Maine: State’s Case Against Employer Precludes Employees’ Suit for Severance Pay

By SHRM Online staff Feb 17, 2015
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A lawsuit filed by the state of Maine against a company for severance pay owed to company employees precludes a separate suit brought by the employees and their union, according to a federal trial court. The court also ruled that the employees’ claims for vacation pay should be heard by a state court.

Verso Paper Corp. and Verso Paper LLC stopped operating its Bucksport, Maine Paper Mill because it planned to sell the mill to AIM Development USA LLC. As part of the sale, Verso bargained with the employees and their unions, including the International Association of Machinists and Aerospace Workers, AFL-CIO, Local Lodge No. 1821 (IAM), as required by their collective bargaining agreements (CBA).

In December 2015, Verso and the IAM reached an agreement that resolved many issues, but not for payment of severance benefits and the equivalent of the vacation time the union members would have received in 2015. A dispute remained about the timing of payments. Verso did not plan to pay severance or accrued 2015 vacation time to its employees before April 1, 2015 based on the terms of the CBAs, which stated the payments were not due until three months after the employees’ last day of employment. The employees argued that state law required severance payments by made within one regular pay period after their last day, so Verso should make the payments by Jan. 8, 2015. As a result, several former or soon to be former mill employees and IAM sued Verso for severance pay and final wages, including accrued 2015 vacation pay, under Maine law. They also filed a motion for attachment and trustee process.

The state through the director of the bureau of labor standards filed a complaint against Verso and a proposed consent order in Kennebec County Superior Court on Dec. 23, 2014. Maine law allows the director to bring an enforcement action in “any court of competent jurisdiction” against an employer to enforce the provisions of the state’s severance pay statute, the trial court explained. The consent decree would allow Verso to pay half the severance by Jan. 8, 2015 and the remainder by March 19, 2015. The company also would have until March 19 to pay employees’ accrued vacation pay. After reviewing the parties’ arguments, the legislative history and the relevant case law, the court dismissed the employees’ claims for severance pay because Maine law precluded them from going forward once the director filed suit in state court against Verso.

The court also dismissed the employee’s claims for vacation pay because a state court rather than a federal court is a better venue for adjudicating that claim.

Machinists v. Verso Paper Corp., D. Maine, No. 1:14-cv-00530 (Jan. 20, 2015).

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