Parsons, who was traveling home from practice when he was involved in a three-car collision on Jan. 15, suffered "multiple severe and permanent injuries including a traumatic brain injury, disc herniation, and a torn labrum," according to a statement from law firm Morgan & Morgan obtained by Yahoo Sports' Chris Haynes.
Parsons' attorneys, John Morgan and Nick Panagakis, said the injuries he sustained in the collision - caused by a man who was later arrested for drunk driving - have "potentially (ended) Mr. Parsons' career as a professional athlete."
The Hawks initially announced Parsons had been diagnosed with a concussion and whiplash, without specifically mentioning the disc herniation or torn labrum.
The veteran floor-spacer is in the final season of his current contract - a four-year, $94.4-million pact he signed with the Memphis Grizzlies in 2016. The Grizzlies traded him to the Hawks in July in what was effectively a salary dump.
Parsons has missed significant time throughout his playing career due to basketball-related injuries. He appeared in just five games for the Hawks this season, averaging 2.8 points and 1.4 rebounds in just under 11 minutes per appearance.
The 31-year-old established himself as a strong supporting contributor on winning basketball teams during a four-season span split between the Houston Rockets and Dallas Mavericks. From 2012-16, he averaged 15.4 points, 5.1 rebounds, 3.2 assists, and one steal per night while shooting 38.5% from beyond the 3-point arc.