Can a company withhold severance?

UPDATED: Oct 1, 2022

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Can a company withhold severance?

My company terminated my employment after 22 years by stating that my job position was eliminated. All employees sign a handbook that provides 2 weeks of severance per year capped at 26 weeks. They made me sign a separation agreement giving me 28 weeks if I stayed an extra month, which I did. After the termination took effect, I found out that a job was posted with a similar description to my job. I applied and was told that I was the most qualified for

the job. It it pays less and I’d have to sign an agreement giving up my severance in order to take the job. It certainly sounds unethical and I was wondering if it’s illegal to break the contracts on severance or hold it hostage for this new reduced salary position?

Asked on March 28, 2018 under Employment Labor Law, New York


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

It's neither unethical nor illegal. You agree to sever-ance for sever-ing (cutting; ending) your employment relationship with the company. Why should they have to give you severance when you don't end the relationship but take a different job? Severance is payment made when employment ends; if employment doesn't end, even if you take a different or lower paying job within the same organization, you are not doing the thing (walking away from the job presumably without suing, since that's a standard part of severance agreements) you had agreed to do in exchange for the payment; therefore, they do not need to pay you.

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