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United Airlines Appears to Stiff Early Retirees

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Was it a “Bait-and-Switch” Scheme to Get Airline Workers to Retire Early?

Chicago, ILCast your mind back to 2020. We were staying at home, fully masked, wearing blue gloves, bleaching our kitchen counters and very worried about people living in congregate settings, like nursing homes. Needless to say, we weren’t flying anywhere. United Airlines, like all other airlines, had a powerful incentive to reduce overhead, including employee costs. Such is the background for this ERISA lawsuit.

In November 2021 Micheal (Susie) Hoffman, a retired flight attendant, filed a class action ERISA lawsuit the Northern District of Illinois alleging that United Airlines reneged on its promise to “upgrade” retiree health benefits if a better plan was rolled out within 36 months of the date workers took early retirement. Hoffman v. United Airlines alleges that the broken promise wrongly denies benefits protected under ERISA.

Hoffman was consolidated with several similar lawsuits. In July, United filed a motion to dismiss the consolidated lawsuit, claiming that the retirees were not eligible to participate in the improved benefit plan. It’s still early days for this lawsuit.

Early Out and the “Message from Oscar”             

In 2017, United instituted an Early Out Retiree Policy (“Early Out policy”) providing that if an Early Out Program was rolled out within 36 months of an employee’s retirement – and that employee met all the participation criteria – the employee would be eligible for any additional benefits offered by the subsequent Early Out Policy.

The company offered a variety of incentives to encourage workers to take voluntary early retirement and unpaid leaves without the option of returning to work. In a nutshell, the message was, “Please go away.”

In early 2020, the company offered a modified version of the 2017 Early Out policy, with the following message from Oscar Munoz, CEO of United.

The relevant part of the “Message from Oscar” reassures workers:

“Many of you have told me that you are holding off on retirement, waiting to see if the company offers another early out. I want to be upfront and transparent with you about our future plans, so you can make the best plans for yourself and your family. So, to give you greater confidence when you do make the decision to retire, I’ve asked to add a new clause to our retirement policy. If something dramatic happens in the industry and we decide to offer an early out within 36 months after you retire, you would be eligible for the financial benefits of the program even after retiring.”

“Upfront’ and “transparent” seem cringe-worthy in retrospect.

The timeline

  • In July 2020, Ms. Hoffman left United under the terms of the Early Out policy.
  • In October, 2020, United notified its employees that it would be ending its Early Out policy as of January 1, 2021, but that the policy would still apply to anyone, like Ms. Hoffman, who retired prior to that date.
  • In January 2021, United adopted a United Airlines Frontline Voluntary Separation Leave (“VSL”) Plan. The VSL Plan offered better benefits than the Early Out policy. These included up to $112,500 in additional pay and a $125,000 contribution to a retiree health account, according to the lawsuit.
  • In February 2021, Ms. Hoffman applied for the additional benefits offered by the VSL Plan. Her application and subsequent appeal were denied because, as United claimed, she was not eligible for the enhanced VSL benefits because she was not an active employee.
  • She brought this ERISA lawsuit in November 2021.

Permanent Leave of Absence or Severance Plan? Retirees Beware        

United asserts, perhaps disingenuously, that neither the Early Out policy nor the VSL Plans are covered by ERISA. Instead, it characterizes these plans as “leaves of absence,” which pay cash benefits in exchange for the individual’s promise not to return to work. The difference between a permanent leave of absence policy that pays benefits and a severance plan that would be covered by ERISA is not immediately obvious.

Retirees can find themselves in a precarious position when it comes to enforcing health care promises made to them in order to encourage them to take early retirement. Hoffman, however, is not like Vollmer v. Xerox Corp., a recent ERISA lawsuit in which the employer unilaterally reduced health care coverage for retirees. She and similarly situated workers remained eligible for benefits under the Early Out Policy because they took retirement before January 2021.

In Hoffman, United appears to have gone back on its promise to offer an upgrade if a better plan became available. The schmoozy “Message from Oscar” could prove troublesome for the airline.


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