Employee Terminations: Delaying the Inevitable is Inevitably Bad for the Company

Post It - Waiting.jpgEmployee terminations are an unfortunate reality of every business. But that doesn't mean employers and their managers are good at carrying out terminations. 

Take for example a response Sir James Dyson (yes, the vacuum guy was knighted by Queen Elizabeth II in 2006) gave when he responded to Bloomberg Businessweek's "Ask a Billionaire" feature that asked what is the best way to fire someone:

It's terrifying. It took me six months to pluck up the courage to fire the first person.

I have not had the opportunity to represent too many billionaires, but in my experience in representing other business owners, this response is fairly typical and understandable. Often this reluctance is justified that "maybe" the employee will turn it around or that the employee will get the message and just quit. But whatever the reasons - real or manufactured - for delaying the firing will often make the situation worse for the employer and its operations. 

Waiting to terminate only compounds the problem.

When it comes to employee terminations, the fact is an employee may not work-out for a business for any number of reasons. Regardless of those reasons, at the end of the day the interests of the employee and the company are no longer (if they were ever) aligned. And it is a mistake for this misalignment to continue.  

But when the employer fails or otherwise delays in making the termination, now the employer is compounding the problem by continuing in a misaligned relationship. This situation is not good for anyone - the employee, the employer, and its operations or other employees, especially those who work along-side with the yet-to-be terminated employee. 

And another real concern employers should consider is that if an unhealthy employment relationship is allowed to fester, that employee may become disgruntled and actively undermine the business and its relationships with customers or vendors.   

But Haste Makes Waste(ful) Litigation. 

Nothing in this post should be read to mean that any termination should be a spontaneous decision. Instead, employers need to make sure every termination follows a well-reasoned and documented process. The better the process, the more likely the employer will be able to avoid a later claim the termination was unlawful.

See this link for an actual example of a manager's testimony is directly contradicted by emails and other documents. Also, see this link for considerations employers should examine with their employment attorneys.  

Conclusion

Ending a person's employment is a major event and it needs to be handled carefully and should be handled with dignity. But once it is determined an employee's performance or conduct is not acceptable, termination may be the only option. But once this is substantiated, the employer should not delay the carrying out the decision: The employee needs to be terminated no matter how terrifying the experience may be for the employer.  

For more information about investigating employee misconduct and terminating the employment relationship, contact employment attorney Jason Shinn. Mr. Shinn routinely collaborates with employers and human resource professionals to properly document issues involving employee misconduct and terminations. This documentation has proven invaluable in fending off claims for wrongful terminations.  

Jim Leyland - A Great Baseball Manager, but a Bad Example for Managing Your Company's HR

Jim_Leyland_pregame_at_Dodger_Stadium (1).jpgJim Leyland, the now former manager for the Detroit Tigers, officially announced his resignation today. Under his tenure, which lasted eight seasons, Mr. Leyland took the Tigers to two World Series and had an overall record of 700-597.

An example in "what not to do" in managing a company's human resources.

Mr. Leyland's tenure with the Tigers can offer human resource professionals a few important insights on how to make decisions when it comes to terminating employees. And while I like Mr. Leyland and despite his success, his management style is a lesson in "what not to do" when it comes to managing your company's human resource department. 

Again, I like Mr. Leyland and I have every reason to believe he knows as much or more about baseball than the cumulative insight of all of the past and current t-ball coaches, former high-school baseball players, writers, other "experts," etc. that made up the loud and consistent constituency who previously called for Mr. Leyland's job. 

The truth is, however, Mr. Leyland's decision-making process in managing a baseball team is not something your company should follow when it comes to terminating an employee. This is because when it came to managing Mr. Leyland was known for managing on "instinct" rather than metrics. For example, in explaining major revisions to the starting line-up of the Tigers going into Game 4 of the American League Championship Series against the Red Sox, Mr. Leyland explained

I was laying on my couch at home last night watching the Dodgers and the Cardinals. And I just got to thinking ... I think something had to be done ... I did what I thought was the right thing to do ... You can say I’m crazy, you can say I’m nuts, you can say I’m dumb, you can say whatever the hell you want. 

