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Can Signing A Severance Agreement With Your Employer Affect Your Disability Benefit Claim?

On Behalf of Disability Insurance Law Group | | Disability Insurance Policies

Signing a severance agreement with your employer can hugely affect your disability benefits claim.  In fact, by signing a severance agreement you can entirely waive your right to pursue your disability benefits claim. Most severance agreements drafted by your employer’s lawyers include broad-reaching language that requires that you agree to release your employer from any and all claims that you may have against your employer in exchange for, and in “consideration” of, the amount of money to be paid you under the severance agreement.

The wording of severance agreements vary greatly, but no matter how broad or specific the language is within the severance agreement presented to you by your employer, the danger exists that in signing the severance agreement you are waiving your rights to your disability benefits claim under a group disability benefit plan provided to you by your employer as a benefit of your employment.

By way of example, the language in the severance agreement that would raise concern may be similar to: “By signing this agreement, you, your agents, assigns, heirs, executors, and administrators, agrees to forever release employer, employer’s parents, affiliates, subsidiaries, predecessors, successors, assigns, attorneys, and any director, officer, agent, trustee, employee, representative, insurer, employee benefit or welfare program or plan, from any and all claims, demands, actions, causes of action, liabilities, damages, known or unknown, which you now have, or claim to have, which arose at any time prior to the date you execute this agreement, including, but not limited to, under any federal, state, local or foreign law dealing with or regulating employment, The Age Discrimination in Employment Act (“ADEA”), The Americans with Disabilities Act, The Rehabilitation Act, The Family and Medical Leave Act, The Civil Rights Act, Employee Retirement Income Security Act (“ERISA”), Equal Pay Act, breach of contract, claims for unlawful discharge, any law related to emotional distress, mental anguish, benefits, wages, hours, discrimination, harassment, or retaliation.”

Such a provision may extend for a much shorter sentence than the above, or a more extensive paragraph, or even an entire page or two of the agreement. There may be additional definitions or provisions contained within the severance agreement or included as an addendum or attachment to the agreement, which could further impact the question of whether you are waiving your rights to pursue your disability benefits claim by signing the agreement.

The language is likely extremely complicated, and the true meaning of the provisions or potential application of the provisions in court may be convoluted and ambiguous. The language may not make clear whether you are specifically waiving your rights to any disability claim under an employee benefit plan, or it may make it very clear that you are waiving your rights. Either way, it is critical to have a skilled attorney review the terms of your severance agreement before you sign the severance agreement.

Does severance pay affect disability benefits?

A skilled attorney can provide you with advice on how to ensure that you do not waive your rights to pursue your disability claim while still proceeding with the severance agreement which will provide you with severance pay that may be a necessity. Once the severance agreement is signed, there is no going back on the language contained therein. We have had occasions where we’ve had to reject handling potential clients’ disability benefits claims because the clients signed a severance agreement with their employer which had the effect of waiving their rights to pursuing their disability benefits claim.

However, at DI law Group, we are also regularly involved in advising clients in regard to necessary revisions to a severance agreement before they sign to avoid a waiver of their rights related to their disability claim, and we work with our client, our client’s employer and attorneys to get this done.

It is critical to point out that there are customarily other standard provisions within the severance agreement which serve to protect the employer from claims by employees who sign a severance agreement but later allege that they did not understand that they were waiving certain rights when the signed the agreement and accepted the severance pay, and thus, that because they did not knowingly waive those rights, the rights should not be waived under the law.

An example might be an employee who signs a severance agreement out of desperation to receive needed severance pay, or who signs the severance agreement without fully reading or understanding the terms because they “just want to be done with it”. By way of example, many times above the signature lines to the agreement is a provision that reads something similar to: “By signing this release, I state that: I have read it; I understand it and know that I am giving up important rights; I agree to all the terms contained within the agreement, I am aware of my right to consult with an attorney before signing it and have had the opportunity to do so; I have consulted with my attorney before singing it; I have signed it knowingly and voluntarily.”

When an employer advises you to consult with an attorney and further requires that by way of your signature to your agreement that you are attesting that you’ve read and understand the agreement, consulted with an attorney, and are knowingly and voluntarily signing the agreement, the effect is to protect the employer from employees later alleging that they did not knowingly waive certain rights or they didn’t understand what they were signing.

Of further significance is that a severance agreement will likely also have a completeness of agreement provision, which includes that the severance agreement sets forth the complete agreement between the parties, and that by signing the agreement, the employee has not relied upon any representations or statements not written into the agreement that were made by the employer with regard to the agreement.

In other words, if something is not written into the agreement, it essentially does not exist in the legal world. It cannot be overemphasized that one word can change the entire meaning of an agreement, and any language included in a severance agreement should be reviewed and drafted by a skilled attorney who understands the language necessary to be included, and who can accurately and adequately advise you of the impact of you signing a severance agreement. The words written into the severance agreement are what govern the agreement at issue and determine what the agreement means under the law.

Although an employer may tell you that no revisions will be made to the severance agreement, and that it is a “take it or leave it” offer of severance pay, it may be possible to negotiate terms (and we’ve regularly negotiated terms of severance agreements for our clients at Disability Insurance Law Group). If handled properly, it is possible for you to proceed with the severance agreement and still retain you right to pursue your disability claim under your group disability benefit plan offered to you as a benefit of your employment by your employer (who you are now releasing from any and every claim under the severance agreement).

It is particularly compelling when an employer includes the language that requires you to attest that you have consulted with an attorney in order to enter into the severance agreement, but then turns around and alleges that the terms of the severance agreement are non-negotiable. A knowledgeable attorney is best equipped to advise you and your employer as to the significance of the inclusion of such language, and the significance of your ability to be involved in the negotiation process surrounding the terms of the severance agreement where such a provision (and other legally significant provisions) are required by the employer in the severance agreement.

It is important to note that this is not the only provision in the severance agreement, and a severance agreement contains many provisions of concern. Nor is the only impact of the provision discussed in this bog a potential waiver of your rights to your disability benefit claim. The focus of this blog entry is a narrow discussion regarding the potential impact of a severance agreement on your disability benefit claim under your employer’s disability benefit plan offered to you as a benefit of your employment.

Contact our attorneys for a disability benefit Claim

If your employer has offered you a severance package or agreement, and you are uncertain whether you will be waiving your rights to pursue your disability claim, please contact one of our skilled attorneys for a free consultation before you sign anything in regard to the severance agreement presented to you.

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