New York Legislature Passes No Severance Ultimatums Act and Anti-Waiver of Employment Rights Act In Effort to Curtail Uninformed Waivers of Employee Rights

Both chambers of the New York Legislature have passed the No Severance Ultimatums Act and the Anti-Waiver of Employment Rights Act. The No Severance Ultimatums Act would add certain procedural hurdles to obtaining an enforceable post-employment release of claims, while the Anti‑Waiver of Employment Rights Act would bar certain waivers of employee rights under the State’s Labor Law and Human Rights Law in pre‑ and post‑employment settings. Both Acts reflect the Legislature’s intent to protect employees in the preservation and exercise of substantive and procedural rights. The Legislature must still deliver both bills to Governor Hochul for her approval or veto before year-end. 

No Severance Ultimatums Act

If signed into law by the Governor, the No Severance Ultimatums Act would amend the New York Labor Law to require that any employer offering an employee or former employee a severance agreement: 

1. notify such individual of their right to consult an attorney about the agreement;
2. provide a consideration period of at least twenty-one (21) calendar days to consider the agreement; and
3. provide a seven (7) calendar day period for such individual to revoke the agreement after execution of the agreement.

The employee can, however, choose to shorten the 21-day consideration period so long as the employee’s decision is knowing, voluntary, and not induced by the employer through certain means specified in the Act – namely, employers cannot coerce the employee to shorten the review period through fraud or misrepresentation, by threatening to withdraw or alter the consideration period, or by providing different (more favorable) terms to employees if they sign the agreement before the consideration period expires.

The framework set forth in the No Severance Ultimatums Act draws from the requirements of the federal Older Workers Benefit Protection Act for waivers of an employee’s claims under the Age Discrimination in Employment Act, but it has significantly broader reach in that it is not limited to only certain claims – it applies to all agreements offered by an employer to an employee upon the employee’s separation which require the employee to release their claims against the employer. 

Under the Act, severance agreements that fail to meet these requirements will be deemed void and unenforceable. Thus, if the law is enacted, it will be crucial that employers ensure compliance to enjoy the intended benefits of the severance agreement.

Anti-Waiver of Employment Rights Act

The Anti-Waiver of Employment Rights Act, if enacted, would broadly invalidate any contractual provision that waives or limits an employee’s rights, remedies, or claims under two key New York employment statutes – the New York Labor Law and the New York State Human Rights Law. It remains unclear whether the Act’s prohibitions would extend to existing agreements. Importantly, however, the Act would provide two broad exceptions for: (i) the settlement of good faith bona fide disputes raised by the employee; and (ii) agreements executed upon or following the termination of an employee’s employment. 

While the bill does not expressly carve out an exception for requiring an employee to arbitrate instead of litigate New York Labor Law and New York State Human Rights Law claims, it does acknowledge that federal arbitration law may preempt this law’s prohibition on waivers. This, in turn, would likely permit employers to continue to use certain class/collective action waivers in various employment-related agreements. Employers, however, should expect future litigation (and potentially government agency guidance) on this issue. 

Given these carve-outs and other limitations, the Act’s primary effect is on prospective waivers of employee rights, remedies, or claims. The Act would likely limit an employer’s ability to require a new hire or current employee to agree to pre-dispute jury trial waivers or class action waivers, to shorten the time an employee has to assert a claim under the statutes, or to waive an employee’s rights to recover certain damages under such laws. 

Importantly, the Act also puts at risk an employer’s ability to require an employee, during their employment, to execute a release of claims in exchange for certain discretionary compensation or other consideration, such as a promotion. Further, as noted above, the Act, as drafted, excludes from its prohibition agreements that are entered into “upon or following the termination of an employee’s employment” – this language likewise places at issue whether an employer could require an employee serving a notice or transition period to execute a release before the employee’s separation ultimately becomes effective. 

Takeaways

The question now is whether these bills will ultimately become law as passed. The Legislature first has to present the bills to the Governor, which it can do up to the end of 2026, after which the Governor can approve or veto the bills. Should these bills become law, employers should exercise caution when seeking to obtain waivers in certain types of employment agreements and should work with counsel to update their separation agreements and processes. We will continue to monitor developments. 

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