Reductions in the workforce and involuntary layoffs are common business practices most companies use, no matter what the economic climate is. It means your employer has a sure-fire strategy when it comes to letting people go, and the best practice to handle such moments is a severance agreement.
While the severance agreement seems like an added benefit for the employees, it isn’t! Most employers offer severances to prevent legal issues after terminating a worker, even though the New York Employment law does not require them to offer a severance package.
Has your employer offered you to sign a severance agreement, and you do not know what it is? This article will tell you everything about these agreements and the components of these packages.
We have also explained the role of a severance attorney and why you should appoint one before accepting a severance agreement in New York.
What is a Severance Agreement?
A severance agreement comprises the payment and other benefits that an employer offers to an employer who leaves the company under certain circumstances. You might receive severance pay if you are being terminated or laid off for any reason (which should be legal under the New York employment laws).
This agreement is a release of waiver of liability that the outing worker signs, protecting the company from lawsuits. The most common components of these agreements are outplacement services, compensation, and other benefits in exchange for the worker’s signature.
Who Can Have a Severance Agreement?
As per the law, to get severance pay, an employee must have:
- Worked full-time or part-time with the company
- A regularly scheduled tour of duty
- Served under a qualifying appointment
- Completed at 1 year or 12 months at service
- Opted for voluntary layoff or voluntary severance package (however, they must complete the voluntary period in order to get benefit from the voluntary program)
Note: Employees eligible for immediate annuity payments may not receive the severance package.
Is a Severance Agreement Legally Required?
New York is an at-will state, which means it does not require employers to provide a severance package to their employees mandatorily. Also, the FLSA (Fair Labor Standard Act) does not require employers to provide a severance when employees leave.
However, the contract is legally enforceable if a company mentions severance in the employment agreement. There are certain circumstances when the severance benefits may be legally binding.
Such as when an employer lays off a significant percentage of its employees and in the event when a plant closes. The law also requires employers with more than 100 employees to offer a WARN notice when laying off at least 50 workers at once or from a single site.
In addition, voluntary layoffs also require the employer to offer a voluntary separation package to the employees.
Why Do Employers Offer Severance to their Employees?
There are several reasons employers in New York offer severance to terminated employees, even when it is not a legal obligation. For example, “Apple Inc. has a policy of providing severance to employees terminated for any reason other than misconduct and performance.”
Moreover, employers offer unemployment benefits such as severance pay to prevent terminated employees from leaking proprietary information and avoid lawsuits. Employers with a voluntary layoff policy also provide a financial incentive to their employees.
It is important to note that severance pay is different from termination pay. Employers have the option to offer severance pay, whereas the law requires them to pay termination pay in case of traditional layoff.
What Are the Components of a Severance Agreement?
A severance agreement is a complex legal document that has several components explaining what the employee will receive in exchange for agreeing to the company’s terms of separation.
Typically, these packages offer one to two weeks of paid salary per year worked, the components can largely vary from employer to employer and depend on other factors too.
Below we have explained the components of a typical severance agreement in New York.
Reason for Separation
Most severance agreements outline the reason for separation, helping the employer and the employee reach a satisfying outcome. The agreement may contain details about why the employer has laid off the employee, and once the terminated employee signs the agreement, it protects the employer from any legal challenges.
Timeline
The contract also explains specific details about the employee, such as their date of joining, date of termination, and the deadline the employee gets to accept the severance agreement.
As per New York law, an employee gets 21 days to accept a severance. Furthermore, they get seven days after signing the agreement in case they change their mind. In the event of a mass layoff or when the company fires too many staff members, the employees get around 45-days to accept or reject the severance.
Did your employer offer you a severance with a shorter deadline than what the law states? Contact Levine and Blit to get the severance agreement reviewed and know the next steps you need to take.
Severance Pay
The pay or wage is one of the biggest components of a severance agreement. Typically, these agreements require the employer to pay a certain percentage of the employee’s salary over a certain period of time.
Some employers offer a lump sum amount, whereas some provide it to their employers in the form of regular payments.
In most cases, the severance pay is negotiable, and an attorney can help you negotiate it with your employer.
Health Insurance
Some employers even provide continued health coverage to their employees for up to 18 months from the date of their termination. According to the COBRA (Consolidated Omnibus Budget Reconciliation Act), workers in New York are legally entitled to receiving continued health insurance and medical coverage for a year and a half after their service ends with the employer.
Paid Time Off
As a benefit, payment for unused vacations can also be part of a severance agreement. Some companies cash these unused vacations and sick leaves and provide them to terminated employees.
Career Placement
Some employers in the state also provide career coaching and outplacement assistance to help the employees find a new jobs. This benefit assures the employees that their careers will be stable, while it helps the employer avoid any legal consequences.
Liability Release
After explaining all the benefits, the terminated employee will receive, the outline also comprises a general liability waiver. This is a Release that requires the employers not to pursue or make any legal claims against the employer. This liability release is mentioned in a severance agreement to protect:
- Shareholders
- Other employees
- Directors and CEO of the company
- Affiliated companies
The general liability release clause specifies a few instances in order to protect the employer from litigation from FMLA violations, discrimination, wrongful termination, and civil rights violation.