(If you read the full context of this quote, Mr. Leyland was making the point that his decision would mean pundits would be talking about it and him instead of his player Austin Jackson who had been struggling as the lead-off hitter for the Tigers. In other words, Mr. Leyland did what he routinely did - make decisions with an eye towards protecting his players - not a bad example to follow for any organization).

In assessing Mr. Leyland's decision-making process, one critic described him as,

a relic of days gone by, where you managed by instinct and feel. Then, smart people realized that you can base decisions on the situation and cold, hard numbers, and "go by the gut" managers like Leyland became increasingly obsolete.

Regardless of whether you agree with this (I don't), applying this sort of decision-making process to employment decisions is almost always going to set your company up for striking out when it comes to federal and Michigan employment law matters.

How Leyland's Management Style Can Play out in Employment Discrimination Claims.

Consider for example a recent wrongful employment termination and discrimination lawsuit in which I represented the terminated employee.

In that lawsuit, the manager responsible for terminating the employee eagerly testified that her decision was made based on a "careful" and "deliberate" assessment of objective documentation that she had specifically asked the employee's direct supervisor to prepare. In other words, this appeared to be an "anti-Leyland" decision to terminate an employee.

The problem with the manager's story, however, was that the decision-making process she testified to going through did not happen. Instead, the manager confirmed that the information she used to "carefully" and "deliberately" terminate the employee was sent by email as several attachments. When shown this email, the manager admitted it was sent on a Wednesday at 7:42 PM.

However, another manager, the human resource manager, had already advised the employee that morning he was terminated. In other words, there was over (at least) an 11 hour discrepency between the termination and when the manager could have even opened the email containing the documents she purportedly relied upon in terminating the employee.    

Confronted with this undisputed timeline, the manager's testimony changed to assurances that the managers had "probably" talked prior to terminating the employee and that the manager "could have reviewed" some documents prior to terminating the employee. But when pressed about the significant discrepancies and what actually happened (as opposed to what "could have" happened), the defendant company's manager was unable to recall a single conversation or reviewing a single document before making the decision to terminate this employee.

The manager eventually admitted, taking a page from Mr. Leyland's management book, that she relied only on her "belief" that the terminated employee was not a "team player." It doesn't take a MLB manager to tell you that subjective "belief" is not even in the ballpark of "careful" and "deliberate" decision-making process when it comes to terminating an employee, especially when your company tries to substantiate that "belief" after the fact.

Closing Thoughts on Managing an Employee Termination. 

Again, I like Mr. Leyland and I appreciate what he has done for Michigan and the Tigers. But using "guts," instinct, or beliefs for managing your company's human resources is no way to run a successful company. This is especially true - as the above deposition testimony shows - where there is almost always a paper trail to create a documented timeline of events. And if your company's human resource professional or managers' beliefs or instincts don't match up with that timeline, it is that much easier to attack the termination decision vis-a-vis the process that went into making that decision.

Once a company's decision-making process is called into question, employers should expect any close calls, i.e., factual determinations, will no longer be resolved as a matter of law, which means a jury is going to decide those issues. And similar to an umpire, sometimes juries make the wrong call, which can change the outcome of a game. For this reason alone, it is important to not only make the right call when it comes to terminating an employee, but to be able to back up the decision with objective, documented reasons.  

For more information about eliminating and managing employment law risks, including investigating employee misconduct or properly terminating the employment relationship, contact Jason Shinn. Mr. Shinn is a Michigan employment law attorney who has represented employers and individuals since 2001. Photograph is from the Wikimedia Commons.

Michigan Court Refuses to Expand Claim for Wrongful Termination in Violation of Public Policy

No in Red.jpgWhile maybe not quite as exciting as last night's fantastic win by the Detroit Tigers, Michigan employers got a great win this week from the Michigan Court of Appeals involving a claim for wrongful termination in violation of a public policy.

Specifically, in Irwin v Ciena Health Care Management, Inc. (PDF), a nurse was employed in an at-will position. After she was terminated, she filed suit urging the Court to recognize a cause of action for the wrongful termination of a health care professional for refusing to provide care that allegedly violated the standard of care applicable to medical professionals.

