In Re Susanne Calvello
New York State Nurses Association
April 25, 2014
DECISION AND AWARD
Cohen Weiss & Simon LLP
By Thomas N. Ciantra, Esq. Attorney for New York State Nurses Association
330 West 42nd Street New York, New York 10036-6979
Advocates for Justice, Chartered Attorneys
By Arthur Z. Schwartz
225 Broadway Suite 1902 New York, New York 10007
Mark E. Brossman, Esq.
In connection with the separation of Susanne Calvello (“Calvello”) from her position as Senior Associate Director of the Economic and General Welfare Program with the New York State Nurses Association (“NYSNA”), the parties entered into a Severance Agreement, Waiver and General Release dated February 29, 2012 (the “Severance Agreement”). Joint Exhibit 1. The Severance Agreement provided the following economic benefits:
Calvello remained employed until May 9, 2012 (the date on which all approved accrued vacation leave, sick leave and other accrued paid leave time was exhausted). During this period she received all employee benefits including health and pension benefits. At the end of the period she was voluntarily separated from employment (the “Separation Date”).
Beginning on May 10, 20 I2, Calvello received six (6) months pay with all related benefits.
Immediately following the above six months pay, Calvello received an additional three (3) months severance pay (in addition to any severance pay due under NYSNA’s existing policy). The Severance Agreement specifically states: “Employee’s pension credit will continue to accrue during this period, and she will be able to make 401(k) contributions and repay 401(k) loans, if any, during this period.” (Emphasis added). NYSNA paid the full cost of Calvello’s health, dental and vision insurance premium, and life insurance and short-term disability insurance through the three (3) month period referenced above.
In return for the above consideration Calvello released NYSNA from all claims. The negotiations history provide additional support for the above language that “[b]enefits would be through the end of the month her 9 mos. of severance runs out.” See Employee Exhibit 8 and 13.
Thereafter it was determined that pension credit could not continue to accrue during the nine month period of pay following the Separation Date pursuant to ERISA and the terms of the Pension Plan. It was similarly determined that Calvello could not make 401(k) contributions during this period. Testimony of Judith A. Flory, Esq., Counsel to the NYSNA Employees’ Pension Plan (the “Plan”).
Calvello brought this arbitration pursuant to paragraph 24 of the Severance Agreement. The parties mutually selected the undersigned to hear the case.
Position of the Parties
Calvello argues that the clear language of the Severance Agreement requires payment to her. The value of the additional service under the Plan contemplated by the Severance Agreement is calculated at $323.94 per month or a present value at 2/28/13 of $38,776, and 401(k) deferrals with interest to 5/9/13 in the amount of $12,622.54. See Employee Exhibit 2.
NYSNA argues that paragraph 19 of the Severance Agreement provides that if any provision is “invalid or unenforceable” the remainder of provisions shall not be affected without regard to the invalid portions. Since under the terms of the plans and applicable law severance pay cannot be considered compensation, Calvello cannot receive pension credit during the severance period or make 401(k) contributions from the severance amounts.
It is undisputed that in the negotiation of the terms of the Severance Agreement the parties agreed that Calvello’s pension credit would continue to accrue during the nine (9) month severance period, and it was agreed that she would be able to make 401(k) contributions. It is also undisputed that if she accrued additional pension credit based on her severance pay during the nine (9) month period, her pension benefit would have increased by the amount of $323.94 a month. As Arthur Schwartz, Esq. stated in his submission:
“The parties clearly intended that Ms. Calvello have this important benefit a pensionable severance payment. There is no question that this was a material and a fundamental part of the contract. Just because the pension benefit cannot be achieved through the pension plan does not make it impossible to achieve what the parties sought to achieve, particularly since the parties agreed that the benefits exceeded those which might be received “under the normal operations of the Employer’s benefit plans.” The proposal made by Plaintiff, to pay her the present value of the lost benefit, addresses the agreed-upon term and gets it paid out, even though the payment will not come through the Pension Plan. ”
NYSNA’s contrary position was clearly stated by Thomas N. Ciantra, Esq. as follows:
“In negotiating the Severance Agreement, the parties contemplated that Calvello’s “pension credit [would] continue to accrue” during the severance period and that she would be able to make 401(k) contributions from those amounts. Joint Exhibit 1 Paragraph 3. They were mistaken: Calvello could not accrue pension credit on the severance payable under the Severance Agreement because it is not compensation within the meaning of the Pension Plan or the law. Nor could she contribute a portion of her severance pay to the 401(k) plan since severance pay is not compensation under that plan… Performance of the Severance Agreement is impossible because the severance benefits are not compensation under either of the plans’ terms or the law and, as a result, Calvello may not receive credit for such compensation under the Pension Plan and may not make contributions on such severance pay to the 401 (k) Plan.
The Severance Agreement did not provide for this contingency.
NYSNA certainly did not agree to pay Calvello any additional compensation in the event the severance payments were determined not to be compensation that would support credit under the Pension Plan or amounts that could be contributed to the 401(k) Plan. Calvello, had, of course, proposed this provision and, if anything, she assumed the risk that the Plans – which were not party to the agreement – might conclude otherwise. NYSNA should not be required to, in effect, insure Calvello against loss with respect to a term she negotiated.”
I find that NYSNA agreed to provide consideration to Calvello in exchange for her Release which included additional pension accruals which would result in an increased pension benefit. Since the agreement to provide such accruals cannot be accomplished due to ERISA and the terms of the Plan, I find that NYSNA shall be required to make good on its promise as set forth in the Severance Agreement. I reject the argument that it is “impossible” to fulfill the contract’s requirement. Although Calvello cannot receive pension credit during the severance period, I hereby require NYSNA to pay Calvello $323.94 per month, which will make her whole under the Severance Agreement for the amount she would have received under the NYSNA Employees’ Pension Plan. I do not, however, grant any additional payment to Calvello for her inability to make 401(k) contributions from the severance pay, as this calculation strikes me as speculative and Ms. Calvello in fact received all direct severance pay under the Severance Agreement.
April 25, 2014
Mark E. Brossman, Arbitrator