SEVERANCE AGREEMENT CLAUSES AND THE NLRB

On February 21, 2023, the Board issued McLaren Macomb, 372 NLRB No. 58, returning to longstanding precedent holding that employers violate the National Labor Relations Act (NLRA or Act) when they offer employees severance agreements that require employees to broadly waive their rights under the Act. Specifically, the Board held that where a severance agreement unlawfully conditions receipt of severance benefits on the forfeiture of statutory rights, the mere proffer of the agreement itself violates Section 8(a)(1) of the Act because it has a reasonable tendency to interfere with or restrain the prospective exercise of those rights - both by the separating employee and those who remain employed.

According to NLRB general counsel: “Lawful severance agreements may continue to be proffered, maintained, and enforced if they do not have overly broad provisions that affect the rights of employees to engage with one another to improve their lot as employees” ....[However], the future rights of employees as well as the rights of the public may not be waived in a way that precludes future exercise of Section 7 rights, including engaging in protected concerted activities and accessing the Agency.”

See NLRB General Counsel Issues Memo with Guidance to Regions on Severance Agreements

EMPLOYMENT DISCRIMINATION: SEVERANCE RELEASE FRAUDULENTLY INDUCED

Evans v. Bloomberg LP, NYLJ August 13, 2020, Date filed: 2020-07-31, Court: Supreme Court, New York, Judge: Justice Lucy Billings, Case Number: 160707/2019 (emphasis supplied)

"I. INTRODUCTION

 In this action for discrimination based on age, disability, and gender and for retaliation, defendants move to dismiss the amended complaint based on documentary evidence: a release that plaintiff signed November 28, 2016, barring her discrimination and retaliation claims. C.P.L.R. §3211(a)(1) and (5). Defendants also seek a declaratory judgment that the release is valid and enforceable. C.P.L.R. §3001. The court grants defendants’ motion to dismiss plaintiff’s claims that the release is void and declares that it is not void due to her incapacity, duress, the release’s ambiguity, its lack of consideration, and its violation of statutory requirements, without opposition. C.P.L.R. §§3001, 3211(a)(1) and (5); N.Y. Gen. Oblig. Law §15303; Allen v. Riese Org., Inc., 106 A.D.3d 514, 515 (1st Dep’t 2013); Serbin v. Rodman Principal Invs., LLC, 87 A.D.3d 870, 870 (1st Dep’t 2011). The court denies defendants’ motion to dismiss plaintiff’s claim that the release is void because it was fraudulently induced, however, as explained below. If it is void, then of course it does not bar her discrimination and retaliation claims. GoSmile, Inc. v. Levine, 81 A.D.3d 77, 82 (1st Dep’t 2010); Federal Ins. Co. v. Kozlowski, 18 A.D.3d 33, 39 (1st Dep’t 2005). Plaintiff timely filed the amended complaint before defendants served any answer to her original complaint. C.P.L.R. §3025(a). Although plaintiff’s amended complaint repeatedly refers to “other similarly situated members of her protected class,” Aff. of Elise M. Bloom Ex. 1 (Am. V. Compl.), plaintiff has clarified that her amended complaint does not allege a class action. Therefore defendants’ motion to dismiss plaintiff’s class action allegations is academic.

II. THE ALLEGED FRAUDULENT INDUCEMENT

To void the release due to its fraudulent inducement, plaintiff must show that defendants misrepresented or concealed a material fact, knowing the misstatement or omission was false, to induce plaintiff to rely on it, and that plaintiff justifiably relied on the misrepresentation or omission and incurred damages from that reliance. Centro Empresarial Cempresa S.A. v. América Móvil, S.A.B. de C.V., 17 N.Y.3d 269, 276 (2011); Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 178 (2011); Laduzinski v. Alvarez & Marsal Taxand LLC, 132 A.D.3d 164, 167 (1st Dep’t 2015); Perrotti v. Becker, Glynn, Melamed & Muffy LLP, 82 A.D.3d 495, 498 (1st Dep’t 2011). Plaintiff alleges that she signed the agreement releasing her claims against defendants, her former employer and former supervisor, based on their misrepresentation that her position was eliminated as part of a reduction in force. An attachment to the release identifies six other employees in her media department whose employment was terminated simultaneously with hers as part of a reduction in force. Bloom Aff. Ex. 1 (Am. V. Compl.)  Defendants insist that this document refutes plaintiff’s claim of fraudulent inducement, but the attachment only supports her claim that defendants gave her a reason for her termination, a reduction in force, that was false. Plaintiff claims that in 2019 she learned that she and those six other employees, all over age 40, were replaced by younger employees. Id.