The Michigan Supreme Court has recognized a cause of action for wrongful termination in violation of public policy when the plaintiff is terminated "for failure or refusal to violate the law in the course of employment." Such claims are recognized even where the employment was relationship is "at-will." But as explained below, the Court declined to expand the public policy exception. 

Michigan's Public Policy Exception to At-Will Employment 

The Michigan Supreme Court has recognized only three situations when public policy will preclude an employer from terminating an at-will employee:

  1. The employee is discharged in violation of an explicit legislative statement prohibiting discharge of employees who act in accordance with a statutory right or duty;
  2. The employee is discharged for the failure or refusal to violate the law in the course of employment, which may extend to principles derived from authoritative sources other than statutes, such as principles promulgated in constitutional provisions, common law, and regulations; and
  3. The employee is discharged for exercising a right conferred by a well-established legislative enactment.

Returning to the plaintiff's claim for wrongful termination in violation of public policy, the Court reasoned that the standard of care applicable to medical malpractice claims is not based on an objective legal source. Instead, it must be established through expert testimony on a case-by-case basis. And then, the fact-finder can choose to accept or reject that testimony. Accordingly, in contrast to the three public policy examples above, the determination of the standard of care owed to a patient is a fact-driven, subjective inquiry.

Further, the Court also expressed its reluctance to make a "significant departure" from Michigan employment law in recognizing what it considered a new cause of action. Accordingly, it noted that any new public policy basis for a wrongful termination claim should come from the Michigan Legislature or Supreme Court. 

The Take-Away for Employers

First, this decision is a good reminder that even when your company has an at-will employment relationship, there are important limitations for when an employee can be terminated. And the above case is a fine example of a smart employment attorney coming up with a creative strategy to argue around the at-will employment relationship. While this legal strategy ultimately failed, it still exposed the employer to liability and the expense of defending the wrongful termination lawsuit. 

Second and building on the preceding point, any time your company is terminating an employee it is a good idea to first consult with an employment attorney or, at least, an exhaustive employment termination checklist. In doing so your company or HR professional will be in a better position to identify red-flags in otherwise "low risk" terminations and separate out "high-risk" terminations that may require additional attention in order to eliminate or reduce the chance of an employment lawsuit later being filed.     

For more information about Michigan employment law or wrongful termination claims, contact Jason Shinn. Since 2001, he has worked with employers and employees to address federal and Michigan employment law compliance and, if necessary, litigated such matters in state and federal courts. He also comments on employment and HR related issues on Twitter as well as moderating the Michigan HR Toolbox, a LinkedIn group for HR professionals. 

Management Lessons from the NFL: Avoiding Monday Morning Quarterbacking of Your Termination Decisions

Football PenaltyKevin Clark of the Wall Street Journal recently wrote an article, Management Secrets of the NFL, which offered a number of points relative to running a business. 

One point that stood out related to hiring and firing decisions. Specifically, the article noted that 12 of the 32 NFL teams have hired a new coach since the beginning of 2011.

At the front of the hiring pack has been the Miami Dolphins, which have hired seven coaches since 2000. In contrast, the Pittsburgh Steelers have had only three coaches since 1969, with eight Superbowl appearances and six wins.

Employer Considerations for Hiring and Firing Employees

Fortunately for most employers, the management or mismanagement of their company is not on full display like an NFL organization or subject to the intense scrutiny from fans and supposed pundits.

Nonetheless, hiring and firing employees deserve intense scrutiny for any number of reasons that all chip-away at a company's bottom-line. One absolutely necessary goal for any employer, however, is to make sure an employee termination does not become a public event through the filing of an employment lawsuit, which also only multiplies the depletion of a companies resources, i.e., management time for responding to the lawsuit and money to pay for the defense of the lawsuit. 

For this reason, the more employers can do to build the case for an employee's termination, the better off it will be going forward. Here are a few considerations employers should examine with the benefit of experienced employment counsel. 

