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Judge Rules for Aon in Fight Over Former Exec's Deferred Pay

Source: Business Insurance

Posted on 24 Mar 2010

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A federal court judge has ruled that Aon Corp. rightfully denied compensation benefits to a former executive who left the Chicago-based brokerage for a competitor and violated the non-compete provision in Aon's deferred compensation plan for highly paid executives.

Former Aon Aviation President Wayne Wignes left the brokerage in 2007 to become vice chairman of JLT Aerospace North America, a division of London-based rival broker Jardine Lloyd Thompson Group P.L.C.

Shortly thereafter, Aon received information that Mr. Wignes was attempting to solicit Aon clients to move to JLT and succeeded in convincing one client to move, court papers say.

Aon President and CEO Greg Case determined that Mr. Wignes had breached the noncompete provision of Aon’s Excess Benefit Plan and the company in February 2008 denied Mr. Wignes’ claim for benefits.

Mr. Wignes requested a review of the decision by the administrative committee of the plan, which rejected his appeal. He then sued Aon in U.S. District Court for the Northern District of Illinois, arguing that the brokerage’s benefit denial violated the Employee Retirement Income Security Act.

Mr. Wignes argued that he is entitled to benefits because the plan constitutes a unilateral contract, giving him a vested right. Specifically, he argued that a 2003 amendment to the plan containing the non-compete provision was unenforceable because his consent was “neither sought nor obtained” and that the fundamental principles of contract law would be violated if Aon were allowed to reduce or terminate his benefits under the plan.

U.S. District Court Judge Ronald A. Guzman disagreed, ruling Friday that Aon’s Excess Benefit Plan committee made an informed judgment to deny him benefits in light of the relevant facts.

Aon’s plan explicitly provides that “(a) member’s right to receive any payments under the (plan), including any remaining payments if distribution…has commenced…shall be forfeited” if that person “during or after employment, in the sole judgment of the chief executive officer of the company, after a reasonable investigation, breached any of the following provisions,” Judge Guzman wrote in his opinion.

“Those provisions include the prohibition on competition, which expressly calls for the forfeiture of benefits,” the judge wrote. Mr. Wignes “did not deny that he engaged in competitive activity after his termination, and in fact, he admitted that he was employed by a competitor.”

“We are delighted that the court upheld our longstanding position that employees can lose supplemental retirement benefits if they leave the firm and then violate their non-compete agreement,” an Aon spokesman said.

Attempts to reach the attorney for Mr. Wignes were unsuccessful.