Defendants’ further documentary evidence, plaintiff’s email November 21, 2016, to a colleague at Bloomberg L.P., acknowledging that plaintiff’s “division in the media group was dismantled,” also supports her reliance on defendants’ representation in her agreeing to the release. Aff. of Darron Smith Ex. A.

Defendants then inconsistently suggest that plaintiff’s reliance on their own representations of a reduction in force was unjustified. Pointing to the amended complaint’s allegations that plaintiff was a sophisticated, experienced employee in the media industry who produced significant revenue and managed business relationships critical to her employer’s success, defendants criticize her for not giving more studied consideration to the terms of her severance and verifying defendants’ representations. Again, viewing the evidence most favorably to plaintiff, this need for verification only supports her claim that defendants’ offered reason for her termination was questionable. JF Capital Advisors, LLC v. Lightstone Group, LLC, 25 N.Y.3d 759, 764 (2015); Miglino v. Bally Total Fitness of Greater N.Y., Inc., 20 N.Y.3d 342, 351 (2013); ABN AMRO Bank, N.V. v. MBIA Inc., 17 N.Y.3d 208, 227 (2011); Drug Policy Alliance v. New York City Tax Comm’n, 131 A.D.3d 815, 816 (1st Dep’t 2015).

Plaintiff’s allegations regarding defendants’ conduct, in hindsight, reveal cause to question defendants’ representations. On November 20, 2016, after plaintiff had been hospitalized for a nervous breakdown, Bloomberg L.P.’s Human Resources representative Alyson Zeitz telephoned plaintiff and inquired whether she would need leave for a mental disability. When plaintiff responded that she intended to return to work as soon as possible, Zeitz informed plaintiff that her division within her department was being eliminated. Bloom Aff. Ex. 1 (Am. V. Compl.)  If that fact were true, Zeitz had no reason to inquire whether plaintiff intended to take leave for a disability. In sum, plaintiff’s allegations that defendants falsely represented that her position was eliminated as part of a reduction in force, on which plaintiff relied in agreeing to the release, when in fact she was replaced by a younger employee, and her position and division were not eliminated, demonstrate fraudulent inducement that damaged her. American Media, Inc. v. Bainbridge & Knight Labs., LLC, 135 A.D.3d 477, 477-78 (1st Dep’t 2016); Laduzinski v. Alvarez & Marsal Taxand LLC, 132 A.D.3d at 168-69.
Plaintiff also alleges that defendants concealed their severance policies and that Zeitz misrepresented to plaintiff that payment of her accrued salary, bonus, and severance pay was contingent on her signing the release, when in fact the payment was due her regardless of her signing the release. Bloom Aff. Ex. 1 (Am. V. Compl.)

These allegations that defendants concealed their severance policies and falsely represented that she would receive the payments due her only if she signed the release, on which she also relied in agreeing to it, when in fact she was owed the payment under defendants’ policies without signing the release, likewise demonstrate fraudulent inducement that damaged her. Id.


While the release acknowledges that plaintiff has agreed to it knowingly and voluntarily, if fraudulent inducement voids the release, then this provision is void along with the release as a whole. Any knowing agreement by plaintiff is based on her knowledge upon entering the agreement. Johnson v. Lebanese Am. Univ., 84 A.D.3d 427, 430 (1st Dep’t 2011). Defendants offer no reason why plaintiff would have known that the information defendant gave her, on which her knowledge was based, was false. Of course that information regarding the reduction in force may have been entirely true, but the complaint alleges to the contrary, which at this stage the court must accept as true. JF Capital Advisors, LLC v. Lightstone Group, LLC, 25 N.Y.3d at 764; Miglino v. Bally Total Fitness of Greater N.Y., Inc., 20 N.Y.3d at 351; ABN AMRO Bank, N.V. v. MBIA Inc., 17 N.Y.3d at 227; Drug Policy Alliance v. New York City Tax Comm’n, 131 A.D.3d at 816."

SEVERANCE PAY AND UNEMPLOYMENT INSURANCE

From the DOL website:

"Q: How will dismissal or severance pay affect my Unemployment Insurance Benefits?

A: You may eligible to collect benefits under the following conditions: The weekly amount of dismissal/severance pay is less than the maximum weekly benefit rate


OR


The initial severance payment is made more than 30 days after the last day of your employment 


OR


The dismissal/severance pay is stopped


AND


You have enough earnings in the base period to establish a claim.