Once the impacted employee agrees to the severance agreement with a liability release, they cannot sue their employer as per the law.
Stock Options
If your employer has listed stock options in the appointment letter, you are entitled to receive them during your separation from the company. Some employers also offer cash to employees in return for stock options.
Return of Company Equipment
In case the employee has company property, such as laptops and flats, in their possession, the agreement requires the employee to return it to the employer. This component ensures a peaceful transition between the employer and the employee.
Confidentiality Details
This component of a severance agreement limits the proprietary information an employee can disclose to others. Some employers in New York also make the agreement itself confidential, meaning the terminated employees cannot disclose the terms of the agreement after signing it.
Non-disparagement Clause
This clause of the separation agreement prohibits the employee from spreading negative information about the company. If the employee does so, the employer has the right to take legal action against them.
Non-compete Clause
A severance agreement may also contain a non-compete clause that binds the employee from joining their employer’s competitors. However, this clause has an expiration date and is applicable to a certain geographical area only.
Are the Severance Agreements Negotiable?
Yes, some components of a severance agreement are negotiable. You can negotiate these components with your employer with the help of an attorney. Here’s a brief of each element you can negotiate on.
Termination Compensation
There is no rule of thumb for calculating the termination compensation. Hence, an employee can negotiate it with the employer. Hire the best severance agreement lawyers at Levine and Blit to negotiate the termination compensation or payment with your employer.
Benefits
The law does not obligate employers to offer severance pay. However, if the employer still offers a severance, the law requires them to provide continued healthcare insurance to the employees.
If you pay a monthly premium, you may negotiate it with the company to cover the estimated cost while you look for another job.
Paid Vacation Time
PTO or accrued paid time off, including vacation days and sick leaves, is negotiable when signing a severance agreement. There are several employers in New York that offer a PTO policy in the employee handbook.
Liability Waivers
Along with benefits and compensations, severance agreements also include waiver clauses which can be partial or fully negotiable.
Non-disclosure
Employees can negotiate with their employers to receive a certain compensation in exchange for signing the non-disclosure agreement. Either you can demand extra payments or added benefits such as continued health insurance coverage.
With the help of an experienced employment lawyer in New York, you can negotiate these components of a severance agreement. The attorneys will help you improve your negotiation power while telling you about the elements can negotiate according to your job role and duration of employment.
What to Do if Your Employer Offers You a Severance Package?
The last thing any employee would want to receive from their employer is a termination letter. Along with the end of employment, some employees may also receive a severance package. Here’s what to do if your employee offers you a severance agreement.
Don’t React
It’s natural to feel anxious and irritated after your employer sends you a termination letter or severance package. However, it would be great to avoid reacting to it, such as do not lash out at your HR manager.
Ask for Time to Review the Agreement
You get around 21 days to accept a severance package, so ask your manager for some time to review the agreement. Go through everything, such as the reason for your termination, to ensure that it is as per the law.
Hire an Attorney
An employment attorney will help you by reviewing the severance agreement. Sometimes, the termination is a result of harassment, retaliation, or discrimination, which is unlawful activity, and you can file a case with EEOC against your employer.
Decide Whether to Negotiate or Not
If you think that the severance agreement does not offer the benefits you deserve, you can negotiate it with the employer. An attorney will help you with the negotiation, thus, you can claim all the unemployment benefits you should get.
Why is it Important to Hire a Lawyer for Reviewing a Severance Agreement?
Whether your severance package looks lucrative or disappointing, getting it reviewed by a lawyer is essential. The employment attorney will explain to you all the ins and outs of the package you need to know to make an informed choice.
Ensures that a Severance is Necessary
Not all employees need a severance package, and a lawyer will help you determine whether you need it or not. Also, sometimes you don’t need to sign an agreement in order to receive the termination pay.
Your lawyer will help you understand whether signing an agreement is necessary or not.
Calculates the Amount You Deserve
The amount mentioned in the severance agreement might not encompass everything the company owes you. But your attorney can ensure that you receive a reasonable amount for your services to the company.
Protects Your Future Job Opportunities
Some clauses in a severance agreement can bind you and may restrict you from joining the employer’s competitors. The lawyer will review this clause to protect your future job opportunities.
Helps You to Take Legal Action
If the end of your employment results from harassment or discrimination, you can take legal action against the employer for this unlawful behavior. You’ll need an employment attorney to determine if there are enough reasons to stand up a case against the company.
Contact Levine and Blit to Discuss Your Severance Agreement
Getting terminated from the job is an upsetting experience and may tempt you to sign a severance agreement. At crucial times like this, you need to remain objective and get advice from professional severance agreement lawyers at Levine and Blit.
We’ll help you evaluate if you need a severance and if the benefits highlighted in the agreement are something you deserve. When you consult with our lawyers, they’ll explain all your rights and handle all dealings with your employer.
With over 100 years of combined experience and after reviewing numerous severance packages, we understand all tactics employers use to lure employees into these agreements.
Call us at 212-967-3000 for a free case evaluation, and get your severance agreement reviewed by industry-expert attorneys in New York.