NEW YORK, NOV. 11 -- The year was 1980, and Bonnie Busby, who had put in 17 years on a Continental Can assembly line in St. Louis, was a few months from becoming vested in a union-negotiated pension plan.
Busby, 50, said when the company laid her off in November that year, she was assured the layoff was temporary. She said company officials for the next five years repeatedly told her she was likely to be rehired soon. Meanwhile, as the recall failed to materialize -- she was never officially terminated -- her standard of living collapsed.
She was able to find only temporary, minimum-wage jobs, paying much less than the $7.50 an hour and full benefits she had received at Continental Can. For three months she was on welfare, and she had to move out of her St. Louis house and into a trailer.
Continental Can told her she was being laid off because of a decline in business. But documents subpoenaed by lawyers for more than 2,500 Continental employees laid off at plants nationwide show the company's management had adopted a secret plan to systematically lay off workers permanently to prevent them from becoming vested in pension plans, in violation of federal law. Additionally, the lawyers allege, many of the workers were never told their layoffs were permanent. (Under the pension plan, vested employees are entitled to benefits if placed on long-term layoff.)
A class-action lawsuit brought on behalf of workers at 46 Continental plants is due to go to trial in federal court in Newark on Jan. 10. Legal experts said earlier court rulings in this case and in two smaller, related cases indicate Continental may face a major liability judgment, potentially in the hundreds of millions of dollars. Robert Plotkin, one of the lead attorneys for the laid-off workers, said the damages could come to more than $500 million.
Edwin C. Thomas, a Chicago lawyer representing Continental Can, said earlier court rulings had established that the company's plan violated the federal pension law, known as the Employee Retirement Income Security Act, or ERISA. The only remaining dispute in a trial before U.S. District Judge H. Lee Sarokin is how many employees were affected by the illegal plan and how much back pay, lost benefits and other damages they are owed.
Documents obtained from Continental during pretrial proceedings established that, as business turned bad for the company in the late 1970s, its management adopted a secret, computerized plan to prevent employees from becoming vested in the pensions by laying them off before they became eligible. In some cases, entire plants were shut down to prevent significant numbers of employees from qualifying, the suit claims.
ERISA specifically prohibits employers from taking any action against workers for the purpose of interfering with their pension plan rights.
The secret plan came to light mainly because Daniel McIntyre, a lawyer then with the steelworkers union in Pittsburgh, became suspicious about an unusual pattern of layoffs at Continental's Pittsburgh plant. The union filed suit on behalf of workers at that plant, and pretrial depositions and subpoenaed documents in that case turned up "all these smoking guns," according to William T. Payne, a steelworkers lawyer.
The bigger class-action lawsuit was later filed on behalf of workers at most of Continental's other plants. Management documents cited in the nationwide case state that the purpose of the "capping" plan was to lay off workers who were within a few years of vesting, while retaining the vast majority of those who had become vested and would have to be paid pensions and other benefits if they were laid off.
In the Pittsburgh case, the federal court of appeals in Philadelphia ruled in February 1987 that the secret pension "liability avoidance" program clearly violated ERISA. In that case, the appellate judges said that if the Continental plan to avoid paying the pensions doesn't violate ERISA, "We are hard pressed to imagine a set of facts that would."
When Continental tried unsuccessfully to get the Supreme Court to review that ruling, the U.S. solicitor general, who argues the federal government's position in Supreme Court cases, agreed Continental had violated the law. That case has been sent back to federal district court to determine how much Continental must pay the Pittsburgh workers.
A similar case in Los Angeles involving a Continental Can plant in East Los Angeles also went against the company, which agreed last year to pay a settlement of $7.5 million to laid-off workers.
Continental Can is now a unit of Omaha-based Peter Kiewit Son's Inc., a closely held construction, mining and packaging concern that acquired the beverage can manufacturer in 1984. An in-house lawyer for Kiewit referred questions on the case to Thomas.
Laurence Gold, general counsel to the AFL-CIO in Washington, said the Continental case comes at a time of heightened concern nationwide about the safety of pension plans, mainly because of the wave of corporate takeovers and leveraged buyouts.
But Gold and other labor lawyers said the Continental case appears to be unique. Payne, an assistant general counsel for the steelworkers union, said "We haven't come across any other company that has done this."