You must notify the TCC if you receive or will receive dismissal severance pay.  Failure to do so could result in an overpayment of benefits and other penalties. "

For more information, see https://labor.ny.gov/formsdocs/factsheets/pdfs/p825.pdf

UNEMPLOYMENT INSURANCE - VOLUNTARY SEPARATION OR NOT - PART 2

The Appeal Board decision posted yesterday was reversed by the 3rd Department. MATTER OF GILL, 2016 NY Slip Op 8140 - NY: Appellate Div., 3rd Dept. 2016:

"Claimant initially worked for the employer as a welder. Following an injury resulting in his extended absence from work, the employer terminated claimant's employment in April 2013 for staffing reasons. Shortly thereafter, in June 2013, claimant was rehired by the employer as a boiler mechanic. He subsequently filed several grievances contesting, among other things, the denial of a pay increase and vacation leave. In addition, between February 2014 and April 2014, claimant made several requests for leaves of absence for differing reasons. The employer initially denied these requests, but ultimately granted claimant an indefinite leave of absence on April 28, 2014. Following an arbitration hearing, claimant signed a settlement agreement under which he received a payment of $10,000 from the employer and agreed to resign from his position effective May 1, 2014.

Thereafter, claimant filed an application for unemployment insurance benefits. His application was initially denied on the ground that he was disqualified from receiving benefits because he voluntarily left his employment without good cause. Claimant requested a hearing and, at its conclusion, an Administrative Law Judge sustained the initial determination. The Unemployment Insurance Appeal Board, however, reversed this decision and ruled that claimant was entitled to receive benefits. The employer now appeals.

Under the circumstances presented, claimant's resignation and acceptance of the $10,000 payment in settlement of outstanding grievances and other claims constitutes a voluntary separation from employment disqualifying him from receiving unemployment insurance benefits (see Matter of Livingston [Hudacs], 210 AD2d 721, 722 [1994]; Matter of Mathison [County of Dutchess—Hudacs], 203 AD2d 832, 832-833 [1994], lv denied 83 NY2d 760 [1994]). There is no indication that claimant was forced to accept the settlement agreement or that he was subject to disciplinary action if he did not. Consequently, the Board's decision finding claimant eligible to receive benefits is not supported by substantial evidence and must be reversed. Although the employer maintains that claimant is subject to a forfeiture of benefits based upon his willful misrepresentation, this issue was not before the Board and is not properly before this Court."

UNEMPLOYMENT INSURANCE - VOLUNTARY SEPARATION OR NOT - PART 1

Mailed and Filed: APRIL 01, 2015IN THE MATTER OF: Appeal Board No. 584131:

OPINION: The credible evidence establishes that the claimant was separated from his employment on April 28, 2014. The evidence fails to establish, however, that such separation was voluntary. The claimant was not granted his previously requested and denied three weeks of leave on April 28, 2014, nor had he asked to go on three weeks' leave starting on that date. Rather, the claimant was involuntarily placed on an indefinite leave without pay on April 28, 2014. He was not allowed to work on Tuesday, April 29, 2014, or thereafter, and his inquiries as to why he was then being placed on leave and about returning to work went unanswered by the employer. This was an involuntary separation for unemployment insurance purposes, and accordingly, the determination of voluntary separation without good cause must be overruled. The claimant's signature on the settlement agreement dated June 10, 2014, in which he purportedly resigned effective May 1, 2014, and whatever he may have indicated to the Department of Labor about the reason for his separation when and after he filed his claim are immaterial - as he had already been separated involuntarily for unemployment insurance purposes on April 28, 2014.

NEW YORK UNEMPLOYMENT INSURANCE - WAIVER

A discussion was had as to whether, in a severance agreement, an employee can waive his/her right to claim unemployment insurance.

Having never seen this issue before, I discovered that the Labor Law has a clear statement on this:

"Sec. 595. Benefit right inalienable.

1. Waiver agreement void. No agreement by an employee to waive his rights under this article shall be valid.
2. Assignment of benefits void. Benefits shall not be assigned, pledged, encumbered, released, or commuted and shall be exempt from all claims of creditors and from levy, execution, and attachment, or other remedy for recovery or collection of a debt. This exemption may not be waived."

However, a severance agreement can raise other issues as the Appeal Board noted:

"Voluntarily separating from employment to accept a severance package when continuing work is available does not constitute good cause for leaving employment (See, e.g., Matter of Cammisa, 38 A.D.3d1146 [3d Dept. 2007]; Matter of Campolattano, 687 A.D.2d 711 [3d Dept. 1999]; Matter of Standford, 54 A.D.3d 1095 [3d Dept. 2008]). "