  1. Don't recreate history; Document it the first time around. Before you decide to fire an employee, make sure that decision has been thoroughly thought through. And equally important, has the reasons giving rise to this decision been properly documented. For example, if the reason an employee is fired is because of incompetence, don't just take the supervisor's word for it without more. Instead, ask for documentation of the incompetence, including dates and specific details. Such documentation will go a long way to protect your company in the future if the employee challenges your decision. 
  2. Documentation and Second Chances? Documentation may also provide an important check against a manager acting arbitrarily or to assess whether it is appropriate to give an employee a second chance. My experience is that second-chances are often not appropriate. However, if an employee's deficiencies are documented, than such documentation can be compared to the metrics your company uses to evaluate employees in order to make an informed decision. Going back to the NFL theme that opened this post, New York Giants ignored media and fan calls to fire Tom Coughlin after his first three seasons of failing to win a playoff game. Presumably, the Giants' management kept Coughlin based on management's own assessment of the coaching job Coughlin had done. Two Super Bowls later, keeping Coughlin seems to be a good management decision.     
  3. Smart Documentation. The building block for the preceding point is making sure managers understand the value of documentation. So an important habit to drill into managers is that if something is not written down, then it should be assumed a judge or jury will not believe it happened. The other side of the coin, however, is that written words can't be changed. So be sure you and your managers carefully consider how a report may be interpreted down the road, especially by a slick lawyer looking to make his or her client's case.  

Conclusion

The goal for business owners their management and HR professionals should be the same as their employment lawyers when it comes to an employee termination: Imagine the worst-case scenario and then work backwards to prevent it. In terms of employee terminations, a worst case scenario is an employment discrimination lawsuit for a wrongful termination. 

But bad is never good until worse happens (Danish Proverb). And worse happens when an employment discrimination lawsuit is now being decided by a jury who is listening to spotty or inconsistent witness testimony with no supporting documentation to backup your company's prior decision.

For more information about assessing your company's hiring and firing procedures, management training, or responding to a termination, contact Jason M. Shinn, who is a Michigan licensed employment lawyer who regularly assist companies and individuals in responding to employment law compliance and representing in employment related lawsuits.  

How to Terminate an Employee - Baseball Bat Optional

Baseball Bat.jpgBloomberg Businessweek recently featured in its "How to Issue" insight from the manager of the Baltimore Orioles, Buck Showalter, about how to terminate an employee. Mr. Showalter has been a Major League Baseball manager for 14 seasons. Among his recommendations for letting an employee go: 

You’re trying to define reality as you and the organization see it ... You have to be aggressive. If you’re speaking like you’re not real sure about the action that’s getting ready to take place, that really creates a lot of anxiety. So I’ve rehearsed it. And I try to be prepared for whatever might go a different direction… I’ve had a bat within short reach.

Recommendations for Terminating an Employee

Relying on a bat as part of the termination process is not recommended. But it is recommended that employers and HR managers view ending the employment relationship as a process - not an event.

As part of that process, employers and HR should consider the following: 

  1. Record all instances of misconduct, insubordination, or substandard performance. Any such instances should be written up as soon as they occur, even if they are not incorporated into the written evaluation until later.
  2. Before any evaluation process, evaluators should receive written guidelines reminding them of appropriate evaluation behaviors.
  3. Employers should not address employee termination on an ad hoc basis. Instead, managers and decision-makers should have policies and procedures that are consistently followed.  
  4. Avoid disciplinary policies that limit employers to specific conduct. Thus even if an employer's discipline policy is normally progressive, the policy should provide for the exercise of discretion, e.g., disciplining or terminating an employee without exhausting all the steps outlined in the policy.
  5. Before disciplining or terminating an employee for poor job performance, employers should make sure adequate documentation of the employee’s performance deficiencies exist and there is no evidence of disparate treatment.

For additional recommendations relating to the end of the employment relationship, see Employee Exit Interviews - What's On Your Checklist? Also, contact Jason Shinn for further questions or advice on how to properly end the employment relationship. 

Employee Exit Interviews - What's On Your Checklist?

Checklist.jpgI was recently discussing the role exit interviews should have for employers with a group of HR professionals. Their focus had generally been on what the employer can learn from the departing employee and how this insight could improve the overall operation-side of the business.  

