Disney can deny severance pay to manager who suffered stroke - 2nd Circ.

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Toy figures of people are seen in front of the displayed Disney + logo, in this illustration taken January 20, 2022. REUTERS/Dado Ruvic/Illustration

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  • Termination based on inability to work not a ‘layoff,’ majority says
  • Dissent accuses Disney of ‘Scrooge & Marley’ behavior

(Reuters) - A longtime Disney employee who was unable to return to work after a stroke was not entitled to a $44,000 severance payment because her termination was not a “layoff,” a divided federal appeals court held Wednesday.

In a 2-1 split, the 2nd U.S. Circuit Court of Appeals affirmed a federal judge in Manhattan’s ruling against Nancy Soto, who received sick pay and short- and long-term disability benefits for more than a year but was denied severance pay after Disney ended her employment in 2018.

The Disney Severance Pay Plan gave the plan administrator full discretion to interpret ambiguous terms, and the administrator “reasonably interpreted ‘Layoff’ to exclude a termination based on disability,” Circuit Judge Susan Carney wrote. She was joined by Circuit Judge Joseph Bianco.

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Circuit Judge Richard Sullivan dissented, saying the administrator’s decision flouted both the “straightforward” language and the purpose of the plan. That might be expected “from the firm of Scrooge & Marley, but not from a company that proudly, and accurately, touts its ‘ongoing commitment to people with disabilities’,” Sullivan wrote.

Disney and its lawyers at Covington & Burling did not immediately respond to requests for comment late Wednesday.

Soto was represented by David Preminger of Keller Rohrback, who also had no immediate response.

According to the complaint Preminger filed for Soto in 2019, she had started working at Marvel Entertainment in 1995 and stayed with Disney after it acquired the company in 2009. She was working in management when she fell ill in 2016, and was let go in January 2018.

Soto claimed she was eligible for the Disney Severance Pay Plan - an employment benefit governed by the Employee Retirement Income Security Act – because it defined a layoff as “an involuntary termination of employment” that was unrelated to “poor performance or misconduct.” The only other limit was that the termination must qualify as a “separation of service,” rather than a temporary leave, under federal tax law.

U.S. District Judge Alison Nathan dismissed her lawsuit in November 2020, finding Soto never established she was eligible for the plan.

On Wednesday, the majority said the plan’s definition was ambiguous because an “involuntary termination” could have two meanings: either the employee was willing to work, or the employee was willing and able to work.

The plan administrator reasonably adopted the “willing and able” definition because that is how a federal tax regulation defined involuntary termination, the majority concluded.

The case is Nancy J. Soto v. Disney Severance Pay Plan et al., 2nd U.S. Circuit Court of Appeals No. 20-4081.

For Soto: David Preminger of Keller Rohrback

For Disney Severance Pay Plan et al: Shailee Diwanji Sharma, Robert Newman, and Andrew Ruffino of Covington & Burling

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