A severance agreement that worked fine five years ago is increasingly likely to be unenforceable in New York today. The combination of federal Older Workers Benefit Protection Act requirements, the National Labor Relations Board’s McLaren Macomb framework, the 2023 amendments to General Obligations Law § 5-336, and a series of New York-specific disclosure obligations have layered enough rules on top of the standard severance template that even sophisticated employers regularly produce defective releases. A New York business law attorney reviewing severance agreements typically finds three or four enforceability issues per template, and the consequences of those issues do not surface until the former employee accepts the severance payment and then files a claim the release was supposed to bar. Here is what current New York severance law actually requires and where the traps sit.
The Layered Framework Behind Every New York Severance
Severance agreements in New York operate under several overlapping regimes. The starting point is federal law: the Older Workers Benefit Protection Act for any release of age discrimination claims, the NLRA framework for non-disparagement and confidentiality provisions affecting concerted activity, and the standard contract-law requirements for valid releases.
New York adds several specific overlays. General Obligations Law § 5-336 governs confidentiality provisions in agreements resolving harassment, discrimination, or retaliation claims. The 2023 amendments to § 5-336 added new prohibitions that void the release if certain provisions are included. Labor Law § 740, the New York whistleblower statute, creates retaliation protections that severance releases cannot validly waive in advance. The New York State Human Rights Law and the New York City Human Rights Law each carry their own waiver requirements and limitations.
Most templates address some of these regimes well and others not at all. The gap is where exposure lives.
OWBPA Compliance for Employees Over 40
The federal Older Workers Benefit Protection Act applies whenever a severance agreement includes a release of claims under the Age Discrimination in Employment Act, which covers employees aged 40 or older. For an individual termination, OWBPA requires:
- A 21-day consideration period during which the employee can review the agreement
- A 7-day revocation period after signing, during which the employee can rescind
- Written advice to consult with an attorney
- A reference to ADEA rights specifically
- Consideration in addition to anything the employee was already entitled to
For a group termination, the consideration period extends to 45 days, and the employer must provide a disclosure listing the job titles and ages of all employees in the decisional unit who were and were not selected for the program. The disclosure has to be drafted with care: too narrow a definition of decisional unit looks pretextual, too broad a definition makes the disclosure meaningless. Defective disclosures are a recurring basis for invalidating ADEA releases.
The 7-day revocation period is not waivable under any circumstances. The 21-day or 45-day consideration period can be waived by the employee, but the waiver must be knowing and voluntary. Pressuring an employee to sign before the period expires invalidates the waiver and the release.
What § 5-336 Does to a Standard Severance Template
The November 17, 2023 amendments to General Obligations Law § 5-336 made several common severance provisions disqualifying when the underlying matter involves discrimination, harassment, or retaliation.
A release agreement is unenforceable under § 5-336(3) if it contains any of three provisions:
- A liquidated damages provision tied to breach of an NDA or non-disparagement clause
- A forfeiture provision requiring the employee to repay or forfeit settlement consideration for breach of an NDA or non-disparagement clause
- An affirmative statement, assertion, or disclaimer that the employee was not subject to unlawful discrimination, harassment, or retaliation
These three provisions appeared in essentially every standard New York severance template before 2023. Most templates still contain them. An employer using an older template in a separation involving any actual or threatened harassment or retaliation claim has handed the employee a release the employee can ignore while keeping the severance payment.
The statute’s reach to ordinary separation agreements releasing unasserted claims is contested, with stronger arguments that the restrictions apply only when there is an actual claim. Until the courts work this out, the conservative approach is to draft severance agreements as if the restrictions apply, particularly where the departure has any connection to a complaint, internal investigation, or threatened action.
The required notice language has also expanded. Confidentiality provisions covering discrimination, harassment, or retaliation must include a notice that the employee can speak with the New York Attorney General, the EEOC, the New York State Division of Human Rights, the NYC Commission on Human Rights, and the employee’s own attorney without violating the agreement.
