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A CoreStates Bank employee who lost her job in a merger is entitled to compensation after a federal judge in Wilmington, Del. concluded that the new owner, First Union Corp., manipulated the severance plan to deny her benefits. Janet D. Frieberg was earning $71,235 a year as a bank branch manager in Wilmington when the position was eliminated in a corporate reorganization in 1998. With the court judgment in her favor, she will receive a year’s salary and interest plus attorneys’ fees, according to Gary W. Aber, her lawyer from Heiman Aber Goldlust & Baker in Wilmington. First Union had argued that Frieberg wasn’t eligible for severance because she wouldn’t accept a comparable position, as the company defined it. E. Thomas Henefer, the bank’s attorney from Stevens & Lee in Reading, Pa., didn’t respond to a request for comment. Frieberg filed suit in 1999 in U.S. District Court under a single claim for benefits through the federal Employee Retirement Income Security Act, or ERISA. In a 16-page opinion issued July 18, Judge Joseph J. Farnan Jr. granted her motion for summary judgment. The case turned on the questions of whether First Union offered Frieberg a comparable position and whether the bank had an incentive to deny her severance. Farnan determined the bank acted intentionally to avoid paying her. First Union and CoreStates merged in April 1998 and set up a severance plan to cover employees whose jobs were terminated involuntarily. The severance plan was to be available through April 28, 1999, but employees who turned down positions comparable to what they had were not eligible for benefits. Shortly after the merger Frieberg was told her branch manager’s job wasn’t needed, but she could switch to being a customer relations manager. According to Farnan’s opinion, Frieberg was notified by the Human Resources Department she was being offered a “non-comparable” job that she could decline and still be eligible for severance. After Frieberg turned down the offer and applied for severance, however, she was told by the severance plan administrator that the new job was comparable to her old one, so her resignation was considered voluntary, making her ineligible for benefits, Farnan wrote. First Union said the job was comparable because it paid $67,843 a year — which was what Frieberg’s salary was before her last raise. Frieberg filed an internal appeal. She argued the customer relations job was not comparable, because the company intended to reduce the salary to $59,700 on May 1, 1999, Farnan wrote. The date of the salary cut was significant, because it occurred three days after the severance plan closed. Frieberg’s appeal was turned down by the same severance plan administrator in his capacity as the “Appeals Fiduciary.” First Union argued the new position only had to have the same salary as the old position at the time it was offered, and there weren’t any guarantees that an employee’s salary never would be reduced, Farnan wrote. In deciding the case, Farnan noted a court can overturn a plan administrator only if the decision is arbitrary and capricious — except in certain circumstances where the 3rd U.S. Circuit Court of Appeals has held that a “heightened” standard applies. Those circumstances occur when a plan administrator acts under a conflict of interest because of a financial incentive to deny benefits. First Union triggered the heightened standard, Farnan wrote, because the human resources department and the plan administrator took opposite views on Frieberg’s claim and because the plan administrator who denied the benefits also heard the appeal. Under the heightened standard, Farnan concluded that First Union couldn’t sustain its decision to deny severance to Frieberg. “The court agrees with [First Union] that the offer of a ‘comparable position’ does not preclude a future salary reduction. … However, the instant case involves a future salary reduction that … was guaranteed to occur. [First Union] cannot avoid paying severance benefits by initially setting the salary for a new position at one rate so that it qualifies as a ‘comparable position,’ but then reduce the salary several months later,” Farnan wrote. “Such conduct is an improper manipulation of the plan’s provisions.” Farnan added, “The court finds the timing of the salary reductions, only three days after the plan was to terminate, to be striking evidence that [First Union] intentionally chose this date in order to avoid paying severance benefits to affected employees.”

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