Split 2nd Circuit Panel Rejects Ex-Disney Worker’s Bid for Severance

A split panel of the Second Circuit Court of Appeals has ruled that the Walt Disney Co. does not owe severance pay to a terminated former worker after she became unable to work following a stroke. The court found that since Nancy Soto’s termination did not fall within the definition of a “layoff,” Disney did not violate ERISA when it denied her a severance payment. 

As a result, the U.S. Court of Appeals for the Second Circuit affirmed the district court’s dismissal of Soto v. Disney Severance Pay Plan et al., case number 20-4081. 

Disney terminated Soto’s employment after a stroke that left her unable to perform her job. Soto consequently filed a claim for severance pay under her employee benefits plan. Disney denied that claim, stating that her termination of employment did not qualify as a layoff within the meaning of the plan that would make her eligible for severance pay. Soto then sued Disney in May 2019, seeking a $44,000 severance payout and reformation of the severance plan language to meet the requirements of ERISA. 

The judge ruled that Disney’s severance plan did not define the term “involuntary termination of employment, leaving it up to the plan administrator to determine whether that term included a termination based on an inability to work due to disability. The court ruled that the administrator’s determination – that the term did not include disability-based termination – was reasonable and that the administrator did not act arbitrarily in denying Soto severance pay. 

Judge Richard J. Sullivan disagreed with the majority of the panel, finding that “involuntary termination of employment” clearly included all employment terminations for nonperformance-related reasons, including disability. Sullivan reasoned Soto should have received severance pay. 

All three members of the Second Circuit panel agreed that Soto’s reformation claim failed because she did not designate which terms of the severance plan were violative of ERISA or which provisions of ERISA they violated. Her claim also did not identify which terms of the severance plan Disney should reform.

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