Why You Need to Exercise Caution Before Signing a "Severance Letter"

Many New Yorkers have a poor grasp of how employment laws work in the real world. Although you probably know that you have certain rights with respect to compensation–e.g., you must be paid a certain minimum wage, you must receive overtime if you work more than 40 hours per week, et cetera–you may not realize just how easy it is to sign away those rights without realizing it. Employers are often quite sophisticated in their human resources management, and they know how to undermine a potential overtime or wage hour complaint before it even gets to a trial.

For instance, if you have been fired or laid off from a job, you may recall that your employer asked you to sign a “severance letter” or some similar document making your termination official. You probably signed the letter without taking the time to read it fully–to say nothing of seeking an attorney's advice first. The problem is that once you sign a severance letter, you have agreed to its terms, and that likely includes a waiver of any potential discrimination or wage claims you might have in the future.

New York courts are generally unsympathetic to former employees who try and argue the severance letter was not really a waiver. Here is a recent example from a case in upstate New York. The plaintiff worked as a technician for a fuel company. He sued his former employer, alleging it failed to pay him and other employees the legally mandated time-and-a-half for overtime and other related provisions of federal and state labor laws.

The company moved to dismiss the lawsuit, citing a severance letter signed by the plaintiff at the time of his termination. According to its terms, the plaintiff acknowledged receiving approximately $2,400 in exchange for “knowingly and voluntarily” releasing any future legal claims against the company arising out of his employment. This included any claims for unpaid overtime, the company said.

The judge agreed. Among other things, the judge noted that the plaintiff had ample time–21 days, specifically–to review the severance letter before signing it. He could even revoke his consent within seven days of signing the letter, which he did not do. The letter itself even “contemplated” his right to “discuss the terms and conditions of an attorney,” which again he apparently chose not to do. Given these facts and given there was no evidence the defendant coerced the plaintiff into signing the letter, the court held the lawsuit could not proceed.

Never Sign Before Speaking to a New York Employment Attorney

If an employer or former employer puts any paperwork in front of you, it is always a good idea to proceed with caution. Carefully review any letter or agreement before signing it. If you have any questions or doubts, do not hesitate to contact a qualified New York employment attorney who can advise you of your rights. Call the offices of White, Nisar & Hilferty, LLP, at 646.760.6493 today if you need to speak with someone right away.


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