of severance pay. The Court, however, held that the employer's "need to make such simple arithmetical calculations and clerical determinations did not require the establishment of the type of ongoing administrative scheme which Fort Halifax directs is governed by ERISA." Id. at 197.
Citing Angst, the Court further held that it is not relevant that the severance pay plan also provided for the continuation of other employee benefits. Id. at 197 (citing Angst, 969 F.2d at 1539); see also Fontenot, 953 F.2d at 961.
As the employer argued in McLemore, PECO claims that its Plan is an ERISA plan because eligibility "depended upon years of service and severance payment amounts depended upon each individual employee's years of service." PECO's Reply Memorandum at 3. PECO also argues that its Plan required the establishment of an administrative scheme because it was a "multi-phased reduction program operating in several stages[.]" PECO's Reply Memorandum at 3. Finally, PECO argues that an ongoing administrative scheme was required by the Plan because protected employees could reject the Plan and choose to remain with the company in another position.
I find no factual basis for PECO's conclusory statement that its Plan was "multi-phased" nor that its Plan requires the establishment of an ongoing administrative scheme. After reviewing the Plan, I find that once an employee chose to participate in the Plan, the calculations required by the plan administrator were similar to those required in McLemore and Angst. Unlike the programs in Pane and Bogue, PECO's plan administrator was not required to analyze employees' eligibility in light of certain subjective criteria. The plan administrator only had to determine eligibility based on objective criteria and calculate severance benefits according to a simple formula. For example, Middleton was eligible to participate in the Plan because he had been with PECO for more than ten years and he was a PSM employee. If had chosen the Plan, he would have received severance benefits of three weeks pay for each year of service with PECO to a maximum of eighteen (18) months.
PECO appears to argue that when looking at the Plan, the Court must also look to the other options offered protected employees during the reorganization of the Nuclear Group. However, it is clear to me that the fact that eligible employees could reject the Plan and choose to remain with PECO in another position, as did Middleton, is not relevant when considering the character of the Plan. The Plan itself is straightforward, and its administration requires no discretionary analysis of either the employees' eligibility or the calculation of severance benefits for those eligible employees who chose to participate in the Plan.
Just as the severance pay programs in Fort Halifax, Fontenot, McLemore and Angst were not deemed plans within the meaning of ERISA, so too I conclude that PECO's Plan is not an ERISA plan. Accordingly, Middleton's state law claims are not preempted by ERISA, and this Court does not have jurisdiction over this case.
For the reasons discussed above, I find that this Court does not have subject matter jurisdiction over this action. Accordingly, I will order that the Clerk of Court remand this action to the Court of Common Pleas of Philadelphia County.
An appropriate order follows.
AND NOW, this 9th day of May, 1994, upon consideration of the Order to Show Cause (Document No. 2), defendant Philadelphia Electric Company's memorandum of law in support of its notice of removal, plaintiff Lawrence Middleton's response, and defendant's reply, and for the reasons discussed in the attached memorandum, having found that this Court does not have subject matter jurisdiction over this action, it is hereby ORDERED that this action is REMANDED to the Court of Common Pleas of Philadelphia County.
IT IS FURTHER ORDERED that the Clerk shall return the file to the Prothonotary of the Court of Common Pleas of Philadelphia County at Civil Action No. 2251, October Term 1993.
LOWELL A. REED, JR., J.