Severance Agreements in New York

Severance packages are not required under the Fair Labor Standards Act (FLSA). However, most employers throughout the country provide these payments to terminated employees. Because each employer is different, it is important to look at your company’s personnel manual, or policy, on severance packages. Employers who provide severance packages usually have a formula to calculate the benefits based on several factors, such as the employee’s length of employment.

Packages vary and may provide for either a lump sum payment or salary continuation. A lump sum payment is a one-time payment consisting of the full amount of severance pay agreed on between an employee and employer. An employer may choose to continue an employee’s salary, rather than offer a one-time lump sum. For an agreed upon period of time, a terminated employee may remain on the company’s payroll and continue to receive benefits. Health insurance benefits will generally continue under such an agreement.

An employer will present a terminated employee with a severance agreement to review and sign. Because employment in New York is typically on an at-will basis, an employer may terminate an employee with or without cause. Although employers generally can fire an employee at-will, there are several exceptions. An employee may not be fired for unlawful reasons, such as employment discrimination, sexual harassment or retaliation for complaints made. Further, termination may be considered wrongful for any of the following reasons: age (if over 40), gender, race, religion, national origin, sexual orientation, disability, or pregnancy. This list is not exhaustive, however.

If your employment was terminated illegally, you may have the leverage to negotiate a better severance package. While an illegally terminated employee may have greater bargaining power, this power is waived upon employee’s signature of the agreement. A severance agreement may limit your ability to bring any discrimination, retaliation or harassment claims after termination. Employers typically want a severance agreement to include a release of any claims the employee may be able to later bring against the company. Severance packages, thus, offer protection to both the terminated employee and employer. While the severance agreement may restrict your ability to file a lawsuit, it may not restrict your right to file a discrimination charge with the Equal Employment Opportunities Commission (EEOC).

While you do not have to sign the severance package immediately, an employer will generally set a time limit on how long you may wait. If you are over 40 years old, the Old Workers Benefit Protection Act (OWBPA) requires an employer to give you at least 21 days to consider the package. For employees under 40, there is no specific law requiring employers to provide a certain time limit. Consequently, you may only have a few days to consider the offer.

If you believe you have been wrongfully terminated, you should not sign severance agreements in New York until reading them over and consulting with an attorney. Because employers often try to bury terms within these multi-page agreements, it is important to know which rights you are waiving once you sign the agreement. Bargaining power often depends on the strength of the potential claims. An employee who has evidence of workplace harassment may be able to negotiate a better package. Negotiating a better severance package is not limited to the monetary amount provided in the agreement. An employee may ask for an extension of insurance coverage or disability benefits, as well as additional pay.