What Can You Negotiate in a New York Severance Agreement?

When terminated from a job in New York, a severance agreement may be offered. While a severance package may look great at first, it’s important to critically review the document before signing. You may be able to negotiate better terms to help bridge the gap as you search for another job. Here are a few of the most crucial things to consider negotiating in a New York severance agreement.

How Much Your Severance Pay Will Be

The most significant of all terms in a severance agreement is how much pay you will receive. Severance pay is meant to help you make ends meet while you look for other employment, but it’s important to ensure that the amount offered is enough. When considering the optimal dollar amount, estimate how long it will take you to become employed again or receive additional training. Use that estimate to negotiate higher severance pay with your employer.

However, while most employers evaluate the value of severance based on a formula, employees who have legal claims often are able to negotiate for added amounts above the standard formula in exchange for agreeing not to sue their employer.  Employers often evaluate the value of a legal claim based on whether or not the employee has retained counsel.

If and How Your Health Insurance Will Continue

Health care is another top issue that should be addressed in a severance package. Often, employees receive COBRA benefits for a period of time after their employment ends. Ask your employer if you are eligible for COBRA benefits and for how long you will be covered while look for other work. Since many jobs have a waiting period before you become eligible for health insurance, it’s important that COBRA benefits extend through that time as well.

You are legally entitled to a notice which explains your rights at the time of termination. Ask your employer for your COBRA notice and review your options with your lawyer.  Many separated employees are often surprised at the price tag for COBRA continuation insurance, and it helps to have a plan in place for discussing managing those payments – or possibly negotiating for reimbursement of them – with your former employer.

The Return of Your Property

You’ll want to ensure that your New York severance agreement addresses the return of your personal property upon the termination of your employment. Additionally, you could negotiate keeping any personal property that was paid for by the company, such as a laptop, cell phone, or other electronic equipment.

Discussing Non-compete, Non-solicit, or Intellectual Property Agreements

Many employees sign offer letters or employment contracts at the start of their employment which identify obligations they must abide by after they have left their employment.  Regardless of how you are separated, you may have obligations originating from your offer letter or original employment contract which continue even after you leave your employer.  Common examples of those types of agreements including agreements not to compete with competitors, agreements not to solicit clients or employees, and intellectual property agreements which, more often than not, vest the employer with full ownership rights in any inventions, client lists, or other proprietary or original data or information created or obtained during employment.

Make sure you review these agreements and discuss them with your employment lawyer – do you have new employment, and is there a chance you may violate one or more of these agreements?  If so, you may need to include elimination of these obligations in your severance negotiation.  And a word to the wise – sometimes employees simply ignore these obligations in their severance negotiation, certain that their employer will never attempt to enforce them.  You do so at your peril. If your new employer is sued for your mistakes, you will be in a very precarious situation.

Outplacement Services

Find out if your employer is willing to help you with outplacement services. Responsible organizations often offer outplacement services that are designed to ease your transition from one job to the next. If your employer offers outplacement services, negotiate their inclusion into your severance agreement.  However, if you determine that outplacement services are not needed, and if those services have been offered, a common “ask” is to request that the company pay you the cash value of those services in lieu of enrolling you.  

Taxes and Impact on Unemployment Benefits

Severance payments are taxable income to the employee, and so it is important that you bring your severance agreement to your accountant for his or her review.  Depending on how your severance payments are constructed, your severance payments may nor may not be treated as wage income.  Also, in New York State, your unemployment benefits (assuming eligibility) may be impacted by the type of severance you receive.  Lump sum severance payments are treated differently for the sake of unemployment insurance eligibility than “salary continuation” payments.  Your accountant and employment attorney can assist you with this evaluation.

It is never wise to sign off on a severance agreement without first discussing it with a lawyer. At the Law Firm of Christopher Q. Davis, we can help you negotiate a severance package that affords you exactly what you need to transition from your current employment to a new job. Contact us today for a free case consultation to discuss your needs in detail by calling (646) 430-7930.