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Consequences of a Severance Agreement in New York

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New York is an employment-at-will state, meaning that unless otherwise specified, employers may terminate the employment of a worker without having to provide “just cause.” Severance pay is also not required by law; it is a voluntary act by an employer, unless there is a contract in place that specifies severance pay as part of the employment, or if the employer habitually provides severance pay. In any case, if a severance agreement is offered to an employee, some important legal consequences must be kept in mind.

A severance agreement and release usually states that the employee agrees not to make a claim or file a grievance against the company, officers, affiliates and other employees in exchange for financial and other benefits as specified in the agreement. This means that the employee relinquishes all rights to take any legal actions against the employer for their termination, even if there are grounds for a complaint such as discrimination or other labor violations. This is a huge concession to make, and should not be made lightly.

Other severance agreements may also have a non-disclosure or non-competitive clause which means the terminated employee may not work for a competitor or in the same industry for a certain period of time. This can make it difficult for the employee to find work, especially in the present economic situation.

Severance agreements carry significant consequences for the employee, so a labor lawyer should be consulted before the agreement is finalized and signed. It is perfectly acceptable for an employee to request for time to study the agreement and to negotiate the terms. It has to be remembered that it will release the company from any claims that may be made against them, so the compensation offered should be commensurate to the rights being given up. When consulting with a lawyer, make sure to provide copies of the employee handbook, employment contracts if any, and the contact information of relevant past and present employees who may provide insight on what the severance agreement should include.

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