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An employer does not violate ERISA when it refuses to rehire workers in order to avoid increased pension liability, the 3rd U.S. Circuit Court of Appeals has ruled. “Unlike a discharge or other workplace harassment, a failure to hire does not amount to a circumvention of promised benefits because job applicants who have yet to be hired have not been promised any benefits,” U.S. Circuit Judge Jane R. Roth wrote in Becker v. Mack Trucks, Inc.. The ruling upholds a December 2000 decision by U.S. District Judge Franklin S. Van Antwerpen of the Eastern District of Pennsylvania which held that hiring decisions — even when they involve former employees — can never fall within ERISA’s definition of prohibited conduct. The suit was brought by 78 former Mack Truck employees who lost their jobs in massive layoffs in 1987 and claimed that the company violated ERISA � 510 when it refused to rehire them a decade later so that it wouldn’t incur greater pension liabilities. Mack Truck’s lawyers — Edward T. Ellis and Jeanne L. Bakker of Montgomery McCracken Walker & Rhoads — conceded that the company’s reason for rejecting former employees was related to their pension rights. But under � 510, they said, such former employees cannot sue over the company’s refusal to rehire. Although Mack’s former employees were initially the first to be offered new jobs, the company said it soon realized that a rehired former employee with credited service under the pension plan would receive a disproportionately larger pension than a newly hired employee. Former employees who had not vested under the plan would receive credit for past service and would become vested in less than the five years applicable to new hires. And former employees were more likely to become eligible for early retirement before age 62. As a result, in July 1997 Mack decided to stop hiring former employees with credited service under the plan. Van Antwerpen found that the plaintiffs whose pension benefits had not vested at the time they sued had no standing to sue under ERISA. Roth agreed, saying that under the 3rd Circuit’s 1993 decision in Shawley v. Bethlehem Steel Corp., “the non-vested plaintiffs lack a reasonable expectation of returning to covered employment.” The collective bargaining agreement covered recall rights, Roth said, and by the time Mack considered rehiring them, all of the non-vested employees’ recall rights had either expired or been waived in lieu of dislocation benefits. “Thus, under our holding in Shawley, non-vested plaintiffs lack a reasonable expectation of reemployment,” Roth wrote in an opinion joined by U.S. Circuit Judges Thomas L. Ambro and Julio M. Fuentes. Turning to the claims of the vested plaintiffs, Roth again agreed with Van Antwerpen’s decision that they failed to show that Mack Truck’s refusal to rehire them was a “discriminatory activity” that violated � 510. The “plain language” of � 510 makes no mention of refusals to hire or rehire in its list of prohibited employer conduct, Roth noted. But plaintiffs’ attorney Quintes D. Taglioli of Markowitz & Richman in Allentown, Pa., argued that the law’s use of the “discriminate” should be read to encompasses hiring decisions. “We reject this invitation to construe the word ‘discriminate’ out of context,” Roth wrote. “Congress knows how to forbid discrimination in hiring, and when it wishes to do so it will use the word ‘hire.’ “ Since every other federal law that governs hiring practices uses the term “hire,” Roth found that � 510′s omission was legally significant. ERISA, Roth said, was “designed to protect benefits promised to an employee arising from a pre-existing employment relationship.” While the vested plaintiffs once had an employer-employee relationship with Mack, she said, their current complaint “does not address a deprivation of any pre-existing ERISA or recall rights arising out of their former employment.” Instead, Roth said, the plaintiffs were seeking protection as job applicants. “Such protection is inconsistent with Congress’s purpose in enacting ERISA, as evidenced by express statutory language, opinions interpreting Section 510, and by that provision’s legislative history,” Roth wrote. “Congress’s intent to provide a broad array of safeguards for existing employment relationships by no means suggests, however, that it intended to regulate actions taken against a potential employee.”

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