If you do not have an employment contract (or are NOT represented by a labor union), you are an “employee-at-will” under New York law. This means that your employer can
fire you for any reason, no reason, good reason or bad reason. For example, it is NOT illegal for an employer to fire you because you are a Buffalo Bills fan.
There are exceptions to the employment-at-will rule. For example, your employer violates the law if they fire you because of one or more protected classes including your race, religion, sex, national origin, age, disability, marital status, military status, sexual orientation, gender identity, predisposing genetic characteristic, domestic violence victim or familial status. Your employer also violates the law if they retaliate against you because you complained in good faith about unlawful discrimination. Other laws may apply (e.g., whistleblower type laws).
An employer typically is NOT required to provide a severance package to employees who are laid off or fired. If they do, they usually require that you waive ALL legal claims that you may have against them if you want the severance package. You can sometimes negotiate a better severance package (e.g., more money/benefits and/or fewer “strings” attached to your receipt of severance).
SOME IMPORTANT ISSUES TO CONSIDER:
Do you have a discrimination or other legal claim (e.g., for unpaid overtime) against the employer? If so, you may be able to negotiate a better severance package.
How long is the severance period? The length of severance is influenced by many factors including how long you have worked for the employer, how much you earn, how you long you expect to be unemployed, whether you have a valid legal claim and whether there are existing post employment restrictions (e.g., non-compete).
What happens if you die during the severance period? Does your spouse/estate get paid or does the severance die with you?
Will your employee benefits (e.g., health insurance coverage) continue during the severance period?
Will your employer make pension contributions (or otherwise give you pension credit) during the severance period?
What happens to your 401-k or pension benefits if you sign a severance agreement?
How will unpaid commissions, bonuses and paid time off (e.g., unused vacation) be handled?
If you own stock, or have stock options that you have not used, how will that be handled?
Did you develop something during your employment that you think you own? If so, what happens to it if you sign a severance agreement?
Do you have any Workers’ Compensation or disability benefit claims? Are they affected if you sign a severance agreement?
Did you sign a non-compete or other agreement (e.g., no solicit customers and/or employees) that restricts you in the future? If so, what happens to these restrictions if you sign a severance agreement? If you did not sign such an agreement, should you agree to these restrictions as part of a severance agreement?
How will the employer handle inquiries made about you by potential future employers?
What’s in your personnel file that should be taken out?
Will the employer challenge your application for unemployment insurance [UI”] benefits?
Can you collect UI and severance at the same time? The law was changed in early 2014. You cannot collect both at the same time IF the severance benefit: (1) begins within 30 days of your termination; and (2) exceeds the maximum UI weekly benefit rate (currently $504.00).
What happens if your employer is sold during the severance period?
Will the employer pay for outplacement or other services to help you get a new job?
Can you buy equipment you used during your employment (e.g., laptop computer, cell phone, etc.) as part of a severance agreement?
Has the employer reimbursed you for all business expenses? If not, what happens after you sign a severance agreement?
A SPECIAL NOTE ABOUT HEALTH INSURANCE:
We encourage you to explore whether you are eligible for “affordable” health insurance coverage under a federal law known as the Affordable Care Act. Residents of New York
can learn more by visiting http://nystateofhealth.ny.gov
There is an open enrollment period for this type of health insurance. If you lose employer provided health insurance because, for example, you were not able to return to work due to disability, you should be able to secure health insurance coverage in a 60 day “special enrollment period” even if the general enrollment period is over.
However, be careful about accepting continued health insurance coverage from your employer under a federal law known as COBRA. If you accept continued health insurance (including when the employer pays the COBRA cost), you might not be able to get health insurance under the Affordable Care Act when the COBRA payments end if it is not in an open enrollment period.
There are many tricky issues involving severance agreements. Experienced lawyers usually are willing to charge a flat fee to review a severance agreement and meet to discuss it. The investment is WELL worth it given that, once you sign a Release as a condition of receiving severance benefits, you have forever waived what could be a valuable legal claim.