Auto Workers Lose Case of “Rehiring” Rather Than “Reinstating” Them

The difference between “reinstated” and “rehired” was felt deeply by some employees of a world famous automobile company, Ford.

The company sued it for what they felt was a violation of the Employee Retirement Income Security Act (ERISA) when they were rehired rather than reinstated at Ford after being transferred to Ford’s sister concern, Visteon.

The Issue

They were transferred to Visteon Corp. in 2000 when it was under the ownership of Ford Motor Co. But in 2001 Visteon was spun off to stockholders. According to the employee transition agreement that was issued then, Ford had to take up liability for pension benefits of the transferred employees till the time of transfer of ownership, while Visteon was also directed to conceive a comparable and equally beneficial retirement plan for the employees. For the transferred employees, their combined years of service at both Ford and Visteon would be considered for eligibility for early retirement while the monthly pension benefit for an employee would depend upon the individual’s salary provided by Visteon.

The transition agreement was modified by Ford more than three years from the date of transition to an agreement that offered less attractive terms for employees hired or rehired after January 1, 2004. Visteon became part of Ford’s reacquisition plans in 2005 and the once transferred employees were rehired, but as new employees of Ford. Their years of service at both the companies would be combined to determine their eligibility for pension benefits, according to the less favorable plan it introduced through its amended transition agreement. The benefits amount that would be administered was again decided not to be determined.

The Complaint

These rehired Ford employees, who were once transferred to Visteon would no longer be eligible for equal benefits as the non-transferred Ford employees who were at the company before January 1, 2004, according to the new amendment to Ford’s transition agreement. This prompted those employees to sue the auto major under ERISA for rehiring rather reinstating them, making them settle for a less attractive pension benefits package.

The Verdict

Following the dismissal of their case by a federal district court, the employees appealed to the 6^th Circuit. The appellate judges felt convinced by Ford’s argument that was based on a 1991 directive which stated that transferred employees are stripped of any reinstatement rights, leading to the employees’ suit being shown the door again.

What made the case weak for the Ford employees was that, though the new transition agreement drawn up by Ford in 2004 was less satisfactory than the previous one, and thereby violates ERISA Section 510 that classifies as unlawful any action of an employer interfering with its employee benefits, there were some pension benefits they couldn’t expect, making the difference between “rehiring” and “reinstating” them somewhat negligible.