ERISA-Seventh Circuit Rules That A Release Of Claims Signed By A Former Employee In Exchange For A Severance Package Is Valid And Enforceable

In Hakim v. Accenture United States Pension Plan, No. 11-3438 (7th Cir. 2013), the Court faced the question of whether a release of claims signed by a former employee in exchange for a severance package (the “Release”) is valid and enforceable.

The plaintiff, Omar Hakim (“Hakim”), was an employee of Accenture LLP (the “Company”) for nearly ten years, before being let go as part of a workforce reduction in 2003. During part of his tenure with the Company, he participated in the Company’s pension plan (the “Plan”). In 1996, the Company amended the Plan to exclude a number of employees in various departments. Hakim remained eligible to participate in the Plan when the amendment was adopted, but in 1999 he was promoted to a position in which he was excluded from Plan participation under the 1996 amendment.

Upon his termination from the Company in 2003 when he was 39 years old, Hakim signed the Release, in exchange for separation benefits that waived any and all claims that arose prior to signing the Release. In 2008, while he was employed elsewhere, Hakim sought additional pension benefits from the Plan, arguing that the notice of the 1996 amendment to the Plan (which was emailed to employees) was insufficient and therefore violated ERISA’s notice requirements(in ERISA Section 204(h)). After his claim was denied by the Company, he brought this suit in district court. The district court granted summary judgment in favor of the Company, holding that Hakim knew or should have known about his claim when he signed the Release, and thus waived his claim.

Upon reviewing the case, the Seventh Circuit Court of Appeals (the “Court”) said that it agreed with the district court. The Release purports to cover “any and all claims of any nature whatsoever, known or unknown, which you now have, or at any time may have had” against the Company. Since Hakim knew or should have known about his Section 204(h) claim when he signed the Release, the Release is valid and enforceable. ERISA’s anti-alienation rules does not make the Release invalid, since Hakim’s claim is for additional Plan benefits to which he is not entitled under the Plan’s terms (here additional benefits are sought due to failure to provide proper notice under Section 204(h)). Hakim signed the Release voluntarily and knowingly. Therefore, the Court affirmed the district court’s summary judgment.

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