Justices clear up issue in pension-linked firings

December 04, 1990|By Lyle Denniston | Lyle Denniston,Washington Bureau of The Sun

WASHINGTON -- The Supreme Court, clarifying a key issue on workers' rights, ruled unanimously that federal law bars companies from firing workers as a way of avoiding payment of pension benefits or contributing to pension funds.

In its ruling, the court declared that federal law provides the only available protection over such cases and that states therefore may not allow workers to sue under state law in hopes of getting more protection.

A 1974 federal law seeking to protect pension rights has taken over the whole field, the court said in an opinion written by Justice Sandra Day O'Connor.

Before yesterday's ruling, it was unclear whether federal law prohibited the firing of employees to avoid pension payouts, and whether federal law pre-empted state law in lawsuits involving such allegations.

Some workers had sued under state law on the theory that they could get more in damages that way than by relying on the federal law. Damages sought included monetary compensation that did not seem to be available under federal law.

But, in a key part of yesterday's ruling, the justices indicated that workers could rely solely on federal law, since federal courts handling their complaints would have as much power as state courts would.

The ruling came in the case of Perry McClendon of Dallas, a construction-equipment salesman for Ingersoll-Rand Co. who was fired in 1982. The company said it fired him because it was reducing its sales staff, but he argued that the real reason was that he was then about to become vested in the pension plan and was fired to prevent that.

Mr. McClendon sought to recover wages he lost by being fired, plus damages for his discharge.

Justice O'Connor wrote: "It is clear that the relief requested here is well within the power of federal courts to provide."

There was no elaboration of that conclusion, but it appeared to mean that the Texas worker, and others like him, could ask federal courts not only to restore lost pension benefits but also to award damages and other legal protection following illegal firings to avoid pension obligations.

Ingersoll-Rand actually had given Mr. McClendon enough work credit to protect his vesting. But he went ahead with his lawsuit under state law anyway, seeking lost wages and damage payments for the illegal firing. The Texas Supreme Court ruled that he could press those claims in state court. That was the result set aside by yesterday's Supreme Court ruling, in the case of Ingersoll-Rand vs. McClendon (No. 89-1298).

In another action yesterday, the Supreme Court agreed to decide later in the current term whether stockholders or mutual fund investors who wish to sue on behalf of the company or fund for wrongdoing would first have to demand that company or fund directors take action. A lower court said they would have to make that demand in the case of Kamen vs. Kemper Financial Services (No. 90-516).

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