In theory, I don't disagree with having a genuine interest in obtaining feedback from the departing employee. But, I shared my view that a more defensive-minded approach to exit interviews is also needed. In fact, I previously wrote that employees are more disgruntled than ever according to various news sources.

Further, if the exit interview arises out of a termination situation, it is highly likely that meaningful feedback is not going to be provided.

An Employer's Exit Interview Checklist

So from the view of a jaded pessimist ten plus year career as an employment lawyer, the following points are offered for consideration for a defensive-minded exit interview:

  1. Have a documented exit interview checklist. The reason for documenting such a checklist is so that exit interviews are consistently performed and the essentials are consistently covered. This point is underscored in The Checklist Manifesto by Atul Gawande (a great read), where the author notes "if you miss just one key thing, you might as well not have made the effort at all." As demonstrated in the next point, the same principal applies to exit interviews.   
  2. Building upon the preceding point, an exit interview should be carefully developed with management and an experienced employment lawyer. That development and process, however, should include an internal pre-interview assessment where company IT professionals confirm (i) There have been no unusual file transfers/increased email activity with large file attachments leaving the company; (ii) No USB drives installed on the departing employee's computer with corresponding file transfers; (iii) All passwords and any "back doors" into the network have been closed. Failing to take any one of these steps may result in the employer later discovering that a disgruntled former employee has caused significant damage and destruction to the company network and data that could have otherwise been prevented.  
  3. It is also a good idea to "remind" the departing employee of any continuing obligations under noncompete agreements and the like. Further, documenting this "reminder" may later prove to be a critical piece of evidence for an employer's lawsuit and damages for violating a noncompete agreement.   

Additional Employer & HR Resources for Conducting Exit Interviews

Contact Jason Shinn for more information about what to include in an exit interview as a means to protect confidential company. Also follow this link for information about investigating the theft of company information by departing employees.

And for Michigan HR professionals, please consider joining our LinkedIn Group, the Michigan HR Toolbox where these and other issues relevant to HR and employers are routinely discussed. 

Exploring an Employer's Obligations to Pay Accrued Vacation and Severance under Michigan Law

Couple Snorkeling.jpgVacations and the weekends - it's what we often work for. But what happens when a termination ends the work and there is unused vacation time? 

A number of employers have been updating their employee handbooks and policies. In doing so, these employers often raise questions about both vacation pay and severance packages. More specifically, when is an employer obligated to pay accrued vacation pay and what obligations, if any, are there for paying severance to an employee.  

Overview of Michigan's Wage & Fringe Benefits Act  

The starting point for both questions is the Michigan Wage & Fringe Benefits Act, MCL 408.475(1).

As to severance pay, an employer must pay to an employee voluntarily leaving employment or discharged from employment all wages earned and due, as soon as the amount can (with due diligence) be determined. MCL § 408.475(1) and (2).

In other words, under both circumstances (a voluntary or involuntary termination) an employer is not required to pay an employee any wages that are not earned or due.

This is important where an employee provides two weeks notice before ending his or her employment relationship, but the employer elects (usually for business reasons) to terminate the individual prior to the running of the two week notice period. Under those circumstances, there is no requirement to pay an individual for the entire notice period (e.g., two weeks) for any wages that are not earned or due to be paid, assuming there is no employment or collective bargaining agreement to the contary. 

Payment of Accrued Vacation under Michigan Law

The other common question Michigan employers have asked is if a person's employment is terminated, under what circumstances must that person be paid for any vacation time that may have accrued?  

The short answer is that an employer is only legally required to pay an individual accrued vacation time if the applicable employment agreement or policy provides for it. Specifically, the Michigan Wage & Fringe Benefits Act provides that an employer must pay fringe benefits to or on behalf of an employee in accordance with the terms set forth in the written contract or written policy.

Additionally, Michigan's Wage & Fringe Benefits Act defines fringe benefits as compensation other than the wages or salary paid to an employee and specifies such items as vacation time and sick time. MCL 408.471(e).

Creating Incentives to Provide Advance Notice Before Terminating Employment 

With the preceding in mind, Michigan employers actually have opportunities for implementing termination policies and procedures that encourage individuals to provide advance notice (e.g., two weeks notice) before ending their employment relationship.

