Human Resources: Severance

The late night television wars continue to provide fodder for employment law issues. NBC unceremoniously threw Conan O’Brien out of his coveted 11:35pm time slot in January. However, his reputed $33-million golden parachute surely softened his landing.

The scorned Tonight Show host had a contractual right to his severance. However, barring such a contract, or a severance policy, New York employers are not obligated to pay severance when they fire or lay off an employee.

So why do employers, who have no legal obligation to pay severance, choose to pay it? Many times, they do so out of benevolence, guilt or even ignorance. However, the well advised employer will only pay severance if it is getting something in return—a release of claims by the terminated employee.

Most of the time, there is no need for a release (and therefore no need to pay severance). New York is an at-will state. This means that unless a contract or statute says otherwise, an employer can terminate an employee at any time, with or without notice or cause, for any nondiscriminatory reason, or for no reason at all. Accordingly, there is usually no claim by the former employee arising out of a termination.

However, if a company decides to terminate an employee on the heels of her complaint of sexual harassment, she may have a claim for retaliation. Or, if the boss talks about needing “young blood” with “more energy” and replaces an older employee with a much younger person, the terminated employee may be able to prove age discrimination. In sensitive situations like these, an employer may chose to offer limited severance in exchange for a release of all possible claims.

Importantly, not all releases are enforceable, and even a properly drafted release may be useless if the employee can show that it was signed under duress. Employment counsel should be consulted to ensure that the company is getting the waiver of claims that it is paying for.

ellen r. storch, esq.

Ellemn R. Storch is an employment attorney with the firm Kaufman Dolowich Voluck & Gonzo LLP. Contact her at estorch@gdvglaw.com