Seventh Circuit Affirms Discretion Over Who Gets Severance Benefits

A recent Seventh Circuit decision affirms the principle that an ERISA severance plan can reserve to the employer discretion over who is eligible for severance benefits. The case is Carlson v. Northrop Grumman Severance Plan, No. 22-1764, __ F.4th __, 2023 WL 3299703 (7th Cir. May 8, 2023).

The case involved former Northrop Grumman employees who were laid off in 2012 and claimed a right to severance under Northrop Grumman's severance plan. But the plan said an employee was not eligible unless they received a memo from a Vice President of Human Resources notifying them of their severance eligibility. The employees at issue did not receive an eligibility memo.

The employees argued that the requirement to receive an eligibility memo was merely ministerial and should be disregarded. The Seventh Circuit (and the district court before it) disagreed, holding that ERISA allows a severance plan to give the employer discretion over who will receive severance benefits. The