New York, Unemployment, and Severance Agreements

by Littler

Before offering severance to a departing employee, New York employers should be aware of recent changes to the New York unemployment insurance law.  These changes may affect both the timing and language of the severance agreement.

In 2011, the federal government passed the Unemployment Insurance Integrity Act, which required every state to make certain changes to its unemployment insurance law.1  As a result, New York amended New York Labor Law § 581(e)(3) and 12 N.Y.C.R.R. § 472.12, effective October 1, 2013, to require companies to respond to certain New York Department of Labor (NYDOL) unemployment insurance correspondence within specified periods of time.  Previously, Section 472.12(b)2 had provided employers with a loophole so that they could ignore and disregard correspondence from the NYDOL if, for instance, they agreed, in a severance agreement with a particular employee, not to contest unemployment insurance.  Under the new law and regulation, however, employers can no longer do so.

Specifically, Section 472.12(a)-(b) states that employers must respond to “notices of potential charges” within 10 calendar days of the date of the notice and all other requests for information “within the number of days specified in the written (including electronic transmission) or verbal request for information.”  Moreover, an employer’s response to a request for information must contain “adequate information.”  To be considered adequate, “the response must: (1) specify the reason(s) for the separation, or other issue affecting the claimant’s eligibility or entitlement for benefits; (2) answer, in good faith, all questions in detail; and (3) provide all relevant information and documentation for the Department of Labor to render a correct determination regarding the claimant’s eligibility or entitlement for benefits.”3

After the first untimely and/or inadequate response (which can be excused for good cause), the employer’s unemployment insurance account “shall not be relieved of charges relating to overpayments” except if (1) the charges were due to a NYDOL error, or (2) the employer was “unable to respond due to a disaster emergency” as declared by the governor or the president.4  This means that if the employer fails to respond, submits an untimely response, or submits an inadequate response, the employer’s account will be charged for the benefits paid to the employee, even if he or she would have otherwise been deemed ineligible for unemployment benefits.

This is an important change.  An employer now has to be diligent in responding to inquiries from the NYDOL, lest it find itself in the position where its experience rating is charged for unemployment insurance benefits to an individual who is ineligible or not entitled to those benefits. 

This change in the law, however, also has broader implications.  An employer who enters into a severance agreement with a former employee should no longer promise not to respond to the NYDOL’s unemployment insurance inquiries, so that the employee is essentially guaranteed unemployment benefits.  Furthermore, an employer should be extremely careful in entering into a severance agreement where the employer agrees not to contest the NYDOL’s grant of unemployment benefits to an employee.  If an employer does agree to such a provision, the language should make it exceedingly clear that nothing in the severance agreement interferes with the employer’s obligation to respond adequately and truthfully to inquiries from the NYDOL. 

Another recent change in New York’s unemployment insurance law has further implications with respect to severance agreements.  Effective January 1, 2014, the general rule is that employees will not be eligible to receive unemployment benefits for any week that they receive “dismissal pay”5 “attributable to the [employee’s] weekly earnings,” if it “exceeds the maximum weekly benefit rate.”6  However, this rule does not apply “during any weeks in which the initial payment of dismissal pay is made more than thirty days from the last day of the [employee’s] employment.”7  It also does not apply if the severance pay is small enough so that it does not exceed “the maximum weekly benefit rate” established by the NYDOL applicable to that employee.”8  However, this is a low threshold – the maximum weekly benefit rate is currently $405.00 – and will likely not come into play.

In other words, under the newly revised Section 591(6), if an employer decides to time one or more of an employee’s severance payments within the first 30 days following his or her termination, he or she will likely not be eligible to receive unemployment benefits until such time as his or her severance benefits have been paid in full.  However, if an employer waits to start paying its former employee severance until after 30 days from his or her termination, then the severance payments will likely have no effect on the employee’s eligibility for unemployment.  Payment of a lump sum severance does not change the analysis because Section 591(6)(c) instructs that it should be treated as “allocated on a weekly basis” from the employee’s termination date, based on the employee’s actual weekly remuneration, until the lump sum is paid out.  Thus, the employee will be ineligible to receive unemployment benefits during the time he or she is being paid severance benefits, whether paid in increments or in a lump sum. 

Employers should think about how they should structure severance payments in light of this change in the law.  If the employer wants to enable the former employee to receive unemployment benefits immediately after his or her termination date, then the employer may wish to state in the severance agreement that severance payments will not commence any earlier than 31 days after the employee’s termination date.

As a final matter, employers should be aware that, effective January 1, 2014, the wage base for unemployment insurance contributions has increased from $8,500 to $10,300, and the six lowest contribution rates were eliminated.  The wage base will continue to rise every year until 2026, when it will reach $13,000.

1 See GJ Stillson MacDonnell and William Hays Weissman, Federal Unemployment Insurance Integrity Act Creates Tough New Standards for Employers Responding to State Unemployment Insurance Claim Notices, Littler ASAP (Oct. 11, 2013). 

2 The former version of 12 N.Y.C.R.R. § 472.12(b) stated: “If the commissioner determines that it is impossible or impracticable for any employer or group of employers to comply with subdivision (a) of this section with respect to all or a class of their employees, he may exempt such employer or group of employers from such compliance with respect to such employees . . . .”

3 12 N.Y.C.R.R. § 472.12(f).

4 Id. § 472.12(g)-(j).

5 Severance pay, termed “dismissal pay” in the statute, “does not include payments for pension, retirement, accrued leave, and health insurance or payments for supplemental unemployment benefits.”  New York Labor Law § 591(6)(b).

6 Id. § 591(6)(a), (c). 

7 Id. § 591(6)(d). 

8 Id. § 591(6)(a).  

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Littler | Attorney Advertising

Written by:


Littler on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.