The New York Legislature has passed a bill that would impose additional requirements on employers offering severance agreements to New York employees. The bill, colloquially titled the “No Severance Ultimatums Act” (the “Act”) now awaits Governor Kathy Hochul’s signature. Employers should begin to prepare for the potential changes that will accompany enactment.
No Severance Ultimatums Act
The Act adds a new Section 215-d to the New York Labor Law (“NYLL”) and prohibits so-called “coercive severance ultimatums.” Specifically, the Act requires that employers provide separating employees additional time and information before such employees release waivable claims. The Act would apply to all New York employees. Notably, the Act expressly includes governmental agencies in its definition of “employer.”
Under the Act, any employer offering a “severance agreement,” defined as an agreement offered upon separation of employment that requires the employee to release waivable claims against the employer, must notify the employee that:
- The employee has a right to consult an attorney about the agreement;
- The employee has at least twenty-one (21) calendar days to consider the agreement;
- The employee may revoke the agreement within seven (7) calendar days of signing;
- The agreement does not become effective and enforceable until after the revocation period expires; and
- The employee may make a knowing and voluntary choice to sign the agreement prior to the end of the consideration period, provided such decision is not induced by the employer through fraud, misrepresentation, a threat to withdraw or alter the consideration period, or by providing different terms if the employee signs early.
A severance agreement that does not comply with these provisions would be void and unenforceable.
Employers may recognize similar provisions from the federal Older Workers Benefit Protection Act (“OWBPA”), which imposes comparable requirements for severance agreements made with employees aged forty (40) or older. The Act would expand these federal protections to most employees covered under the NYLL, regardless of age.
While employees may voluntarily shorten the consideration period, the Act strictly prohibits employers from using coercive tactics to pressure employees into doing so.
Notably, there is a limited exception to the Act’s requirements for severance agreements negotiated pursuant to a collective bargaining agreement, provided the agreement specifically acknowledges the provisions of Section 215-d.
What Do Employers Need to Know?
If signed into law, the Act would take effect immediately. The Act does not include a grace period, which means employers may need to implement changes on short notice. In addition, any severance agreement that fails to meet the Act’s requirements would be rendered void and unenforceable, invalidating not only the severance agreement itself but also the employee’s release of claims. As a practical matter, an employer could find itself in the position of having paid severance to a departing employee only to learn that the release it obtained in exchange has no legal effect.
The Act is silent on its application to severance agreements that are already in progress at the time of enactment. Unresolved questions include whether agreements that have been delivered but not yet signed would need to be reissued in compliant form, and whether agreements executed shortly before the effective date, but still falling within what would constitute the Act’s seven-day “revocation” window, could be subject to challenge. In light of these uncertainties, employers should evaluate any pending New York severance agreements now and develop contingency plans, including extending existing deadlines or pausing the finalization of agreements until compliance can be confirmed.
Because the Act could take effect without advance notice, employers with New York operations should consider taking proactive steps now rather than waiting for the Governor’s decision. Key areas of focus include:
- Review and revise existing severance agreement templates. Employers should draft updated agreement templates tailored to the bill’s requirements, incorporating the attorney-consultation notice, the twenty-one (21) calendar day review window, the seven (7) calendar day revocation window, and language specifying that the agreement does not take effect until the revocation period has run, so that compliant forms can be deployed without delay if the Act is enacted.
- Coordinate internal stakeholders and communications. Employers should revisit the manner in which severance offers are communicated, including any standard scripts, correspondence, or talking points used by HR personnel and managers during separation meetings. Care should be taken to ensure that no aspect of the presentation could be construed as encouraging or pressuring an employee to execute the agreement before the full review period has elapsed. In addition, employers should confirm that payroll, benefits, and offboarding workflows are aligned with the revocation period so that severance payments are not processed prematurely.
- Audit upcoming separations. Employers should inventory any anticipated New York separations in the near term and establish a protocol for how agreements at various stages – whether recently transmitted, under active review, or nearing execution – will be handled in the event the Act is signed into law.
We will continue to monitor future developments on our blog. Employers with questions about how the No Severance Ultimatums Act may affect their severance practices should consult a Sheppard attorney for assistance.
* Adrienne Davis is a law clerk in the firm’s New York office.