Before you sign anything, you need to understand exactly what you're agreeing to. Whether you're negotiating your exit, preparing for a termination, or reviewing an agreement already in hand, this guide explains what each clause means, why it matters, and how it impacts you.

Overview of Severance Agreements in New York

New York law doesn't require employers to offer severance, but many do as part of the offboarding process. These agreements benefit both sides: employees receive financial support and transitional assistance, while employers gain protection from potential legal claims. Common severance components include lump-sum cash payments, continued health insurance, and outplacement services to help employees find new work.

Severance eligibility can stem from employment contracts, company policy, or collective bargaining agreements. Employees should review their employer's Summary Plan Description (SPD) to fully understand available benefits.

New York's employment and severance laws are constantly evolving. Recent legislative activity—including amendments affecting severance practices and employee protections—makes it essential to stay current. Notably, the New York State WARN Act may impose additional severance obligations on employers during mass layoffs or business closures.

• Review Periods and Revocation Rights

New York employees generally have at least 21 days to review a severance agreement before signing—enough time to carefully examine the terms and consult an attorney.

For employees 40 and older, the federal Older Workers Benefit Protection Act (OWBPA) mandates this 21-day minimum. In group terminations or reductions in force, that window extends to 45 days, and employers must provide additional disclosures—including job titles and ages of both affected and unaffected employees.

Once signed, employees have a non-waivable 7-day revocation period to rescind their acceptance. This built-in protection ensures no one is rushed or pressured into waiving significant legal rights.

• Non-Compete Clauses

Non-compete clauses can place serious limitations on your career after leaving a job. Designed to protect the employer's business interests, these clauses may:

• Prevent you from working for a competitor for 12 months or more

• Prohibit employment within the same industry or geographic area

• Bar you from soliciting former clients or customers—sometimes for up to two years

These restrictions can affect your ability to earn a living in your field or delay your return to the workforce. Legal review is strongly recommended before signing any agreement containing a non-compete. An employment attorney can assess enforceability under New York law, flag overly broad terms, and help negotiate more favorable language.

• Non-Disclosure and Non-Disparagement Clauses

Non-disclosure clauses require you to keep certain information confidential—including the terms of your severance, your termination circumstances, and sometimes the agreement itself. While these provisions protect legitimate business information, they can tilt heavily in the employer's favor if left unchecked.

Make sure any confidentiality obligations are mutual and binding on both parties. Pay close attention to what information is covered and what penalties apply for violations.

Non-disparagement clauses prohibit you from making negative statements about your former employer. While they protect the company's reputation, they can limit your ability to speak honestly about your experience or secure strong references.

Overly broad or one-sided versions of either clause are red flags. Legal review ensures these provisions are balanced, enforceable, and don't unfairly restrict your rights or opportunities.

• Severance Payment Terms

In New York, severance is typically classified as dismissal pay—a designation that can affect your eligibility for unemployment benefits. Even if severance is deposited into a retirement account like an IRA, the classification generally holds. When payments exceed unemployment benefit thresholds, they may delay or reduce your compensation.

While severance isn't legally required, many employers offer it voluntarily to reduce legal exposure or preserve goodwill. Payment terms vary based on company policy, length of service, and the circumstances of termination.

Consulting a New York employment attorney before signing can help you assess whether the offer is fair and identify opportunities to negotiate better terms. Also stay informed about legislation like the Severance Ultimatums Act, which may expand protections and alter severance timelines.

• Health Insurance Continuation

Health insurance coverage is one of the most important components of any severance package. Under federal COBRA (Consolidated Omnibus Budget Reconciliation Act) law:

• Employers with 20 or more employees must offer continuation coverage to qualified beneficiaries after termination

• COBRA coverage typically lasts up to 18 months, with extensions available for disabilities or other qualifying events

• Beneficiaries may be required to pay up to 102% of the full premium, including administrative costs

For employees of smaller companies, New York's "Mini-COBRA" law extends coverage for up to 36 months, helping bridge gaps during job transitions.

You must elect COBRA within 60 days of receiving notice—missing this deadline forfeits your eligibility. Carefully review health insurance terms in your severance agreement and, if possible, negotiate for extended coverage or employer-paid premiums.

• Legal Waivers and Rights

Most severance agreements ask you to waive certain legal claims against your employer. It's critical to understand exactly which rights you're giving up—and under what conditions.

Under New York law, confidentiality and non-disparagement clauses cannot prevent employees from reporting or discussing unlawful workplace conduct, including discrimination, harassment, or retaliation. Overly broad waivers may be unenforceable, particularly when they attempt to strip employee rights without providing adequate consideration in return.

Never sign a waiver without first consulting legal counsel.

• Collective Bargaining Agreement

If you're part of a union, your Collective Bargaining Agreement (CBA) plays a major role in shaping your severance rights. CBAs are legally binding contracts between employers and labor unions that set minimum standards for severance pay, benefits, and termination procedures.

Employers must ensure severance agreements comply with applicable CBAs. Common CBA provisions include:

• Enhanced job security protections

• Formal grievance and arbitration processes

• Defined severance pay structures

• Health insurance continuation guidelines

• Fair treatment protocols during layoffs

CBA terms often take precedence over individual severance agreements. Both employees and employers should review the applicable CBA before finalizing any severance terms.

• Retirement and Other Benefits

Severance agreements frequently address retirement-related benefits, which can have significant financial and tax implications. These may include pensions, 401(k) contributions, stock options, and executive perks.

For executives, agreements often include specific provisions governing the handling of retirement assets—whether contributions continue, are modified, or cease altogether. Understanding how severance affects your retirement income and tax situation is essential.

Stock options require special attention: will unvested options accelerate, be forfeited, or follow the original vesting schedule? Other benefits—like life insurance or vehicle allowances—should also be reviewed to confirm whether they continue or terminate upon separation.

Consulting a legal and financial professional ensures these benefits align with your long-term compensation goals and clarifies how they may affect your unemployment insurance eligibility under New York law.

• Cooperation Clauses

A cooperation clause requires you to assist your former employer after your employment ends. While it may seem minor, these provisions can create ongoing obligations lasting months or even years.

Common cooperation requirements include:

• Participating in internal investigations or audits

• Providing information or testimony in legal proceedings

• Assisting with the transition of responsibilities or clients

• Being available to answer questions about work handled during your employment

Employers have legitimate interests in post-employment cooperation, but the scope, duration, and compensation for that assistance must be clearly defined.

Key questions to ask before signing:

• Is there a time limit? Open-ended obligations are often unreasonable.

• Will you be compensated? If post-employment assistance takes substantial time, fair pay should be negotiated.

• Are there confidentiality or privilege concerns? You should never be required to disclose legally protected information.

• What counts as "reasonable"? Vague language can give employers broad discretion over your time.

An attorney can help narrow overly broad cooperation language and ensure your post-employment commitments are reasonable, time-bound, and properly compensated.

• Consultation with Legal Counsel

The New York State Senate recently passed Senate Bill S372, which requires severance agreements to include written notice informing employees of their right to consult an attorney before signing. This notice must be provided prior to execution—failure to do so renders the agreement void and unenforceable.

This protection is especially important when agreements contain complex provisions like non-competes, broad waivers, or extensive confidentiality obligations.

Working with an experienced employment attorney helps you:

• Fully understand the agreement's terms and consequences

• Spot unfair or one-sided provisions

• Negotiate better terms

• Ensure the agreement complies with applicable labor laws

Given the significant legal and financial stakes involved in any severance agreement, exercising your right to legal counsel isn't just advisable—it's essential.