Before You Sign a New York Severance Agreement: Seven Terms Worth Reviewing
By B. Kevin Burke Jr.
A severance agreement can provide income and benefits while you look for your next position. It can also require you to release valuable legal claims and accept obligations that continue long after the payments stop.
The amount offered matters, but it is only part of the decision. Before signing, understand what you will receive, what you will give up, and what the agreement requires of you afterward. These seven areas deserve careful review.
1. What you will receive and when
Start with the payment provisions. Does the agreement promise a lump sum or installments? When is the first payment due? Can payments stop if you accept another job, or if the employer alleges that you breached the agreement?
Separate the severance offer from amounts that may already be owed under your employment agreement, compensation plan, or applicable law. Earned compensation, reimbursable expenses, and contractual benefits deserve their own accounting. A release generally needs additional consideration; simply paying an existing obligation may not be enough.
An offer described as six months of salary should identify the actual gross amount, deductions, payment schedule, and conditions. Clear dates reduce the chance of a dispute after signing.
2. The claims you are releasing
The EEOC’s guide to waivers in severance agreements explains several important limits on employment releases.
The release is often the employer’s principal reason for offering severance. It may cover discrimination, retaliation, breach of contract, and other claims arising from your employment or separation.
Consider the circumstances of your departure before deciding whether the offer is adequate. Were you terminated after reporting misconduct, requesting an accommodation, or taking protected leave? Does the stated reason conflict with your performance reviews? Were contractual termination procedures followed?
Not every right can be waived through a private severance agreement. For example, an agreement cannot prevent you from filing a charge with the EEOC or participating in its proceedings, although a valid release may limit your personal recovery on released claims. Wage claims can require separate analysis.
The agreement should also preserve your ability to enforce its own promises. You should not release the very right to collect the severance being offered.
3. The deadline to sign and any right to revoke
Do not assume every employee receives the same review period.
For employees age 40 or older, a typical severance agreement seeking to release federal age-discrimination claims must satisfy the Older Workers Benefit Protection Act. Generally, that means at least 21 days to consider an individual offer and at least seven days after signing to revoke. Certain group termination or exit-incentive programs require at least 45 days and additional disclosures.
The agreement must also advise the employee in writing to consult an attorney. An employee may voluntarily sign before the review period expires, but the employer cannot improperly pressure the employee to do so.
These rules concern qualifying age-discrimination waivers. Different rules can apply to settlements of already-filed charges or lawsuits, and New York law may impose separate requirements in particular circumstances.
Record the date you receive the offer, the acceptance deadline, and the procedure for delivering any revocation.
4. Health insurance and other benefits
“Continued health insurance” can mean several things. The agreement should explain when active coverage ends, whether continuation coverage is available, who pays the premiums, and when any employer subsidy ends.
Confirm whether dependent coverage is included and whether you must make a separate election. A promise to reimburse premiums is different from a promise to pay them directly.
Review life insurance, disability coverage, retirement benefits, and any other benefits important to your household. Do not rely on a general statement that benefits will continue if the agreement leaves the details unresolved.
5. Bonuses stock awards and deferred compensation
For executives and employees with incentive compensation, the largest financial issue may be outside the severance payment.
Review bonus plans, stock-option agreements, restricted-stock awards, deferred-compensation arrangements, and the underlying employment agreement. Determine whether separation affects vesting, whether an option-exercise deadline applies, and whether the characterization of your departure changes your rights.
Terms such as “for cause,” “resignation,” and “retirement” may carry specific meanings in the governing documents. Ask which awards survive, which are forfeited, and whether the proposed package resolves any disputed entitlement.
6. Restrictions on your next job and what you may say
Check for noncompetition, nonsolicitation, confidentiality, and nondisparagement provisions. The agreement may introduce new restrictions or reaffirm obligations in documents you signed years ago.
Consider how each provision would affect your actual plans. Can you join a competitor, contact former customers, or recruit a colleague? What information must remain confidential? Are truthful communications with government agencies and your attorney protected?
New York General Obligations Law section 5-336 imposes special limits on confidentiality provisions resolving discrimination, harassment, or retaliation claims. Restrictions on disclosing the underlying facts generally must reflect the complainant’s preference and comply with statutory procedures. Certain penalty and forfeiture provisions can also make a release of those claims unenforceable.
Federal labor law can create additional issues for employees covered by the National Labor Relations Act. Restrictions should be reviewed in light of the employee’s role and applicable law.
7. References cooperation and consequences of a dispute
The practical terms can affect your transition as much as the payment amount.
Consider requesting an agreed reference, a designated contact for employment inquiries, and clarity about how the employer will describe your departure. If continued cooperation is required, define its scope, notice requirements, expense reimbursement, and any compensation for substantial time.
Finally, read the enforcement provisions. Does the agreement require arbitration? Who pays attorney’s fees? Can the employer stop payments based on an allegation, or only after an established breach? Are repayment obligations proportionate and legally permissible?
These provisions deserve attention before a disagreement arises.
Review the entire package before deciding
A sound decision requires reviewing the severance agreement together with the documents governing your employment, compensation, and benefits. An offer that appears reasonable at first may look different once equity, unpaid compensation, or future work restrictions are considered.
If you have been offered a severance agreement in New York, I can help you assess the terms and determine whether changes should be requested before you sign. Contact B. Kevin Burke Jr. at Gross Shuman P.C. at (716) 854-4300, extension 292, or kburke@gross-shuman.com.
This article provides general information and is not legal advice. Contacting the firm does not create an attorney-client relationship.