This is because under Michigan's Wage & Fringe Benefits Act it is possible to draft employee termination provisions that create a financial incentive to provide the requested notice. Consider for example that with proper drafting, employers could make payment of accrued vacation time contingent upon providing a designated notice before ending the employment relationship and failing to provide such notice forfeits any right to accrued vacation pay.  

For more information on drafting employee policies, including provisions for encouraging employees to provide advance notice before ending their employment relationship, contact Jason Shinn.   

 

Employer Obligations When it Comes to Employees and Jury Duty

Jury.jpgAn unlikely employer recently found out that discharging or otherwise disciplining an employee for complying with jury duty is not only bad publicity but also violates Michigan law.   

Specifically, the Detroit Free Press (by Christina Hall) reported that a law firm employee called for jury duty in a murder case pending in Macomb County Circuit Court allegedly produced a letter from her law firm employer indicating that if she did not return to work that she would be replaced. The law firm was not disclosed by the Free Press.

The Macomb County Circuit Court Judge, Mary Chrzanowski, found it “unbelievable” that a law firm had the “audacity to do this.”

The Judge is absolutely right. Jury service is a critical civic duty and a cornerstone of our democratic society. And I'm sure this law firm will be "reminded" about this the next time their attorneys appear before Judge Chrzanowski (I would hate to be the attorney to draw that short straw).  

And this incident is also a good reminder for employers that Michigan - like most states - forbid employers from disciplining or discharging an employee because the employee obeyed or intended to obey a jury summons. See MCL § 600.1348. In fact, Michigan employers who take such action are guilty of a misdemeanor and may be held (and have been held) in contempt of court for violating this statute. 

Take-aways for Employers when it comes to Employees and Jury Duty

In addition to the obvious, i.e., don't  discharge or discipline an employee for complying with jury duty, a few more points to consider: 

Employees, even employees at will, may not be terminated for a reason that violates the public policy of the state, which includes complying with jury duty. Smetts v. Whiteford Systems, Inc., 1990 U.S. Dist. LEXIS 3908 (W.D. Mich. Apr. 11, 1990)(denying motion for summary judgment because a question of fact remained as to whether plaintiff's juror summons was a "significant factor" in employer's decision to discharge plaintiff).

Employers should have a jury duty provision in their employee handbook. Among the topics that this provision should address are: 

  • Describing the procedures an employee is required to follow after being notified that the employee has been summoned for jury service.
  • If the employee is excused from jury duty, must the employee return to work that day?
  • Determining whether employees will be paid during their leave for jury duty and, if so, at what rate? Also, how will any pay an employee received from the courts for jury duty be handled?

In regard to this last point, it is important to note jury duty pay issues may bring into play the Fair Labor Standards Act. Consider for example that under the overtime regulations, employees must be paid on a salary basis to be considered exempt from the FLSA’s overtime requirements. 29 CFR 541.602. There are a number of requirements to meet this exemption, including deductions may not be made for absences due to jury duty or attendance as a witness. 29 CFR 541.602(a). An employer, however, may offset any jury or witness pay received by the employee against the salary due for the week in question. 29 CFR 541.602(b)(3).

As with any content on this site, this material should not be used as a substitute for an attorney’s independent judgment, drafting, and research of your particular situation.

Does Your Employment Separation Agreement Mean What You Think it Means? Michigan Court Addresses Meaning of "Disparagement"

Signing Contract.jpgA recent Michigan Court of Appeals opinion highlights the importance of clearly and precisely drafting separation agreements.

Meaning of "Disparagement" 

In Sohal v. Mich. State Univ. Bd. of Trs. & Davoren Chick M.D., (May 17, 2011) the parties executed a Resignation Agreement and Release relating to Plaintiff's agreement to voluntarily resign from MSU's medical residency program. Specifically, Plaintiff agreed to resign from his position and the parties further agreed that they would not "knowingly disparage" the other.

