High Court to Rule on Suit Claiming Man Was Fired to Avoid Pension Payouts

The Supreme Court today agreed to decide whether workers can sue in state courts when they allege their employers fired them to avoid paying pension benefits.

With millions of dollars at stake, the court said it will use a Texas case to decide whether such state lawsuits are precluded by a federal law protecting pension benefits.

The court is expected to rule sometime in 1991.

The justices agreed to hear an appeal by Ingersoll-Rand Co., which was sued by fired sales representative Perry McClendon.

McClendon was transferred by the company from San Antonio to Dallas in 1979 to develop a sales market there for the company’s construction equipment. He was fired Nov. 19, 1982, four months before his 10th anniversary with the firm.

A worker with 10 years’ experience is entitled to have his pension vested, meaning the employer must contribute to the employee’s retirement benefits.

McClendon sued in state court in Texas, accusing Ingersoll-Rand of firing him to avoid paying pension benefits. The company said it dismissed him to reduce its work force and save money.

The federal Employee Retirement Income Security Act of 1974 protects workers’ pension rights.

But McClendon did not sue in Texas courts for lost pension benefits. In fact, shortly after he sued, the company agreed to vest his pension. McClendon sought a potentially big-money judgment for lost future wages, mental anguish and punitive damages.

The Texas Supreme Court last October overruled lower state courts and revived the lawsuit, ordering a trial.

Many states accept the principle that an employer’s ability to fire a worker at will is limited by public policy, the state court said. For example, the state court said, workers can claim that they were fired illegally because of sex, race or age discrimination or for exercising their collective-bargaining rights.

“We hold that public policy favors the protection of integrity in pension plans and requires in this case an exception to the employment-at-will doctrine,” the state court said.

McClendon is entitled to damages if he can prove he was fired because Ingersoll-Rand wanted to avoid paying pension benefits, the state court said.

The U.S. Chamber of Commerce and other business groups urged the U.S. Supreme Court to overrule the Texas court and hold that the federal pension law preempts such lawsuits.

The Chamber of Commerce said lawsuits by fired workers against their former companies have already mushroomed.