What a New York Business Law Attorney Watches in Non-Disparagement Drafting
Non-disparagement clauses in severance agreements have become one of the most legally constrained areas of drafting in the past several years.
The NLRB’s 2023 McLaren Macomb decision held that broad non-disparagement and confidentiality provisions in severance agreements can violate Section 7 of the National Labor Relations Act, which protects concerted activity for mutual aid or protection. The decision applies to non-supervisory employees regardless of union representation, which sweeps in most rank-and-file employees at private sector employers.
Provisions narrowly drafted to protect legitimate confidential information and to bar truly disparaging statements about the company in their commercial capacity may survive McLaren Macomb scrutiny. Provisions that broadly restrict an employee from saying anything negative about the company, its officers, or its products will not. The case law continues to develop, and the NLRB’s enforcement priorities shift with administration changes, but the prudent drafting position has not yet returned to pre-McLaren Macomb breadth.
Non-disparagement provisions also need to coexist with the employee’s right to participate in agency proceedings and to file charges. SEC Rule 21F-17 prohibits agreements that interfere with whistleblower communications to the Commission, and similar rules apply to other federal agencies.
The Whistleblower and Public Policy Carve-Outs Most Templates Miss
New York Labor Law § 740, the state’s whistleblower statute, was substantially expanded in 2022 to cover retaliation against employees who report or refuse to participate in activities the employee reasonably believes violate any law, rule, or regulation, or pose a substantial and specific danger to public health or safety. The expansion brought New York’s whistleblower protection close to the broadest in the country.
Severance releases generally cannot validly waive future whistleblower retaliation claims, and many cannot validly waive certain accrued claims either. Releases that purport to waive Labor Law § 740 claims without appropriate carve-outs are partially void, and the void portion can take other provisions with it.
Federal whistleblower statutes, including Sarbanes-Oxley, Dodd-Frank, the False Claims Act, and OSHA’s whistleblower provisions, each have their own waiver limitations. A severance release intended to be enforceable across these regimes needs explicit carve-outs for each, drafted with current statutory references.
Practical Steps Before the Next Termination
A few specific moves materially reduce risk.
Update the standard severance template with current § 5-336(3) compliance, removing liquidated damages, forfeiture-of-consideration, and “no discrimination” affirmation provisions for any termination connected to harassment, discrimination, or retaliation issues.
Calibrate non-disparagement and confidentiality provisions to current McLaren Macomb drafting standards, with carve-outs for protected concerted activity, agency communications, whistleblower reporting, and truthful statements about workplace conduct.
For employees aged 40 or older, verify OWBPA compliance: 21 or 45 days of consideration, 7-day revocation, written advice to consult counsel, ADEA-specific reference, and disclosure schedules for group terminations.
Include the expanded notice language identifying the New York Attorney General as a permitted recipient of information that would otherwise be subject to confidentiality.
Confirm that whistleblower carve-outs cover Labor Law § 740, federal whistleblower statutes, and SEC and other agency communications.
For independent contractors, audit the separation template, since § 5-336 now reaches contractor relationships and most contractor templates have not been updated.
When to Bring in a New York Business Law Attorney
Severance drafting in New York requires layering several federal and state regimes onto a single document, and the consequences of getting any one regime wrong can void the release. A New York business law attorney updating templates and reviewing individual separation agreements before they go out can identify the disqualifying provisions, draft enforceable alternatives, and keep the company out of the position of having paid severance on a release the courts will not enforce.
The Mundaca Law Firm advises New York employers on severance and separation agreements, employment compliance, and the broader employment law issues that surface alongside them. If your severance template has not been reviewed under the current § 5-336 framework, the McLaren Macomb standard, and the expanded Labor Law § 740 protections, an audit before the next termination is materially less expensive than discovering an unenforceable release after the severance payment has gone out.
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