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Liberty Mutual Changes Company Leave of Absence Policy for Employees Already Out on Leave of Absence

Liberty Mutual Insurance Company's Leave of Absence policy was recently changed to provide that "[f]ailure to return from leave...after 24-months may result in termination of employment." As a result, many employees on an approved leave of absence because of medical disability were advised by Liberty Mutual that if they did not return to work by December 31, 2016 they would be terminated. This included long-time employees approved for disability benefits for years by Liberty Mutual, who administers and self-insures its own disability benefit plan. Liberty Mutual previously had a longstanding policy of retaining "disabled employees" and provided access to ongoing health, dental and vision insurance at employee rates for themselves and their families for as long as they remained approved for long-term disability benefits by Liberty.

Liberty Mutual communicated to employees who had been out on an approved leave of absence as of December 31, 2014 that they may be eligible to receive ongoing benefits as a result of the termination of their employment pursuant to "Company Policy and/or applicable plan provision." Liberty explained that under "Special Benefit Provisions," if employees were on an approved leave of absence as of December 31, 2014, and employment was terminated after 24-months of continuous absence (measured from January 1, 2015), a number of special provisions applied that would allow the terminated employees to continue "certain health and welfare coverage."

Liberty Mutual provided information regarding special enrollment occurring in December 2016 to continue "certain health and welfare coverage." Also in December 2016, Liberty began disseminating a Severance Agreement and General Release ("severance agreement") to these same employees. Despite assurances by Liberty Mutual in prior correspondences to disabled employees that they would continue to be eligible for ongoing long-term disability benefits with Liberty Mutual, the severance agreement contrarily contains sweeping language detailing the far-reaching general release of claims by the signing employee. This extensive release spanning over a page and a half specifically includes that the signing employee is releasing all ERISA claims against Liberty Mutual "with respect to...the Liberty Short-Term Disability Plan [and] the Liberty Mutual Long-Term Disability Plan."

Additionally the Agreement includes that the signing employee acknowledges and agrees that his/her last day of employment with Liberty Mutual was December 31, 2016. If the terminated employee is only entitled to receive "certain health and welfare coverage" if their employment was terminated after 24-months of continuous absence measured from January 1, 2015, wouldn't a December 31, 2016 termination date cause the continuous leave of absence to fall one day short?

Further complicating matters, as Liberty Mutual admits in its letters to affected employees, if an employee's disability subject of his/her long-term disability benefits claim commenced on or after January 1, 2007, then long-term disability benefits will be entirely offset by any severance pay received under the Agreement. In other words, any money paid by Liberty Mutual under the severance agreement will reduce the amount Liberty Mutual owes the individual in long-term disability benefits - usually, this would mean that long-term disability benefits would be suspended until the company recoups the full amount in severance benefits paid. In effect then, wouldn't Liberty Mutual pay zero additional dollars in severance pay (or only a very nominal amount if there was a minimum disability benefit authorized in this instance) despite hugely benefiting from an extensive release by a signing employee of any and all claims he/she may have against Liberty Mutual? This assumes that the disability benefit claim would continue at all after an employee signs the severance agreement, given that the broad release includes that the signing employee releases Liberty from all claims for short term or long term disability benefits.

Furthermore, if an employee signs the severance agreement, will he/she be able to continue health, dental and/or vision insurance under the "Special Benefit Provision," or will the employee be dealing with astronomical COBRA rates or no insurance at all?

If you are facing this situation with Liberty Mutual or if your employer as provided you with a severance agreement and you are uncertain of the result of signing the agreement or whether your rights are appropriately protected if you sign, you should consult an attorney knowledgeable in this area. Please contact one of our experienced and skilled attorneys for a free consultation before you sign anything in regard to the severance agreement presented to you.

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