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Severance/Employment Agreements Archives

Prudential Denies Disability Benefits based on Severance Agreement

The case Thomas v. The Prudential Insurance Company of America, 2018 WL 211 118020, US Dist. Ct. E.D. Pennsylvania, is a reminder of how important it is to understand the implication and consequences of all terms in a severance agreement. When drafting a severance agreement to be signed by a departing employee, employers include broad language designed to protect them as well as their agents, affiliates, fiduciaries, etc. from any future claims or liabilities, whether known or unknown. The result is that by signing the agreement and taking the severance payment, an employee may forever waive their right to legitimate claims or benefits which arose prior to their termination date.

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 "[failure 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.

The Effect of a Severance or Employment Agreement on a Disability or ERISA Benefit Claim

In cases where an employee has a serious illness or injury that will likely prevent them from returning to work for many months or longer, their employer may ask them to sign an employment/settlement agreement and/or severance agreement in exchange for additional compensation or pursuant to company policy. Incorporated into these agreements is usually a general release, which forces the employee to waive their right to any and all potential claims. These agreements, particularly the language contained in the general release, often create a dilemma for the employee: execute the agreement and relinquish potential valuable claims or surrender a valuable severance or settlement with the employer. Accordingly, it is in the employee's best interest to carefully scrutinize the agreement and the general release and seek the assistance of an attorney. In fact, most agreements include language advising and encouraging the employee to seek legal counsel; such language is for the benefit of the employer as well as the employee. In instances where the agreement/release requires the employee to seek legal advice, employers may agree to cover the cost of the employee's legal fees or at least provide a lump sum amount to be used towards legal fees.

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