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SmithKline Beecham Corp. has agreed to pay $5.2 million to settle an ERISA class action suit brought by workers who said they were improperly labeled “temporary” and therefore denied pension benefits despite working full time for months or even years. If the settlement is approved by Senior U.S. District Judge William H. Yohn Jr., it will provide payments to nearly 1,300 workers ranging from $254 to $6,368, depending on the number of weeks they worked on assignments at SmithKline while they were employed by a temporary service agency. After a “fairness hearing” set for Jan. 7, Yohn could also award up to $1.8 million in attorney fees to the trio of lawyers who filed the suit — Philip Stephen Fuoco of Haddonfield, N.J.; Paula R. Markowitz of Markowitz & Richman in Philadelphia; and John Shniper of Phoenixville, Pa. In the suit, the three lead plaintiffs alleged that SmithKline “created a shadow work force” of hundreds of employees who were denied benefits under the Employee Retirement Income Security Act because they were labeled “temporary” or “leased.” Attorney fees would come from the $5.2 million settlement. In reality, the suit alleged, the “temps” often worked side-by-side with full-time SmithKline workers, doing the same work for months on end, before they were offered positions as “regular” SmithKline workers. All of the class members received a letter in April 2000, after they had become regular workers, that informed them of the possibility of additional vesting and eligibility credits under SmithKline’s “cash balance plan” and “retirement savings plan.” In July 2001, Yohn certified the suit as a class action on behalf of about 1,290 workers who began their jobs at SmithKline as temporary workers provided by agencies such as Kelly Services or Olsten Temporary Services, but who were later hired on as regular SmithKline employees. SmithKline’s lawyers — Laurence Z. Shiekman, Brian T. Ortelere, Michael H. Rosenthal and Greg A. Rowe of Pepper Hamilton — moved for summary judgment, arguing that the claims were filed too late because the statute of limitations began to run when the plaintiffs first started to work at SmithKline. Yohn disagreed, holding that the plaintiffs’ claims for benefits “did not accrue until they were hired as regular employees … and received the plan descriptions.” In a December 2003 decision, Yohn said “it would be illogical to hold that one was aware, or should have been aware, of the existence of an injury if that person did not know, or did not have reason to know, that the act allegedly causing the injury was in fact injurious.” In the context of an ERISA claim for benefits, Yohn said, “it is clear that failure to receive benefits does not alone constitute an injury. Rather, the failure to receive benefits is injurious only if one is entitled to receive benefits.” As a result, Yohn said, “an ERISA claim for benefits cannot accrue until the claimant knew, or should have known, that he or she was arguably entitled to benefits.” Applying that logic, Yohn found that the plaintiffs originally believed that they were considered employees of Kelly or Olsten and therefore were not entitled to any pension benefits. None of the plaintiffs received plan descriptions prior to becoming regular employees in 1999, Yohn said. “Upon review of the eligibility definitions contained in the plan descriptions, plaintiffs would have realized that according to these definitions, they were arguably entitled to benefits for the time prior to being hired as regular employees. This is the point at which plaintiffs obtained ‘actual knowledge,’” Yohn wrote. “Plaintiffs did not have reason to suspect prior to that time that they would be entitled to benefits under the [SmithKline] plans, especially since nobody ever told them that they were so entitled,” Yohn wrote. Yohn found that SmithKline failed to produce any evidence that the plaintiffs “should have known” that they were arguably entitled to benefits prior to their receipt of the plan descriptions in 1999. “Hence, the point at which they obtained actual knowledge is, in this case, the same point at which they ‘should have’ obtained such knowledge,” Yohn wrote. “This is not a case where the claimants received the plan descriptions and did not read them for years before discovering that they arguably had a claim for benefits years earlier. Rather, plaintiffs in the instant case were diligent, and filed claims for benefits … soon after they were hired as regular employees,” Yohn wrote. Although Yohn trimmed many of the claims from the suit, his decision cleared the way for the plaintiffs to pursue claims for benefits under the retirement plans and for breach of fiduciary duty. Yohn found that the plaintiffs survived summary judgment on their claims that SmithKline breached its fiduciary duty in four ways — in its initial and continuous failure to calculate and award them vesting and eligibility credits; its failure to keep track of their vesting and eligibility credits; by imposing a “burden shifting scheme” on the plaintiffs, requiring them to provide the information supporting their entitlement to vesting and eligibility credits; and in its failure to notify the plaintiffs of their right to appeal SmithKline’s benefits decisions. According to court papers, the plaintiffs are asking Yohn to award incentive payments of $15,000 each to the two original plaintiffs — Louise D. Thomas and Dennis D. Darden — and a $5,300 payment to the third named plaintiff, Linda Jean Allen, “in recognition of the time each expended in prosecuting this lawsuit.” The settlement agreement calls for the remaining plaintiffs to split the remainder of a $3 million fund. In the settlement agreement, the class members are divided into three groups. The first group consists of 325 class members who have already received additional vesting and eligibility credits. Those workers will receive awards ranging from $254 (for those who worked 26 weeks or less as “temporary” workers) to $3,042 (for those who worked more than 156 weeks as a “temp”). A second group of 255 workers who responded to the April 2000 letter, but received no additional vesting credit will receive the same awards as the first group as well as an additional award ranging from $475 to $3,326, depending on the year they were hired as a regular employee. The third group consists of 710 workers who did not respond to the letter. They, too, will receive the same awards as the first group, as well as additional payments ranging from $356 to $2,494. In an interview, Shniper said the plaintiffs must pay taxes on the awards because they are not being paid out of SmithKline’s benefits plan. Shniper said the plaintiffs’ lawyers have not yet worked out the details of how the taxes will be paid, but the final plan will ensure that the tax consequences of the awards are considered.

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