New York employers may soon face new requirements if offering severance agreements to departing employees. In June, the New York State Legislature passed the “No Severance Ultimatums Act” (S.372A), which would establish minimum notice, consideration, and revocation requirements for certain severance agreements. The legislation is currently awaiting Governor Kathy Hochul’s signature. If signed, the law would take effect immediately.
The legislation is intended to prevent employers from pressuring employees to make immediate decisions about severance agreements and would extend protections that currently apply in certain circumstances under federal law to a broader group of New York employees.
What Would the New Law Require?
If enacted, the law would add a new Section 215-d to the New York Labor Law. The requirements would apply when an employer offers an employee or former employee a severance agreement requiring the employee to release claims that may legally be waived.
Employers would be required to notify employees in writing that:
- They have the right to consult with an attorney regarding the agreement;
- They must be given at least 21 calendar days to consider the agreement;
- They may revoke the agreement within seven calendar days after signing; and
- The agreement will not become effective or enforceable until the seven-day revocation period expires.
Unlike the federal Older Workers Benefit Protection Act (OWBPA), which generally imposes similar requirements on employees age 40 and older who waive age discrimination claims, the proposed New York law would apply regardless of age and more broadly to severance agreements involving the release of waivable claims.
The legislation would not prevent an employee from signing a severance agreement before the full 21-day consideration period expires. An employee could voluntarily sign earlier, provided the decision is not the result of employer pressure, fraud, or misrepresentation.
Employers therefore should pay close attention to how severance offers are communicated. For example, suggesting that an employee will receive less severance or otherwise be disadvantaged for taking the full consideration period would create compliance concerns.
Noncompliant Agreements Would Be Void
The legislation contains a significant enforcement provision: a severance agreement that violates the new requirements would be deemed void and unenforceable. There is a limited exception for certain severance agreements negotiated pursuant to a collective bargaining agreement, provided the agreement specifically acknowledges the provisions of Section 215-d.
What Should Employers Do Now?
Given that the legislation would take effect immediately upon enactment, employers may have little time to revise their existing forms and procedures. Employers that regularly use severance agreements should consider preparing now by:
- Reviewing severance agreement templates to ensure a new version is available that contains the required notices, consideration, and revocation periods.
- Reviewing separation procedures to ensure the timing of the consideration and revocation periods is properly documented.
- Training HR personnel and managers on the prohibition against pressuring employees to sign early or offering different terms as an incentive to do so.
- Reviewing payment procedures to account for the fact that an agreement will not become effective until the seven-day revocation period expires.
Underberg & Kessler’s Labor & Employment attorneys are closely monitoring the legislation and will continue to provide updates as it moves through the legislative process. If you have any questions regarding this article or any Labor or Employment law issue, please contact Ryan T. Biesenbach at (585) 258-2865 or rbiesenbach@underbergkessler.com.
