New York is an at-will employment state. This means an employer can fire its employees for any lawful reason or for no reason at all and does not have to give any advance notice. Depending on the circumstances, workers who are terminated or fired (as well as those who resign), may be required to sign a severance agreement. These employment agreements are structured to favor and protect the employer – not the employee.
If your employer has asked you to sign a severance agreement, consult the experienced employment law attorneys at Lipsky Lowe LLP. Our practice is dedicated to protecting the rights of employees through all phases of the employment cycle, from the initial application to termination or resignation. When you become our client, you can count on us to be the strength in your corner.
What is a severance agreement?
A severance agreement is a contract between an employer and employee clarifying each party’s rights and responsibilities in the event of job termination. Severance agreements typically contain provisions that are designed to protect the employer’s interests:
- A non-disclosure clause barring the employee from discussing the reason for his or her termination or any confidential business information
- A non-compete provision barring the employee from, for a certain amount of time, accepting a job with a competitor in the same geographical area
- A non-disparagement agreement requiring the employee not to make negative comments about the employer, including social media posts
Critically, severance agreements almost always require an employee to agree to general release, under which the employee is waiving his or her rights to assert any potential claim against the employer from the beginning of the world (some of the agreements actually say that) to the date the employee signs the agreement. This includes claims you know about or do not know about. It is important to note that employees 40 or older must be allowed 21 days to consider signing a severance agreement, and 7 days to revoke the agreement. In any event, the best decision you can make for your future is to consult Lipsky Lowe before you sign a severance agreement.
What should an employee look for in a severance agreement?
Although employers have an unfair advantage over employees who are being terminated, we will leverage our negotiating skills to make sure your interests are protected. While severance agreements vary from employer to employer, the following provisions must be included:
Federal, New York State, and New York City do not mandate an employer pay severance. Employers pay severance because of 3 factors: if it is pursuant to an employment agreement; for goodwill (i.e., helping the employee bridge the gap to the next job); and to “buy” the general release. The more liability exposure a company fears, the more value it attaches to the general release and will, in turn, pay a larger severance. Our legal team will work to ensure you receive the maximum severance pay you deserve, including any partially or fully accrued paid time off or bonus pay. We will also make sure that any release excludes any of your rights under the law, the severance agreement, or any vested rights in an employee benefit plan, such as retirement benefits.
Under the Consolidated Omnibus Budget Reconciliation Act of 1995 (COBRA), terminated employees are entitled to continue health insurance coverage under the company’s plan for up to 18 months after termination. While the premiums generally must be paid by the employee, it may be possible to have your employer pay the COBRA payments on your behalf for a set period of time or arrange for a lump sum payment.
A key issue that must be addressed in a severance agreement is how the company will respond to any reference checks or recommendation requests from prospective employers. A severance agreement can be structured to include a provision whereby your employer acknowledges that you have performed admirably during your tenure and that the company will provide positive recommendations to any prospective employers. To avoid potential litigation, however, an employer may only confirm that an employee worked at the company and was in good standing.
At the time you were hired, you may have signed an employment agreement specifying that disputes or claims will be resolved through arbitration, and such a provision will likely be included in a severance agreement. While arbitration clauses have generally been upheld by the courts, limited discovery procedures can undermine your ability to make a claim. We will protect your rights by ensuring that arbitration will be conducted in accordance with widely accepted rules and procedures and that the company will pay for any fees, including arbitrator’s fees and filing fees.
Although your employer will look to keep the terms of the severance agreement confidential, we can negotiate for exceptions, such as for disclosures made to family members and your attorneys or any disclosures related to any legal or arbitration proceeding.
While there are other critical components of a severance agreement, the best way to protect your rights to enlist the services of an experienced employment law attorney.
Why You Need A NYC Severance Lawyer To Negotiate
Being terminated from a job is an upsetting experience and employees may be tempted to just sign a severance agreement and move on. At times like this, it is important to remain objective so that you will be on firm footing as you seek a new position. When you consult with us, we will explain all of your rights and handle all dealings with your employer. Our objective is to make you receive a comprehensive severance package and to protect all of your legal rights and employee benefits. Please contact our office today to learn how we can help.