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Q: Severance pay - NY ( Answered 5 out of 5 stars,   0 Comments )
Subject: Severance pay - NY
Category: Business and Money > Employment
Asked by: blancbooks-ga
List Price: $20.00
Posted: 08 Sep 2003 20:06 PDT
Expires: 08 Oct 2003 20:06 PDT
Question ID: 253710
My company may be offering a volunteer severance package for long
standing employees.  I have been there 15 years.  However, they may
also reserve the right to deny this selectively based on performance. 
For example, I am a high performer at the organization and wish to
take the package if it is generous enough.  Can they legally deny this
on a one-by-one basis, or do they have to let me take it if I choose?

Request for Question Clarification by mvguy-ga on 08 Sep 2003 21:24 PDT
Can we assume you are not covered by a collective bargaining agreement?

Clarification of Question by blancbooks-ga on 09 Sep 2003 04:25 PDT
Correct, I have no bargaining agreement, no signed contracts, no verbal promises.
Subject: Re: Severance pay - NY
Answered By: ephraim-ga on 11 Sep 2003 21:21 PDT
Rated:5 out of 5 stars

Thanks for your question!

Before providing you with an answer, I'd like to give you a few
disclaimers. I am not a lawyer and I have no specific legal training.
As per Google Answers' policy, my answer does not constitute legal
advice, and you are advised to consult with a lawyer licensed to
practice in your locality if you need real legal advice. As a
researcher, my job is to point you in the direction of material that
should inform you about this topic, but I am not permitted to provide
you with legal advice.

Given all that, the information I've uncovered seems to indicate that
you probably have no right to demand a particular severance package
from your employer.

New York State is an "at-will" employment state. This means that both
the employer and the employee are permitted to terminate their
relationship at any time and for any reason if a contract does not
specify otherwise. You have no contract, so you're an "at-will"

Entwistle Law describes the at-will doctrine at [

"Most of the states in this country still follow the at-will
employment doctrine. What this means is that an employer and an
employee are permitted to terminate the employment relationship
between them for any reason or no reason at all. Coincidentally, New
York State is one of the strongest remaining at-will employment
states. Many states in the union have created numerous exceptions to
the rule, but it still has a controlling effect on most employment

Exceptions to the at-will doctrine include discrimination based on
race, religion, or other factors. Other exceptions may involve whistle
blowing. Despite these standard exceptions, at-will makes it extremely
difficult for an employer or an employee to win a judgement against
the other based on termination of services.

There's a common misconception that as an employee, you're required to
give two weeks notice. In fact, as an at-will employee, you're
permitted to quit and leave on the spot (though I wouldn't suggest
this because it would probably burn bridges). Similarly, an employer
has the right to ask you to leave effective immediately. Since you
don't need to give two weeks notice, your employer is similarly not
obligated to provide you with any severance pay whatsoever. (They
*are* obligated to pay you for the time you've worked, but that's a
separate issue.) All of this assumes that you have no signed contract
which requires separation pay.

Most of the data which I uncovered about the requirements of an
employer to provide severance pay dealt with employees who had been
fired or laid off from their jobs. Very little of it specifically
dealt with severance pay due employees who were accepting a severance
package. I do feel, however, that given the "at-will" nature of your
employment, much of the following applies in your case.

One law firm's web site says the following at [ ]. (The
comments are not specific to New York, but likely apply.)

"Q:     Is there a law that requires employers to provide severance

No. An employer has no obligation to provide severance pay. The only
benefit that employers must by law provide is unemployment


Q:     I heard that my employer has a severance plan. If so, am I
entitled to benefits?

If an employer creates a severance plan, the employees covered by the
terms of the plan are entitled to the benefits that the plan provides
upon the occurrence of the event that triggers benefits. However, an
employer may create, modify or abolish a severance plan as it sees
fit. Most employers choose to have no severance plan at all.

If your employer has a severance plan, you are entitled to a written
summary description of it. The plan description will tell you what, if
anything, you are entitled to receive."

David Lira, an attorney in New York, writes something similar on [ ]:
"Generally, employees have no right to a severance package.  If
terminated, about the only thing they are entitled to receive, beyond
the last week of pay, is any unpaid vacation or annual leave...In rare
cases, employees might be able to claim the existance of a severance
plan, even though there is no formal severance plan.  This would be
very difficult to prove.  You would have to that the employer had a
regular practice of providing severance according to a fairly regular

Even though you may not be personally aware of a written agreement or
policy, [
] describes circumstances under which an employer may be required to
give you severance pay.

"An employer may be legally obligated to give you severance pay if you
were promised it, as evidenced by:

    * a written contract stating that severance will be paid
    * a promise, in an employee handbook, of severance pay
    * a long history of the company's paying severance to other
employees in your position, or
    * an oral promise to pay you severance -- although you may run
into difficulties proving the promise existed."

You've said that you "have no bargaining agreement, no signed
contracts, no verbal promises." Without something in writing, it is
difficult to determine what rights you might have under your companies
voluntary severance plan. The quote above lists some circumstances
where an implied promise exists. If none of these apply to you, I
recommend that you ask for a written copy of the policy. If they're
making you an offer specific to your circumstances, ask for a written
copy of their offer to you. Once the offer is made, show it to a
lawyer who specializes in employment contracts so that you understand
the terms and conditions being offered, along with what rights you are
giving up in return for payment.

