One issue that frequently arises in the realm of disability benefits is whether an employee can continue to receive disability benefits after being terminated from his or her job. Before diving into the issue of disability benefits after termination, it is first important to understand the difference between a medical leave of absence under the Family Medical Leave Act (“FMLA”) and short-term and long-term disability benefits. The biggest difference is that a leave of absence under the FMLA is unpaid. The FMLA is a federal law, the purpose of which is to protect your job position while you are out of work. Thus, most employees are entitled to up to 12 weeks of unpaid, job-protected leave. Disability benefits are offered through your employer via private insurance policies and are typically paid in the range of 50% to 70% of your monthly earnings. 

What happens to long-term disability if you lose your job?

It is possible to continue receiving disability benefits after your employment has been terminated. If the payments are made by an insurance company, then you will continue to receive benefits. However, if the disability payments are made directly by your employer, then your ongoing payments may be at risk. Whether those employer-paid disability benefits will continue is dependent on the specific terms of your disability plan. Even if an employee is terminated for cause, disability administrators must consider the claimant’s medical status that existed at the time they were fired. In other words, the administrator cannot deny the disability claim simply because the employer terminated the claimant’s employment, unless the disability plan contains express terms to the contrary. 

It is also important to acknowledge an employee’s circumstances leading up to his or her last day worked prior to their disability. Most employees contemplating filing a disability claim cannot simply “up and leave” their job – their main or sole source of income. They will try to fight through their disability until they can no longer do so. Courts have acknowledged this fact. For example, in Rochow v. Life Ins. Co. of N. Am., 482 F.3d 860 (6th Cir. 2007), the United States Court of Appeals for the Sixth Circuit held that disability insurers cannot deny a disability claim solely because the claimant worked after he or she first began experiencing symptoms of the disabling medical condition. 

Does being on disability protect your job?

No, receiving disability benefits does not protect your job. In fact, many employers will terminate a disability claimant’s employment after they have received long-term disability benefits for a certain period of time. Employers do so because they deem it unlikely that the employee will be returning to work at any point in the foreseeable future. Employers also cite a need to fill the employee’s position as justification for terminating an employee who is receiving long-term disability benefits. 

However, there is a significant difference between terminating an employee who has been receiving long-term disability benefits and terminating an employee who intends to seek long-term disability benefits (or other employee benefits). Section 510 of the Employee Retirement Income Security Act of 1974 (“ERISA”) permits an employee to sue their employer if the employer terminated the employee for the purpose of interfering with the employee’s right to benefits. Section 510 also allows employees to file a lawsuit against the employer for retaliating against the employee for the employee’s attempt to access employee benefits (including long-term disability benefits).

Do disability payments continue after termination?

While it is rare, some long-term disability policies do state that employees are ineligible for disability benefits if the employer has terminated their employment for cause. Whether your specific disability policy contains this type of language will determine whether a for-cause termination precludes receipt of long-term disability benefits.

It also bears mentioning that your health insurance coverage will also likely be affected by your termination. Employer-sponsored healthcare benefits typically end upon the final day of the month in which the employee was terminated, unless the employee elects to continue coverage via COBRA. This can cause issues with your ongoing long-term disability claim, as you are still required to provide ongoing proof of disability in order to maintain your disability benefits. Therefore, if financially possible, it is important that you continue to seek medical treatment despite your lack of employer-sponsored healthcare benefits. In addition to COBRA, you may be eligible for discounted health coverage via www.healthcare.gov.

Can you get short-term disability after being fired?

Short-term disability benefits provide income replacement for non-work related injuries or illnesses that render an employee unable to work for a limited period of time. While employers are generally not required to provide short-term disability benefits, many do. The maximum amount of time an employee can receive short-term disability benefits varies based on the governing disability policy – employees can receive benefits for as short as several weeks or as long as one year. If your employment is terminated prior to filing a short-term disability claim, then you may face more resistance getting your claim approved.

Unlike the FMLA, short-term disability benefits do not provide for job protection. Therefore, it is possible to be fired from your job while on a short-term disability leave. This is where the federal Americans with Disabilities Act (“ADA”) can be relevant. The ADA requires that employers with 15 or more employees offer workplace accommodations that would permit the employee to perform their job duties. Some states, including Illinois, require employers with as few as one employee to provide reasonable accommodations. A temporary leave request could qualify as a reasonable accommodation, provided the request does not cause the employer an “undue hardship.” (For a comprehensive list of reasonable accommodations, visit www.askjan.org.) Ultimately, however, if you remain unable to return to work due to your disabling condition, your employment could be terminated. 

If you find yourself in a situation involving disability benefits and a termination of employment, you should not hesitate to reach out to an experienced employee benefits attorney given the complexity surrounding these issues. In many instances, you may still be entitled to benefits despite losing your employment. You may also have a cause of action against your employer if it terminated you to prevent you from accessing your disability benefits.

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Update on ERISA-governed insurance benefit claims:  NACLE

Update on ERISA-governed insurance benefit claims: NACLE

ERISA law is constantly changing; and with each new ruling, the scope and context of how issues relating to disability, life and health benefits are resolved by the courts is constantly evolving.  In June of 2021, Mark DeBofsky recorded a continuing legal education program for the National Academy of Continuing Legal Education (NACLE) providing an update on ERISA-governed insurance claims.