120 Million Reasons for Executives to Check Their Behavior

By Broderick C. Dunn, Esq.

 

Charlie Rose. Al Franken. Matt Lauer. Kevin Spacey. These names are just a few titans of their respective industries who have been toppled by the #metoo movement. Former CBS chief executive, Leslie Moonves, is just the latest name to join the ignominious list. CBS Corporation put out a statement on December 17, 2018:

“We have determined that there are grounds to terminate for cause including his willful and material misfeasance, violation of company policies and breach of his employment contract, as well as his willful failure to cooperate fully with the company’s investigation.”

https://www.nytimes.com/2018/12/17/business/media/les-moonves-cbs-severance.html

As a result of Mr. Moonves’ alleged actions, CBS is refusing to honor his $120 million exit payout per his employment agreement.

 

While the District of Columbia, Maryland, and Virginia are at-will jurisdictions meaning, with few exceptions, an employer can terminate an employee at any time and for any reason, many executive level, private sector personnel like Mr. Moonves are lucky enough to have employment agreements which state that their employment is not terminable at-will. For example, many of these employment agreements are for a specific term and state that they may only be terminated before the end of the term “for cause.” While “cause” is generally defined in executive employment agreements, there are still many red flags that executives need to be on the lookout for when negotiating with their employers.

 

Executives should be wary of any employment agreement which allows an employer to terminate an executive’s employment for cause if the executive is convicted of a crime. If crime is not defined to include felonies or crimes involving moral turpitude, an executive could be terminated for cause merely for getting a reckless driving ticket.

 

Executives should also be wary of any employment agreement which allows an employer to terminate the executive for “any breach of company rules.” Without further definition, a breach of company rules could be something as innocuous as participating in an office March Madness Pool or using a company computer to check your fantasy football team.

 

Finally, executive employment agreements should have a cure provision in them. Should an executive run afoul of some company policy or procedure, a cure provision would force the company to notify the executive about the policy or procedure that he or she violated and the executive would then be given time to cure their breach. This is basically a second chance. Companies can be liable for breach of contract when they terminate an executive employment agreement for cause but do not give the executive a chance to cure. Mr. Moonves and CBS will likely end up in arbitration or other lengthy litigation. Avoid his problems by drafting a favorable employment agreement and adapting your behavior to the changing workplace. After all, you just might have 120 million reasons why.

 

Broderick C. Dunn practices business litigation and employment law. To schedule a consultation, please call 703-865-7480. You can follow Mr. Dunn on Twitter at https://twitter.com/broderick_dunn and connect with him on LinkedIn https://www.linkedin.com/in/broderickdunn.