Severance agreements might feel like a lifeline when you’ve unexpectedly lost your job. However, the same employer that fired you or laid you off isn’t offering you money because it’s the right thing to do. Severance agreements typically ask you to sign away your rights to sue your employer, and if you have a valid claim against the company, you could leave a lot more money on the table if you accept.
A knowledgeable severance attorney can help review your severance agreement for any red flags that might make you consider refusing to sign. Contact Joseph & Norinsberg online or call 212-227-5700 today for a free consultation.
Should I Sign a Severance Agreement?
With a Severance agreement, a departing employee typically agrees to certain conditions with their employer in exchange for a benefits package, usually consisting of additional weeks of pay and extended health care coverage.
Companies aren’t required to give severance packages to laid-off New York employees. If they do, they usually require that the employee agree not to sue the company. The agreement may also include other restrictions on your future behavior.
However, severance benefits can be worth the tradeoff. Accepting a severance agreement can help you weather financial difficulties while you look for a new job and can sometimes include access to employment help. The framework in the agreement can also protect both you and your employer from a legal standpoint.
In New York, you have the right to negotiate the terms of a severance agreement or reject it if you wish. Your employer must give you time to consider the agreement and seek legal advice.
What Are Red Flags in a Severance Agreement?
Most severance agreements are relatively straightforward and benefit both parties. However, some might protect your employer more than they help you and could be worth renegotiating or rejecting outright. Some common red flags in severance agreements include the following:
Pressure to Sign
No employer should pressure an employee to sign a severance agreement on the same day it’s proposed. If your company seems eager to pay you severance money, you likely have something to lose by signing it. Consult with an attorney before signing a severance agreement, especially if your employer attempts to bully you into signing it.
No Continuing Insurance Options
The Consolidated Omnibus Budget Reconciliation Act, or COBRA, requires companies with 20 or more employees to offer a temporary extension of health care coverage if they would otherwise lose it. New York state law extends that requirement to smaller employers and allows extended coverage to last up to 36 months.
Continuing coverage under COBRA can be very expensive, as you may have to pay the full cost of the premiums your employer previously helped cover. You might be getting a lowball offer if your severance agreement does not include any subsidies to help manage COBRA costs.
Responsibility for Unnecessary Damages
Some employment contracts include a “liquidated damages” clause, setting a flat rate penalty for any breaches. These clauses can create a nightmare scenario in which you must pay large fines for various contract violations, whether or not the company suffered any real harm from them.
If your severance agreement includes a liquidated damages clause, it might be best to hold off on signing.
Inadequate Severance Pay
Severance package payouts are typically structured as weeks’ worth of your current salary, with the number of weeks depending on your position within the company and your seniority.
If the severance pay your employer is offering seems conspicuously low, you may be in a position to ask for more compensation before you sign anything.
Waiver of Liability
Asking a departing employee to waive their ability to sue the company is a standard part of any severance agreement. However, if you believe you were unfairly terminated or otherwise have a claim against your employer, accepting a severance package may not be in your best interest.
Some agreements may also ask you to waive rights that cannot be waived by law, including entitlement to certain benefits, the right to pursue a lawsuit for future offenses, or the right to make a discrimination claim with the U.S. Equal Employment Opportunity Commission or participate in its investigation process.
What Restrictive Clauses Can Employers Include in a Severance Agreement?
In 2023, the National Labor Relations Board found that some restrictions commonly included in severance agreements illegally infringed on employees’ labor rights. The NLRB banned most confidentiality, non-disclosure, and non-disparagement provisions from severance agreements.
Employers can’t legally require you to sign overly broad restrictions on your ability to discuss your employment experiences with others. However, they can still prevent you from sharing proprietary information or trade secrets.
An employer may also ask you to sign a non-compete clause, which prevents you from accepting a similar position with a competitor, or a non-solicitation clause, which means you can’t contact your employer’s customers or other employees for business purposes. The Federal Trade Commission is attempting to ban most non-compete agreements as of April 2024. A federal court has issued an order preventing the FTC from enforcing the ban. However, the FTC will likely appeal the order.
Can You Negotiate a Severance Agreement?
Your employer should expect at least some negotiation over the terms of your severance package. You can bargain over the proposed agreement or even reject it outright. You have no obligation to enter a severance agreement.
Employers have a vested interest in continuing to attract talented workers, so you may have some leverage in negotiations depending on your seniority, experience, specialization, or contributions to the company. If you have experienced harassment, a toxic work environment, retaliation by your employer for exercising your rights, or any other unlawful behavior before or during your termination, agreeing to drop a potential claim could net you a more lucrative deal.
It’s vital to speak with an experienced attorney to understand your situation and explore your options before signing a severance agreement.
Contact Joseph & Norinsberg For Your Employment Law Cases
A skilled employment lawyer can help you find any red flags in your severance agreement and then use the information available to you to make the right decision for you and your future.
At Joseph & Norinsberg, we have experienced severance negotiation attorneys with deep knowledge of employment law and provide empathetic, personalized attention to each client. We understand the importance of securing a fair severance package. We will work tirelessly to protect your rights and achieve a fair outcome for you.
Call Joseph & Norinsberg today at 212-227-5700 for a free consultation.
