Ten former telephone company employees, most from North Carolina, have filed a class action lawsuit against landline company Embarq Corp. and its former wireless parent, Sprint Nextel Corp., over Embarq's decision this summer to reduce or withdraw some retiree benefits.
The federal lawsuit, filed in Kansas City, Kan., claims Embarq violated federal law protecting retirement benefits and seeks to have those benefits restored. Plaintiff attorneys estimated the class action would cover almost 13,000 former Embarq and Sprint workers.
Spokesmen for Overland Park, Kan.-based Embarq and Reston, Va.-based Sprint didn't immediately return phone calls after the lawsuit was filed.
The 10 plaintiffs, eight in North Carolina and two in Florida, worked for and retired from local telephone companies that were subsidiaries of then-Sprint Corp. Sprint spun off its local division to Embarq last year following its acquisition of Nextel Communications Inc.
In reporting its second-quarter earnings on July 26 of this year, Embarq said it would eliminate medical coverage and Medicare premium subsidies for Medicare-eligible retirees and dependents, effective Jan. 1
It also capped life insurance benefits through company-sponsored plans for qualified retirees to $10,000, effective Jan. 1, and eliminated life insurance coverage for retirees receiving benefits through a subsidiary company plan, effective Sept. 1.
The company said the changes would reduce post-retirement benefit expenses by $20 million for the rest of the year and save the company $30 million a year beginning in 2008.
In the lawsuit, which was filed Friday, the plaintiffs argue that the company violated the Employee Retirement Income Security Act, or ERISA, by unlawfully revoking the long-standing benefit plan.
They also claimed that company officials told employees their benefits were protected for life and encouraged some of them to retire before changes to the plan occurred in 2001.
"If the benefits were not in fact secure from reduction or termination during retirement, then defendant Embarq and its predecessors in interest systematically misrepresented these benefits to plaintiffs and the members of the class," the suit says.
It includes Sprint in those allegations as Sprint was in charge during most of the benefit plan's lifetime.
"There's a legal question of whether you can ever get rid of the duty for benefits," said plaintiff attorney Alan Sandals. "If Embarq either doesn't want to or is incapable of honoring those benefits, Sprint is still liable."
The suit added that four of the plaintiffs have already filed charges of age discrimination against Embarq with the Equal Employment Opportunity Commission and they are still waiting for the agency to either take up their case or give the four the right to file suit themselves.
If the EEOC allows them to sue, they plan to add age discrimination to the class action lawsuit.