If you’ve been laid-off or let go, your finances are probably an immediate concern. One of your first questions may be, ‘Will I get a severance package, and will it be enough?’
In New York, your employer is not required by law to provide you with a severance package, nor are there any rules for what a severance package should include.
Despite the lack of statutory guidelines, many New York companies do voluntarily offer severance packages to executives and other employees when they’re terminated, laid-off, or reach retirement. If a severance package is offered, your reaction may be one of relief, but there are things to consider and carefully review before you accept the package.
New York Severance Package Basics
A severance package is an offer of pay and benefits to an employee upon termination or completion of their employment. Your severance package will likely be based on your length of employment with the company, among other factors.
While there is no set formula for creating or evaluating a severance package, the typical package contains one or more of the following:
- Severance Pay – This is simply a cash payment. It can be paid in one lump sum, or over a specified period, and is often determined by your role and title within the company. It can be as much as several years-worth of pay, or as little as a percentage of one regular paycheck.
- Separation Agreement – This is a contract that you’re often required to sign before accepting your severance package. It usually explains the package in detail, specifies the end-date of your employment, and outlines your obligations. (This will be discussed further in Part 3.)
- Outplacement Services – This is when your former employer pays for a job placement service company to help you find a new position. Some employees find them helpful, while others receive little value from them.
- Health Insurance – COBRA requires your employer to give you the option of paying for your health insurance at the company rate for a period of 18-months. However, some companies will offer to continue paying for your health care coverage for a certain period.
- Vacation Pay – Your employer may offer to pay you for any unused, earned vacation time.
- Stock Options – Finally, if you had stock options as part of your employment, your severance package may include an explanation of your stocks current value.
When You May Be Entitled to a Severance Package
Although the law does not typically require employers to offer severance packages, there are circumstances when you may be entitled to one.
First, your employer may be contractually obligated to offer you a severance through your employment contract or other agreement. Employment contracts are common among executives, salespeople, upper-level management, and many professionals, such as engineers. If you signed an employment agreement at the onset of your employment, review the language carefully to see what it includes.
Second, some companies have their severance pay policies or plans detailing who receives severance packages, and under what circumstances. If so, there should be a Summary Plan Description (SPD) for you to review which should describe your rights and obligations under the plan.
Third, if you’re a union member with a collective bargaining agreement, your employer may be required to offer you a severance as part of the agreements’ terms and conditions. These agreements often have particular conditions, though, so it’s important to read the fine print.
Finally, oral promises and past severance package payments can make your employer obligated to offer you a severance. There is a lot of a gray area here, though, and it can be difficult to argue or prove your entitlement. Verbal agreements to pay severance, for example, have been upheld in the past, but the challenge is in providing the proof. Similarly, if your employer has a history of offering severance packages, it may be possible to argue that you’re entitled to one, as well. The challenge, here, is in making a reasonable comparison to the past employees’ circumstances and yours. That said, verbal agreements and previous severance offers can work in your favor.
It’s important to understand that if you quit voluntarily or were fired for misconduct or other cause, you may not be eligible for your severance package, even if there is a union, employment, or other agreement in place.
The Review Period and What to Look For
Companies don’t offer severance packages for the sake of being nice. There is always something in it for them and accepting the package often means that you’re giving up certain rights, in exchange. This makes it critical that you review the package thoroughly before signing and accepting anything.
New York law states that all employees over 40 have 21-days to review a severance package offer if you were terminated as an individual. If you were terminated as part of a larger layoff, then you have 45-days. Unfortunately, employees under the age of 40 have no such statutory protections. Many companies will offer younger employees the same review period, but they’re not legally entitled to. You may get as little as one day to review the offer. Regardless, it’s essential to use any review period you do have wisely.
One of the most important things to look at is the Separation Agreement. By signing this agreement, you’re likely waiving your right to sue the company in the future. For example, if you were terminated for reporting sexual assault, you will lose the right to sue for the assault. Alternatively, if your termination was based on discrimination, such as gender, race, or sexual orientation, you will have no legal recourse for the discrimination once you sign the separation agreement. So, your reasons for termination should be considered before you waive your right to sue.
Non-compete agreement language may also be included in the separation agreement. If so, it should be considered a red flag. These types of agreements often limit your job prospects even after your relationship with your previous employer is finalized. For example, the non-compete may restrict you from accepting a position with one of the companies’ direct competitors for a certain period of some, sometimes a year or more. Depending on your industry, this could severely limit your job opportunities.
Also, be on the lookout for non-solicitation language. These clauses can prevent you from contacting key customers in your field for a set period, often up to two years. These agreements can also prevent you from recruiting former colleagues to your new company.
Similarly, non-disparagement or non-disclosure clauses may be a sign that the severance package is biased towards your employer. These types of clauses often include language that requires you to be secretive about the terms of your employment and termination. If the clause doesn’t require the same of your employer, then something isn’t quite right. This is essentially the equivalent of a gag order and would require you to remain silent, even if your former employer was to make accusations about you, speak poorly about you to others in your industry, or otherwise makes statements that could ruin your reputation and career.
Finally, it’s important to be aware of a 2014 NY labor law change which prohibits people from collecting unemployment benefits if they’re receiving severance payments from a former employer. If your severance package includes payments that exceed the states maximum weekly unemployment benefits, then you may not be able to receive unemployment benefits at all. This is not necessarily a reason to reject your severance package offer, but it is something to be aware of and consider.
Fortunately, severance package offers can often be negotiated. Remember, your employer is looking for peace of mind, but you must agree to their terms, first. So, while they are looking out for their own best interests, it will behoove them to make you happy, as well.
NY State Employment Laws and Resources
Protecting Retirement and Health Benefits After Job Loss – U.S. Department of Labor
Health Care Continuation Coverage – Federal Registrar
Wage and Hour FAQ’s – NY State Department of Labor
New York Severance Package Lawyers
We’ve been helping employees protect their rights after layoffs and terminations since 1999. No matter what your position or industry, call us for a telephone consultation to see how we can help.