On June 1, New York's State Senate Passed the No Severance Ultimatums Act. Now it sits on Governor Hochul's desk, awaiting her signature. Naturally, this raises three (3) questions:
- How does this proposed law seek to change the status quo?
- What does this proposed law mean for employers? and,
- If signed, when would this Act become effective?
The Underlying Purpose for the No Severance Ultimatums Act
In the Senate's summary of the bill, they articulate that the Act is designed to close a loophole in the existing law that affords employees who are being terminated from their positions and being provided with a severance agreement the same protections that are currently afforded with respect to waivers of potential Federally-protected discrimination legal claims that could otherwise be brought against the employer.
More specifically, the Act seeks to amend Labor Law §215-d to read as follows:
§ 215-d. Prohibition against coercive severance ultimatums.
2. Severance ultimatums. Any employer offering an employee or former employee a severance agreement shall notify such employee that
(a) Such employee has the right to consult an attorney regarding such agreement;
(b) Such employee shall be provided with a consideration period of not less than twenty-one calendar days within which to consider the agreement;
(c) Such employee may revoke such agreement within seven calendar days of the execution of such agreement, and the agreement shall not become effective or enforceable until such revocation period has expired; and (d) Such employee may sign such agreement prior to the end of the consideration period set forth in paragraph (b) of this subdivision, as long as such employee's decision to shorten such consideration period is knowing, voluntary, and not induced by the employer through fraud, misrepresentation, or a threat to withdraw or alter such consideration period prior to the expiration of such consideration period, or by providing different terms to such employee if such employee signs such agreement prior to the expiration of such consideration period.
3. The provisions of this section may be waived by any severance agreement that specifically acknowledges the provisions of this section and negotiated pursuant to a collective bargaining agreement.
4. Notwithstanding any other law to the contrary, any severance agreement shall be deemed void and unenforceable if it violates the provisions of subdivision two of this section.
If Signed, When Would the No Severance Ultimatums Act Become Effective?
Luckily, the proposed statute answers this directly: immediately upon the Governor's signature.
The Takeaway for Employers
Fortunately, the takeaway for employers is really straightforward and simple: if you're considering letting an employee go and severance is either explicitly called for by the employment agreement or for other reasons you have compelling reasons to offer this departing employee severance, it certainly behooves you to, at the very least, check on the status of this proposed law before finalizing the terms of the severance agreement to make sure it is done correctly, and will ultimately be enforceable before a New York court.
