Microsoft Layoffs 2025: Understanding Your Rights

In the first half of 2025, Microsoft initiated massive workforce reductions, laying off over 6,000 employees—approximately 3% of its global workforce. Microsoft’s headquarters are in Redmond, Washington, but the layoffs included workers in Atlanta, San Francisco and Mountain View, Washington DC, Maryland, Virgina, New York, Vancouver, and Boston. It also included remote workers nationwide. These layoffs, announced in May, have since been added to in Washington state with hundreds more employees being terminated.

For employees affected by these layoffs, it’s crucial to understand their rights under the Employee Retirement Income Security Act of 1974 (ERISA), especially concerning disability benefits. ERISA provides protections for employees participating in employer-sponsored benefit plans, including the right to appeal denied claims and to file lawsuits for wrongful denial of benefits.  Microsoft employees need to understand that if they can demonstrate they were disabled before their last day of work, they are covered under Microsoft’s short and long term disability plans even if they have already left Microsoft.

The Microsoft Short and Long Term Disability Plans

Microsoft’s short and long term disability plans are both administered by Prudential Insurance Company.  Microsoft pays the benefits for the short term disability, while Prudential pays long term disability. Under the short term disability plan, employees can receive up to 26 weeks of paid leave. The first 8 weeks are paid at 100% of the employee’s base pay.  Weeks 9 to 26 are paid at 75% of base pay. If the employee works in a state like California or Washington that offers paid state disability benefits, you will be required to apply for them, and those benefits will be offset, or deducted, from what Microsoft pays.

The long term disability plan takes over at 26 weeks.  To qualify for benefits under the long term disability (“LTD”) plan, employees must be able to demonstrate that they were disabled throughout the “elimination period,” which is 26 weeks and ties to the 26 weeks of the short term disability  policy. The LTD plan has three levels of coverage, depending on which one the employee selected.  Option 1 provides 40% of the employee’s “monthly earnings;” Option 2 provides 50%, and Option 3 provides 60%.  If the employee chooses Option 1, the maximum monthly benefit is $10,000, for Option 2 it is $12,500, and for Option 3 it is $15,000.  All employees are automatically enrolled in Option 3 unless they choose one of the other options.

“Monthly earnings” is a defined term.  It means the employee’s gross monthly earnings at the time the employee became disabled. It includes base pay, and the average commissions, bonuses, and overtime pay earned over the past 12 months. It does not include “extra compensation.” Courts in the Ninth Circuit have held that where the policy does not define “bonuses” and does not address stock awards or options, such awards or options should properly be considered a bonus and thus included in the monthly earnings.

For the first 24 months of long term disability, the employee has to prove the inability to perform the material and substantial duties of their “own occupation.”  After 24 months the employee must demonstrate the inability to perform the duties of any gainful occupation for which the employee is reasonable fitted by education, training or experience.

The LTD Plan includes limitations of 24 months of coverage for any disability related to Mental Health or Substance Abuse, and any disability based on “self-reported” symptoms that cannot be verified by testing.

What do you need to demonstrate disability, especially if you were working full time at the same time you are claiming disability? You need to demonstrate that your treating physician agrees that you have restrictions and limitations that keep you from performing the materials duties of your own occupation. Under the Microsoft Short and Long Term Disability Plans, you need to demonstrate “regular” treatment by a medical professional for the condition that keeps you from working.

Many people push through disability and try to work anyway because they love their job, or they need the income, or both. Courts understand this and have routinely held that the fact that an employee was working does not bar them from claiming disability at the same time.  Employees can also make claims for disabilities that arose after they learned of the termination of their position but before their last day, if they have medical support.  That includes depression and anxiety, if an employee is diagnosed with and actively treating for such a condition.

The Ninth Circuit and ERISA Disability Insurance Claims 

Prudential routinely denies many disability claims, especially those involving mental health or “self-reported” symptoms such as pain, migraines, or fatigue.  Insureds are required under ERISA to appeal a denial, but after one appeal, there is no further option for reconsideration under the short or long term disability plans. The next step is litigation.  Prudential, like most insurers, is often interested in buying out the value of the insured’s claim at litigation. This enables some insureds to obtain a lump sum settlement.  Prudential looks at the total claim and litigation, including the court where the litigation is filed and the judge assigned, when making determinations about settlement.

