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Hamilton v. Air Jamaica

argued: April 15, 1991.

HAMILTON, ROBERT L., APPELLEE
v.
AIR JAMAICA, LTD., APPELLANT



On Appeal from the United States District Court for the Eastern District of Pennsylvania; D.C. Civil Action No. 89-06133.

Stapleton, Greenberg, and Higginbotham, Circuit Judges.

Author: Stapleton

Opinion OF THE COURT

STAPLETON, Circuit Judge

Air Jamaica, Ltd. appeals from a judgment in favor of its former employee, Robert Hamilton, for additional severance pay in accordance with the terms printed in Air Jamaica's employee handbook ("the Handbook"). This case requires us to determine whether the Handbook is an ERISA plan and, if so, whether Air Jamaica's reservation of the right to determine non-pension employee benefits at the time they accrue is consistent with ERISA. We conclude that the Handbook is an ERISA plan and hold that Air Jamaica's reservation of the right to determine benefits as they accrue is consistent with ERISA and precludes Hamilton's claim. Accordingly, we will reverse the judgment for Hamilton.

I.

Hamilton was employed by Air Jamaica as an account executive in Philadelphia since 1976. In early March 1989, Hamilton received the employee handbook, which in addition to setting forth certain benefits contained the following provision:

Although it is our present intention to continue these pay practices, employment policies and benefits, we reserve the right, whether in an individual case or more generally, to alter, reduce or eliminate any pay practice, policy or benefit, in whole or in part, without notice. Moreover, personnel actions taken or decisions made will not necessarily be reversed or modified if these policies or procedures are not followed.

Appendix at 107.

In a letter dated May 25, 1989, Hamilton received notice that his employment with Air Jamaica would be terminated effective May 31, 1989 as part of a corporate reorganization. The termination letter also outlined the severance benefits to which Hamilton would be entitled. The benefits outlined in the letter, and the benefits which Hamilton actually received, were substantially lower than those outlined in the employee handbook Hamilton was given in March of 1989.*fn1 According to Air Jamaica, the benefits scheduled for payment to Hamilton, as they were outlined in the termination letter, reflected their actual severance policy which had been in practice for a number of years. Air Jamaica also asserted that "all other employees terminated . . . before, after, and contemporaneously with Hamilton's termination, received severance pay in accordance with [the] actual policy. . . ." Brief for Appellant at 7. Air Jamaica contends that the incorrect policy outlined in the employee handbook was due to a printer's error. Air Jamaica corrected the handbook error in writing on May 30, 1989, one day before Hamilton's actual termination, when Vice President of Administration, Campbell Barrow, sent a memorandum to all employees setting forth the "actual" severance policy.

Upon his termination, Hamilton filed suit in district court seeking severance pay in accordance with the written policy in the handbook. The district court held that, although the severance policy printed in the manual appeared to be a printer's error, under the Employee Retirement Income Security Act of 1974, § 402(b)(3), 29 U.S.C.A. § 1102(b)(3) ("ERISA") the employer was bound by that policy. Hamilton v. Air Jamaica, Ltd., 750 F. Supp. 1259, 1267 (E.D. Pa. 1990). It held that a written plan must control over an unwritten plan and therefore concluded that the terms set forth in the Handbook were Air Jamaica's severance plan under ERISA.

The district court then considered whether Air Jamaica's reservation of the right to determine benefits on a case by case basis barred Hamilton's claim, but held that giving full effect to such a provision would be inconsistent with ERISA. The court further held that Air Jamaica, through the same explicit reservation, had reserved its right to amend the plan. Nevertheless, the court concluded that the amendment here -- one day before Hamilton stopped working -- was untimely and that recognizing it would frustrate ERISA's policy of protecting employees' legitimate expectations. The district court therefore entered judgment for Hamilton on his claim for severance pay under ERISA.*fn2

This court has jurisdiction over the final judgment of the district court pursuant to 28 U.S.C. § 1291. The district court had jurisdiction over the ERISA claims under 28 U.S.C. § 1331 and 29 U.S.C. § 1132(f) and had pendent jurisdiction over the state law claims. The proper application of ERISA to ...


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