Employment · Severance
What a Severance Agreement Is Really Asking You to Give Up
The money is only half the deal. The other half is every claim you have, and almost nobody tells you what that half is worth.
When someone brings me a severance agreement, they almost always ask the same first question: is this a good number? It is the wrong place to start. A severance agreement is a trade. The employer pays you, and in exchange you sign a release. You cannot judge the price without knowing what you are selling.
What the release takes
A general release in a New York severance agreement usually gives up every claim you have against the company as of the day you sign: discrimination, harassment and retaliation, breach of contract, unpaid commissions and bonuses, defamation, and anything else that has already happened. It cannot give up claims that arise after you sign. It also cannot take a short list of things the law protects no matter what the paperwork says: your right to file a charge with the EEOC or a state or local agency, your unemployment benefits, your workers’ compensation rights, your vested pension, and certain federal wage rights. See what claims you can’t give up.
Everything else is on the table. That includes two claims people routinely sign away without noticing.
A New York WARN Act claim. If you were let go in a group layoff without the required 90 days’ notice, the employer may owe you up to 60 days of pay and benefits. A general release extinguishes that claim, and no court has to approve it. There is a strong argument, from the words of the statute, that severance conditioned on signing does not even reduce what the employer owes. So the employer may be buying a claim worth two months’ pay with money it would owe you anyway. See severance after a group layoff.
New York wage claims. Unpaid commissions and bonuses are exactly the kind of claim a release reaches. If money you already earned is being folded into the “severance,” you may be paying for your own release.
The honest part
For most people, the claims a release would end are worth little. Being let go is not, by itself, unlawful, and most terminations do not come with a claim that would survive a motion to dismiss. I tell people that when it is true, because a lawyer who makes every offer look low is not helping anyone.
That does not mean there is nothing to negotiate. It means the leverage is somewhere other than the severance payment amount. Employers change these terms far more readily than they change the payment amount:
- When the first payment arrives. In New York, if the first severance payment comes more than thirty days after your last day of work, the severance does not reduce your unemployment benefits at all. It costs the employer nothing to agree. See whether severance affects unemployment.
- A neutral reference and an agreed statement about your departure.
- Mutual non-disparagement, naming who at the company it binds.
- Narrower restrictive covenants. New York still has no statute banning non-competes, but courts enforce them only as far as they protect a legitimate interest, and an employer that fired you without cause generally cannot make you forfeit severance for competing. See non-competes in severance agreements.
- COBRA contributions, and equity vesting.
When the claims are worth something
Sometimes they are worth a lot, and the release is the most valuable thing you own in the negotiation. Two situations come up again and again in my practice. (Both are composites, not any particular client.)
The new supervisor. A long-tenured employee has done well for years under a supervisor she gets along with. That supervisor retires, and a younger manager takes the job. The new manager seems uneasy supervising someone with more experience and more standing in the group, asks her whether she has any retirement plans, and hears that she has none. Over the following months come criticism of work that was never criticized before, reassigned responsibilities, a performance plan, and finally a severance offer. Each step can look ordinary on its own. Together, and following a question about retirement, they are the kind of pattern age discrimination claims are built on.
The relationship that ended. An employee has a romantic relationship with her supervisor. It ends, and it ends badly. Afterward her assignments dry up, her reviews turn, and she is pushed out. That can support a sexual harassment claim, particularly where the supervisor pressed to continue the relationship or treated her work differently once she ended it. It is also a situation where the law limits what the employer can ask for in return: New York restricts confidentiality terms in agreements resolving harassment claims, and federal law makes a confidentiality or non-disparagement clause signed before a sexual harassment dispute arose unenforceable. See confidentiality clauses.
In situations like these, the release may be worth considerably more than the payment being offered for it. Two rules make them worth a closer look:
If you are 40 or older. A release of an age claim is valid only if the agreement meets every requirement of the federal Older Workers Benefit Protection Act, including 21 days to consider it (45 in a group layoff), 7 days to revoke, and a written recommendation to see a lawyer. If it misses any of them, the release does not waive the age claim, and you do not have to give the money back before you sue. See what changes if you are 40 or older.
If the agreement resolves a discrimination, harassment or retaliation claim. New York voids the entire release if the agreement makes you pay liquidated damages or forfeit the severance for breaching a confidentiality or non-disparagement clause, or if it has you affirm that you were never discriminated against. That last line is boilerplate in a great many agreements. See confidentiality clauses.
In those cases, the question “is this a good number?” finally has an answer, because you can compare the offer with a realistic estimate of what the claims would bring. That estimate is not the amount a jury might award. It is what a case like yours is realistically worth before suit, after accounting for what the employer will argue and how long the fight would take. It is almost always less than people hope, and sometimes a great deal more than the employer is offering.
Before you sign
- Write down the date and time you received the agreement, and work out which consideration and revocation periods apply. See how long you have.
- Gather what the release would end: your pay records, commission or bonus plan, any unpaid amounts, every restrictive covenant you have signed, and anything in writing about why you were selected.
- Get a realistic read on what your claims are worth, from a lawyer or from the case evaluator, and compare it with the offer.
- Decide what you would ask for, starting with the terms that cost the employer least.
A severance agreement is a price for your claims. Know what you are selling before you agree to the price.
This article is general information about New York and federal law, not legal advice, and it does not create an attorney-client relationship. The examples are composites, not any particular client. Attorney Advertising. Prior results do not guarantee a similar outcome.