What You Need to Know About Severance Agreements

New York law does not require employers to offer severance packages to terminated employees unless there has been a promise to do so or the employment contract specifies that severance is payable when the employment relationship ends. Nonetheless, many employers offer severance pay as a goodwill gesture and to provide the worker with a financial buffer while they look for another job.

What Is Included in Severance Agreements?

Every employer is different, but those who offer severance packages typically use a formula to calculate benefits. Depending on the company, this formula may include the employee’s position in the company and length of employment. The amount owing may be paid in a lump sum or temporary continuation of salary. The terminated employee may also continue to receive health insurance benefits for a specified period of time.

Practically all severance agreements require the terminated employee to waive any potential claims against the company. While signing it may restrict their ability to sue the company, it may not affect their right to file a discrimination complaint with the Equal Employment Opportunities Commission.

While employees do not have to sign the severance package right away, there is no law requiring a company to provide a certain time limit for workers under 40. For those over 40, the Older Workers Benefit Protection Act mandates that an employer give them at least 21 days to consider the agreement.

Involuntary Severance Pay: Is It Possible?

Even in cases where severance pay is not a company policy, employers can find themselves in a situation where they can, via their statements or actions, inadvertently agree to pay severance to a terminated employee. Examples include:

  • An oral commitment made to the employee
  • A regular practice of providing severance packages to employees terminated under similar conditions

These practices can obligate an employer to provide severance lest they be accused of backing out on a verbal agreement or showing favoritism. In New York, it is a misdemeanor to not provide a severance package after committing to do so, and an employer who is found guilty of willfully and wrongfully refusing to pay could be ordered to:

  • Pay the severance and liquidated damages
  • Cover the employee’s reasonable attorney fees

Contact an Employment Law Attorney

A fair severance agreement can enable employer and employee to separate on good terms and give the latter what they need to move forward. If you are a New York employer, an employment law attorney at Rosen Law, LLC can draft an agreement that may eliminate accusations of unfair or illegal treatment. We also help employees contest agreements that are not fair or consistent with company policy. To schedule a consultation, please contact our office.

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