7th Circuit Court of Appeals
Case Name: Alan Carlson v. Northrop Grumman Severance Plan
Case No.: 22-1764
Officials: Easterbrook, Hamilton, and Lee, Circuit Judges.
Northrop Grumman laid off some workers in 2012 and did not provide severance benefits to all of them. The firm’s Severance Plan (“the Plan” for short) provides that a laid-off employee regularly scheduled to work at least 20 hours a week will receive severance benefits if that employee “received a cover memo, signed by a Vice President of Human Resources (or his/her designee), with this document addressed to you individually by name.” Another part of the Plan confirms this requirement: “You must be designated as eligible for this plan by a Vice President of Human Resources (or his/her designee). You are designated if you received a memo addressed to you, notifying you of your eligibility for this benefit.” Alan Carlson and Peter DeLuca, who did not receive such a document (which the parties call the “HR Memo”), filed this suit contending that the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001– 1461, entitles them to severance benefits anyway.
The Seventh Circuit affirmed, first finding no abuse of discretion in the withdrawal of the reference order. The Plan makes the receipt of severance benefits contingent on the receipt of an HR Memo, which the class members did not get. Welfare-benefit plans under ERISA—unlike retirement plans—need not provide for vesting, and the terms of welfare-benefit plans are entirely in the control of the entities that establish them.