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The Law

Going Out of Business to Avoid Paying Pensions

The issue: Can a company shut down a plant in order to avoid paying workers their pensions?

For 18 years, Michael Delich, 51, had been a welder, a fitter and a crane operator at the Johnstown, Pa., FreightCar America (FCA) plant. Like other workers who had been at the plant for decades, he expected to spend the rest of his working life at FCA, then retire and collect his pension. But that dream ended abruptly when FCA shut down the plant in August 2007.

“I’d worked hard for it, and I was entitled to it,” Delich says. “I was so mad at the thought I would lose that pension.”

So were about 75 other FCA employees, who were about to qualify for full pension coverage because they had worked at the plant for more than 20 years, and another 30 who had worked there for more than five years.

They successfully sued FCA, claiming that the company had deliberately closed the plant to prevent workers from qualifying for an estimated $20 million in pension and retirement benefits.

“For these people, pensions were absolutely critical, as they are for so many workers who have put in decades of service,” says attorney John Stember of Stember, Feinstein, Doyle and Payne, the Pittsburgh law firm that represented the workers, first in U.S. District Court and then before the U.S. Court of Appeals for the Third Circuit in Pennsylvania.

Even though the plant did not reopen, all the workers, including Delich, will receive the pensions to which they would have been entitled if the plant had remained open through 2009.

“Older workers are especially vulnerable when any of their benefits are eliminated, which is why AARP cared so passionately about this case,” says Mary Ellen Signorille, senior attorney for AARP Foundation Litigation. “It’s truly outrageous to shut a plant solely to eliminate paying out pensions.”

The federal Employee Retirement Income Security Act (ERISA) prohibits companies from closing a plant to prevent workers from vesting in their pensions. During a trial, the workers’ attorneys cited statements from labor negotiations that they said showed FCA officials’ intent to do just that.

“We had a smoking gun here,” says Stember. “Without one, these can be very, very tough cases to win or settle.”

FCA also operates plants in Danville, Ill., and Roanoke, Va. Pat Ritchey of Reed Smith LLP in Pittsburgh, which represented the freight car manufacturer, declined to comment.

What it means to you: If you think that your employer has interfered with your eligibility for pension and retirement benefits protected by ERISA, or if you think your company is planning to close with that purpose in mind, you may have a legal claim. Contact your union, a labor law attorney or the Pension Rights Center in Washington.

Emily Sachar is a journalist and author based in Brooklyn, N.Y.




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