A company agreed to pay a bonus to employees who worked until the completion of a construction project. The plaintiffs quit before the project ended, but nevertheless sued their former employer in Louisiana State Court, seeking the 5% bonus for the period they worked, pursuant to the Louisiana Wage Payment Act.

The company removed the case to Federal Court on the ground that the Project Completion Incentive Plan is governed by ERISA, which pre-empts the Louisiana statute.

Plaintiffs never filed a motion to remand, but argued that the “Plan” is not governed by ERISA because it does not involve an ongoing administrative scheme. The district court disagreed, concluding that the incentive program was an ERISA plan because it required ongoing discretion and administration in determining whether a qualifying termination took place.

The U.S. Fifth Circuit reversed.

“ERISA governs only for a severance plan that requires an ongoing administrative program. The complex administrative activities typical of such a plan may include determining the eligibility of claimants, calculating benefit levels, making disbursements, monitoring the availability of fund for benefit payments, and keeping appropriate records in order to comply with applicable reporting requirements. Looking at the Project Completion Incentive Plan based on the record before us, we do not see the ongoing administrative scheme characteristic of an ERISA plan. That big-picture assessment can also be seen by considering various factors we have used to determine whether a severance payment rises to the level of an ERISA plan.  First, the Plan calls for only a single payment….  Also distancing the Plan from ERISA is the simplicity of calculating the one-time payment….  That brings us to the issue of discretion, which is primarily why the district court concluded ERISA governed. ERISA plans typically require plan administrators to make ongoing discretionary decisions based on subjective criteria.”

In this particular case, however, “determining whether an employee was transferred does not seem to require a significant degree of discretion. And while the classification of a layoff may entail some exercise of judgment, it is less subjective to determine whether the company was undergoing a reduction in force than to assign the cause of a particular employee’s departure. As even the latter may not always entail more than a modicum of discretion, the reduction-in-force determination alone is not sufficient to turn a severance agreement into an ERISA plan. What is more, some eligibility determinations under the Plan will be clear as day. It is for these Plaintiffs, who concede that they are not eligible because they quit before construction had ended. No discretion is required to determine that.”


Atkins v. CB&I, No.20-30004, 2021 WL 1085807 (5th Cir. March 22, 2021).