Recently, the New York State Legislature passed a bill that would establish the “No Severance Ultimatums Act”, which would impose new restrictions and requirements on employers relating to such agreements. The bill is now awaiting Governor Kathy Hochul’s signature and if signed, would take effect immediately.
Specifically, the bill prevents employers from giving coercive ultimatums to employees or former employees to enter into severance agreements. The bill would amend the New York Labor Law to establish minimum review protections to prevent employers from giving coercive ultimatums to employees or former employees to enter into severance agreements. Pursuant to the bill, an employer offering a covered severance agreement would have to notify the employee that they:
- have the right to consult an attorney regarding the agreement;
- have no less than 21 calendar days to consider the agreement;
- may revoke the agreement within 7 calendar days after signing it, and the agreement will not become effective or enforceable until the revocation period has expired; and
- may sign the agreement before the end of the 21-day consideration period, but only if the decision to do so is knowing, voluntary, and not induced by fraud, misrepresentation, threats, or an offer of different terms to sign earlier.
Under the proposed legislation, any severance agreement that fails to satisfy the above mentioned requirements would be deemed void and unenforceable which would invalidate the agreement and the employee’s release of claims.
It would still be allowable for an employee to sign the agreement before the 21-day review period ends, but the employee’s choice to sign early must be voluntary. Employers would not be able to induce an employee to sign early through fraud, misrepresentation, threats, or by offering more favorable terms in exchange for a faster signature.
Notably, procedural protections already exist under the federal Older Workers Benefit Protection Act that require review and revocation periods for employees age 40 and older. The New York bill expands those protections to now cover severance agreements regardless of the employee’s age and regardless of whether the agreement involves discrimination-related claims.
Employers should be prepared to act quickly if Governor Hochul signs the bill. If enacted, severance agreements must be updated to include the right-to-attorney notice, 21-calendar-day review period, seven-calendar-day revocation period, and clear effective-date language.
We will continue to monitor developments closely and will keep you apprised of same. If you have any questions regarding the proposed legislation, please contact Ali Law Group.
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