As a class action lawsuit alleging ERISA violations with respect to Twitter successor X Corp’s severance plan continues into 2024, now is a good time for employers to review their severance practices and policies with ERISA counsel to determine whether those plans are subject to ERISA and, if so, whether any action is necessary or appropriate.
Do you have a severance plan?
This determination is particularly important for any company that has a practice of offering severance but does not have a written plan document since courts may find such practices to be an ERISA plan.
Adopting an ERISA severance plan can have advantages, such as state law preemption and a bench trial for any disputes, but there can be other factors that need to be taken into account. Companies should discuss their severance practices with ERISA counsel to determine whether an ERISA plan exists and, if necessary, draft a severance plan document.
Key Quote below from X’s motion to dismiss:
The employees’ claim “fails for the simple reason that there is no such thing as a “Twitter Severance Plan.””
X Corp., Musk Defend Severance Suit by Disputing Plan Existence