New York Legislature Advances New Restrictions on Severance Agreements

The New York Legislature recently passed a bill that would impose new procedural requirements on employers seeking releases of claims in employee severance agreements. The bill, known as the No Severance Ultimatums Act, is expected to be delivered to Governor Kathy Hochul before the end of 2026. Given the legislation’s potentially significant impact and immediate effective date if signed, we are providing this advance notice so employers can begin assessing their severance practices and preparing for possible implementation.  

The bill would add a new Section 215-d to the New York Labor Law that would extend requirements similar to the federal Older Workers Benefit Protection Act (OWBPA) to all severance agreements requiring employees to waive claims against their employer. 

Scope of Covered Agreements

The bill targets what the legislature characterizes as “coercive severance ultimatums” and would apply when an employer offers an employee or former employee an agreement related to the individual’s separation from employment that requires the release of waivable claims. 

Unlike the OWBPA, which applies only to waivers of federal age discrimination claims by employees age 40 and older, the New York bill would apply regardless of the employee’s age or the nature of the claims being released. As a result, the legislation would significantly expand the population of those entitled to periods of time to consider and revoke severance agreements. 

Proposed Requirements

Under the bill, an employer offering a covered severance agreement would be required to notify the employee that:

• The employee has the right to consult with an attorney regarding the agreement;
• The employee has at least 21 days to consider the agreement;
• The employee may revoke the agreement within seven days after execution; 
• The agreement will not become effective or enforceable until after the revocation period expires; and  
• The employee may execute the agreement before the expiration of the 21-day review period, provided that the employee’s decision to do so is knowing, voluntary, and not induced by the employer through fraud, misrepresentation, threats to withdraw or alter the offer, or promises of more favorable terms in exchange for early execution.  

For many employers, these requirements will be familiar because similar requirements already exist under federal law and certain New York statutes addressing confidentiality provisions in agreements involving discrimination, harassment, and retaliation claims. 

Consequences of Noncompliance

The legislation does not create an express private right of action or enforcement mechanism by the New York State Department of Labor. Rather, the bill provides that any severance agreement that violates its requirements will be deemed “void and unenforceable.” 

This would create substantial risk for employers because the primary purpose of most severance agreements is to secure an enforceable release of claims. Under the proposed framework, an employer that provides severance benefits in exchange for a release could later discover that the release is unenforceable if the agreement failed to satisfy the statute’s procedural requirements. 

The legislation also provides that it does not diminish protections available under any other law, rule, or regulation. Accordingly, employers would need to continue to evaluate overlapping obligations under federal law, the New York Labor Law, the New York General Obligations Law, and other potentially applicable statutes. 

Collective Bargaining Exception

The bill contains an exception for severance agreements negotiated pursuant to a collective bargaining agreement. Employers, however, should carefully evaluate the scope of any claimed exemption since the legislation does not appear to create a blanket exclusion for all union-related severance arrangements. 

Practical Considerations for Employers

If Governor Hochul signs the legislation, employers may face immediate implementation challenges because the bill would take effect upon signing. Employers with New York workforces may therefore wish to begin evaluating their severance practices now.

Among other things, employers should consider:

• Reviewing New York severance agreement templates to ensure they contain the required notices and procedural provisions;
• Evaluating whether current separation practices align with a seven-day revocation period before agreements become effective;
• Reviewing communications used by human resources personnel, managers, and employee relations professionals when presenting severance agreements;
• Training decision-makers to avoid conduct that could be viewed as encouraging or pressuring employees to forgo the full review period;
• Assessing pending separations and reductions in force that may be affected if the governor signs the legislation; and
• Confirming continued compliance with OWBPA requirements and other federal and state laws governing waivers and releases. 

Given the bill’s proposed immediate effective date and the absence of transition guidance, advance preparation could help minimize disruption if Governor Hochul signs the legislation.