A lawsuit filed last month by three Kalispell Regional Medical Center employees alleges the hospital and its parent company, Northwest Healthcare, illegally cut a severance pay plan that allowed some employees to cash in on unused sick leave.
Sheila Chipman, Ellen Hames and Deborah Wallen filed a complaint in Flathead County District Court in September, alleging Northwest Healthcare broke its employee contract when it eliminated a plan that reimbursed workers with 25-plus years of employment for unused sick hours.
Pending court approval, the complaint could become a class action lawsuit where the three women could be joined by hundreds of other employees.
With over 2,000 employees, Northwest Healthcare is the valley’s largest employer. About 20 of the company’s sub-businesses, such as KRMC, The Summit and several emergency care or specialty clinics throughout the regions, are also listed as defendants in the lawsuit.
“We wanted to make sure to represent all employees who were possibly affected,” Joe Bottomly, a Kalispell attorney representing the plaintiffs, said. “I think others will be interested in joining – you can imagine if your employer just took your benefits that you’d want to fight that, too.”
In a prepared written statement released by Northwest Healthcare, treasurer Bill Freeman said he didn’t believe the company’s actions merited a lawsuit.
“We had begun discussion of some concerns we heard from a few employees about this, so we were surprised and disappointed about the lawsuit,” Freeman said. “We believe, like any business, the hospital has the authority to modify, add to, or discontinue the employee benefits it offers.”
Freeman said Northwest Healthcare adopted its Continued Illness Bank – a plan that allows the company’s employees to accumulate hours that they can then use as paid time off for personal or family illness – several decades ago. The CIB continues to exist, he added.
In 2002, though, the company added a severance pay plan to the benefit, which allowed employees with 25-plus years of employment to cash in those accrued CIB hours when they left the company. That severance pay plan was eliminated in July of this year for employees who hadn’t yet reached the 25-year mark, Freeman said.
Employees who already had 25 years with Northwest Healthcare were grandfathered in and will still receive a severance payment for their unused CIB hours.
“The elimination of the severance pay plan was prompted by current interpretation of accounting rules that would require the hospital to increase its severance pay liability to include all employees, not just those who had reached 25 years of service,” Freeman wrote. “This liability increase would have had a significant detrimental impact on the hospital’s financial position.”
The plaintiffs, however, argue that by unilaterally removing the severance pay plan – which was included in the employee handbook – Northwest Healthcare broke its contract with employees and violated Montana’s wage protection statutes. They are asking the court to find employees have a legal right to the benefit and damages.
Depending on employees’ pay rates and their amount of accumulated sick time, Bottomly estimated that some employees’ payouts could reach $15,000 to $20,000. “It can be significant, depending on the person,” he said.
A hearing to determine if the lawsuit qualifies as a class action hasn’t been scheduled yet. A judge must decide, based on the number of people potentially involved and whether there are similar findings of fact, if the lawsuit should be handled individually or as a group, Bottomly said.