The Advisors' Blog

Earlier this summer, the New York legislature passed the “No Severance Ultimatums Act” – also known as SB S372A. Although it’s still awaiting Governor Kathy Hochul’s signature, companies may want to track the bill because it will immediately amend New York law if signed. This Sheppard blog explains what the law will do if it’s adopted:

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.

The Sheppard team points out that these requirements are similar to the federal Older Workers Benefit Protection Act (“OWBPA”) – which applies to severance agreements made with employees aged 40 or older. The Act would expand these federal protections to most employees covered under the NYLL, regardless of age, with an exception for severance agreements negotiated pursuant to a collective bargaining agreement (provided the agreement specifically acknowledges the provisions of Section 215-d).

Our site doesn’t give employment law advice – or any legal advice, for that matter – but consider this a nudge to call up your friendly employment lawyer to evaluate how the law would apply to your company, and review and revise forms if needed. The Sheppard blog emphasizes the need to plan ahead, but also points out that there are some open questions:

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.

Among other things, the blog also recommends revisiting standard scripts, correspondence and workflows used in communicating severance agreements, to ensure they don’t run afoul of the law and that payments aren’t processed before the revocation period ends.

– Liz Dunshee