New York: Proposed protections for employees offered severance agreements

At a glance

• New York legislators have passed the No Severance Ultimatums Act, which, if signed, would introduce mandatory notice, review, and revocation rights for employees offered severance agreements.
• Employers would be required to inform employees of their right to consult legal counsel, provide at least 21 days to consider the agreement, and allow a seven-day revocation period after signing.
• If enacted, any severance agreement that fails to comply with the new requirements would be deemed void and unenforceable.
• The proposed law would apply to severance agreements containing waivers of legal claims, extending beyond discrimination, harassment, and retaliation claims already subject to similar protections under New York law.
• Employers may wish to review separation agreements, update internal procedures, and provide guidance to human resources (HR) personnel to help avoid conduct that could be perceived as pressuring employees to sign early.

New York legislators have passed Senate Bill S372A, known as the No Severance Ultimatums Act. If signed by Governor Kathy Hochul, the bill would amend the New York Labor Law to establish minimum procedural requirements for severance agreements containing waivers of legal claims. If signed into law, the bill would take effect immediately.

The proposed legislation would require employers to provide individuals with time and information to evaluate severance agreements before deciding whether to sign them. It would apply to agreements offered in connection with an employee’s separation from employment where the individual is asked to release claims that can legally be waived.

Under the bill, employers would be required to notify employees and former employees of their right to consult an attorney before signing the agreement. Employers would also need to provide at least 21 calendar days for the individual to consider the terms and a seven-day revocation period after signature. The agreement would not become effective until the revocation period has expired without the employee withdrawing their consent.

The legislation would not require employees to use the full 21-day review period. An employee could choose to sign earlier, provided that the decision is made knowingly and voluntarily and is not influenced by pressure, misrepresentation, or incentives designed to encourage execution before the review period expires.

The proposed legislation contains consideration and revocation requirements similar to those applicable to certain waivers of age discrimination claims under federal law. However, the scope of the New York legislation would extend beyond those circumstances. While existing New York requirements relating to confidentiality and non-disparagement provisions in discrimination, harassment, and retaliation settlements already incorporate similar consideration and revocation periods, the proposed law would extend these protections to a wider range of severance agreements that contain waivers of legal claims.

The bill also includes an exception for severance agreements negotiated pursuant to a collective bargaining agreement, provided that the agreement expressly acknowledges the relevant statutory provisions.

If enacted, employers may wish to review and update severance agreement templates to incorporate the required notices and timelines. Organizations may also wish to assess their separation procedures and provide guidance to HR professionals and managers regarding communications during the review process.

Employers may wish to review communications that could be interpreted as pressuring an employee to sign before the end of the consideration period, including by threatening to withdraw, reduce, or alter severance benefits if an employee takes advantage of the full consideration period.

Employers operating in New York may wish to monitor the bill’s progress and evaluate whether updates to severance practices would be warranted if the legislation is enacted.