Note that an employee handbook is not always considered grounds for a
promise as per the following New York ruling at [ ]:

"In Weiner, the Court of Appeals recognized a breach of contract claim
brought by an employee who alleged that he had relied on a provision
in McGraw-Hill’s employee handbook that discharge would be for just
cause only, where the handbook was referred to in the employment
application, where he turned down other offers of employment in
reliance on the just-cause provision, and where he had been required
to abide by the just-cause standard with respect to the employees he

The Court of Appeals distinguished the promise of just-cause-only
discharge in Weiner from the “more nebulous no reprisal clause” in
NYNEX’s business code, and based its decision on the effectiveness of
the handbook’s disclaimer of contractual rights, stating that
“routinely issued employee manuals, handbooks and policy statements
should not lightly be converted into binding employment agreements.”"

In the above case, the employee handbook contained a disclaimer that
it wasn't a binding employment agreemnt, so the court decided that it
couldn't be used as a contract.

Under certain circumstances, your severance agreement with your
employer may be required to comply with a federal law known as ERISA.
"The Employee Retirement Income Security Act of 1974, or ERISA,
protects the assets of millions of Americans so that funds placed in
retirement plans during their working lives will be there when they
retire," according to the US Department of Labor's page at [ ]. Even though
ERISA was designed to deal with retirement plans, its rules frequently
affect severance agreements, and the law may provide grounds for
filing suit against an employer.

Since I don't know the exact terms of your potential severance
agreement, I'm not in a position to guess as to whether or not your
agreement falls under ERISA. You can find a chart summarizing when
ERISA is applicable at [

Why should you care if ERISA applies to your case? Because of court
decisions like the following at [ ] which were
filed under ERISA. In this case, an employer lied about the future
availability of a retirement plan, and the former employee filed suit
under ERISA claiming that he would have waited to retire had he known
about the new plan.

"Employer Liable under ERISA for Misrepresentation About Retirement

An Illinois federal district court held that an employer violated its
fiduciary duties by misrepresenting the potential availability of an
early retirement incentive to an inquiring employee. In Beach v.
Commonwealth Edison Co., an employee who was considering retirement
after 31 years asked his supervisor and human resource officials
whether the company was considering any retirement incentive plans for
his division. He was assured that no such plan was being considered,
and if any incentive were considered, it would not include his
division. Relying on these assurances, the employee retired. Six weeks
later, the company announced a voluntary severance and incentive plan
for the employee's division. The retired employee was told he was not
eligible because he had already retired. Although the standard
generally applied in this type of case is whether a benefit was "under
serious consideration" at the time the employee inquired, in this case
the court applied a stricter standard because the employee relied on
the misrepresentation, and the human resource officers owed the
employee a fiduciary duty to provide accurate information. This case
highlights the importance of training supervisors and human resource
officials to deal with inquiries in an accurate and consistent

Another ERISA court case from the 2nd federal circuit provides the
most specific information I was able to find about your circumstances.
Since New York is part of the 2nd federal circuit according to [ ], the ruling described at [ ] is probably very
applicable to your case:

"In Murphy v. International Business Machines Corp., 23 F.3d 719 (2nd
Cir.), cert. denied, 115 S. Ct. 204 (1994) defendant established a
voluntary, severance plan, reserving the right to reject an applicant
if the company determined the employee was necessary to the efficient
operation of the business.  Plaintiff applied for benefits.  The facts
contained in the administrative record demonstrated that the company
considered her to be a critical resource and denied her application
for benefits.  The court affirmed, holding that given the highly
discretionary language of the plan, the denial of benefits was not
arbitrary or capricious."

In this case, IBM created a voluntary severance plan, but reserved the
right to withhold the plan from any employee whom it did not want to
retire. An employee filed suit, and the circuit court determined that
she was not eligible for benefits because the plan specified that IBM
could pick and choose which employees had the right to apply for the

The above case seems to directly apply to your circumstances. All
you've told me is that your employer wants to "deny this selectively
based on performance." You haven't specified if your employer wishes
to deny the benefits to high performers or low performers. Based on
the above case, I would believe that in fact, your employer can word
the policy to exclude any employee they wish, whether a high performer
or a low performer, as long as the policy does not violate federal or
state discrimination laws, or other specific exclusions under the
"at-will" doctrine.

I hope this information has been helpful. If any of the above is
unclear, feel free to ask for clarification before rating the answer.

Good luck!


Clarification of Answer by ephraim-ga on 11 Sep 2003 21:23 PDT
My search strategy was cut off in the final answer, so here it is:

I performed Google searches on the following terms:

"employment law" "severance plan"
"employment law" "severance plan" "new york"
law OR laws "severance plan"
law or laws "severance plan" "new york"
erisa "voluntary severance"
erisa "severance plan"
law OR laws "voluntary severance"
law OR laws "voluntary severance" "new york"
"new york" "at will employment"

blancbooks-ga rated this answer:5 out of 5 stars
Thank you - exactly what I was looking for.

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