While under ERISA an insured can technically bring suit anywhere in the US, Prudential will push back on most suits if there is not a specific connection, arguing successfully that the court should not bear the cost of the litigation without a clear connection. Under ERISA, there are three locations where the insurer cannot dispute the venue of the lawsuit – if it is filed where Prudential is headquartered, if it is filed where the insured lives, or if it is filed where the disability plan is administered.  Microsoft administers the Plans in the Western District of Washington in the Ninth Circuit.  This is arguably one of the most favorable districts in the country for disabled plaintiffs.

Many insurers include language in their disability policies that grant them “discretion” in deciding claims. Courts interpret that language to mean that the court must accept the insurer’s decision unless it is clearly “arbitrary and capricious.” The Microsoft policies include this language.  But discretionary clauses have been banned in Washington state and are not enforceable, and courts have uniformly held in the Western District of Washington that the ban applies to the Microsoft disability policies. That means that the court will consider the claim objectively on its merits, rather than giving Prudential the benefit of the doubt.

Washington state also embraces the doctrine of notice prejudice.  This means that unless the insurer can demonstrate actual prejudice from a late-filed claim, the insurer must accept and consider that claim.  Many states will allow an insurer to deny a claim as late-filed automatically. Where insureds often do not have a diagnosis for medical issues in a timely period and only receive a diagnosis after they leave employment, insurers in many states have been able to avoid responsibility for those diagnoses by pointing to the fact that they were late-filed.  When suit is filed in Washington, the insurer cannot escape its responsibility for the claim even if it is filed late.

What Do You Need to Make a Late-Filed Claim?

For any claim, the support of your treating physician is paramount.  You cannot make a successful disability if your doctor or therapist does not believe that you are disabled.  Your treating physician does not need to be a medical doctor. Under the Plans, you need to be seeing a “legally qualified medical practitioner according to the laws and regulations of the governing jurisdiction.”  Washington recognizes naturopaths and therapists as legally qualified medical practitioners. That practitioner cannot be an immediate relative or spouse. If you are a Microsoft employee who has received notice of termination but are still employed, a claim will not be considered late-filed.  If your doctor agrees that as of your last day of work you had restrictions and limitations, whether mental or physical, that precluded you from performing the material duties of your job, you can apply for disability benefits at Microsoft.

If you are making a claim after you have already left work, you need to demonstrate that you were treating for the symptoms that disabled you on or prior to your last day of work. You do not need to show a diagnosis, but you do need to demonstrate that you were experiencing symptoms of the disability and that you sought treatment for those symptoms, so medical records need to show treatment.  Your treating medical practitioner will also have to be willing to complete paperwork confirming your disability and that it began on or prior to your last day of work.  With that information, Prudential will be required to accept and review your claim even if you last worked at Microsoft months or even years ago.

Obtaining Legal Counsel During the Appeal

Many insureds appeal the denial of their benefits themselves.  The problem with that is, if the appeal is denied and litigation is required, your attorney will not be able to improve your position.  Under ERISA, there is usually no discovery in litigation. A judge rules on the claim, and the judge is limited to the information in the claim file.   That means that the appeal is the insured’s only chance to get all information into the file that would benefit the judge.  This includes declarations under penalty of perjury from witnesses, additional medical records, letters from the treating physicians, independent testing to support the disability, issues with Prudential’s doctors, and medical literature to educate the judge about the insured’s disability and diagnosis.  The appeal isn’t just for Prudential – it is the insured’s one chance to strengthen the file for litigation.

An appeal within 180 days of denial is required.  The insured cannot bring suit if there is no appeal.  As soon as a denial is received, an insured should contact counsel for assistance to give counsel time to perfect your appeal.

Where Monahan Tucker Law has attorneys and offices in Washington, California, Arizona, Oregon, Nevada and Pennsylvania, it can assist Microsoft employees anywhere in the country and if necessary bring suit for its clients in the Western District of Washington, because our attorneys are admitted to the court.  We have deep and broad experience with the Microsoft disability policies and with Prudential, and can help you through this difficult time and stressful process and provide you the strongest tactical advantages in your litigation.

Note: This blog post is for informational purposes only and does not constitute legal advice. Individuals should consult with a qualified attorney for advice specific to their situation.