Plaintiff was a medical resident in Michigan State University's program. It was, however, unanimously determined that he should be dismissed from the program. Plaintiff agreed to resign from his position, and MSU agreed to segregate any records regarding the dismissal hearing from his file. The parties further agreed that they would not "knowingly disparage" the other and waived the right to "sue, grieve, or otherwise bring a complaint against the other." Plaintiff eventually sued the university and an individual doctor and claimed that both breached the resignation agreement and, therefore, Plaintiff and should no longer be bound by it, i.e., he was entitled to rescission of the contract, including the restriction against suing.
As to the breach, Plaintiff claimed that since leaving MSU, he had been initially accepted into another residence program but was later denied admission based on information conveyed by the Defendant university and an individual defendant. The statements were directly 
responsive to specific inquiries that were required to be answered __. 
Defendants, citing a Black's Law Dictionary 
 In regard to the definition, defendants stated: “‘Disparagement’ is ‘a false and injurious statement that discredits or detracts from the reputation of another’s property, product, or business.’  Black’s Law Dictionary (7 th ed. 1999).”
relied on a different definition of “disparagement,” stating: “The American Heritage Dictionary states that ‘disparagement’ is ‘(1) To speak of in a slighting or disrespectful way; belittle. (2) To reduce esteem or rank.’ . . . See also Webster’s New World Dictionary . . . (also 
including a definition of disparage that does not include an element of falsehood.)”
definition of the term "disparagement," claimed that plaintiff failed to put forth any evidence that Chick or anyone else associated with MSU disparaged him. The non-disparagement clause of the resignation agreement stated - "The University agrees that its Trustees, President, directors, officers, and administrators will not knowingly disparage Dr. Sohal. Dr. Sohal agrees that he will not knowingly disparage the University, its Trustees, President, directors, officers, employees, and administrators." At issue was whether defendants knowingly disparaged plaintiff in violation of the agreement. In denying plaintiff's motion and granting judgment to defendants, the trial court noted that it had previously decided not to use the Black's Law definition of disparagement proffered by defendants. Instead, the trial court applied the American Heritage Dictionary definition proffered by plaintiff, explaining that "contracts are interpreted by the commonly understood meaning of their words." The trial court held that even under that definition, plaintiff failed to present any evidence establishing that defendants disparaged him - "slighted, disrespected, or belittled him." He argued that because the term "disparage" can reasonably be understood in at least three different ways, the term was ambiguous and extrinsic evidence should have been considered to ascertain the intended meaning of the term and the non-disparagement clause. The court held that the term "disparage" in the non-disparagement clause was not ambiguous. While plaintiff attempted to ascribe several "reasonable" meanings to the term "disparage," and thus the non-disparagement clause, "the term fairly admits of but one interpretation." The court noted that several courts of other jurisdictions have determined that the term "disparage" in non-disparagement clauses of settlement agreements was unambiguous, and have similarly defined the term. Affirmed.
Plaintiff only asserts that pursuant to the nondisparagement clause of the resignation agreement, defendants had a duty to remain silent regarding his alleged poor performance. 
The take away
Saying what you mean is not always as easy as meaning what you say. It is therefore, important to review your employment agreements and termination agreements (as well as any other agreements for use in your business) to eliminate or at least reduce ambiguities.  

After signing the Resignation Agreement plaintiff filed suit alleging that since leaving MSU, he "attempted on numerous occasions to associate with another residency program . . . . In each case, he was initially accepted into the program but as soon as the program contact[ed] Defendants . . . , [he] was denied a resident position based on information conveyed by the Defendants."

There were a number of legal issues involved in Plaintiff's suit, but for purposes of this post, the parties disagreed as to what a key term - "disparage" - meant.  

Defendants relied on a legal definition of the term "disparagement:" "Disparagement" is "a false and injurious statement that discredits or detracts from the reputation of another's property, product, or business." Black's Law Dictionary (7th ed. 1999).

Plaintiff argued for a different definition of "disparagement:" "The American Heritage Dictionary states that 'disparagement' is '(1) To speak of in a slighting or disrespectful way; belittle. (2) To reduce esteem or rank."

The trial court accepted Plaintiff's definition. On appeal, the Court agreed and further concluded that the term "disparage" in a non-disparagement clause of a resignation agreement was unambiguous and should be given its plain, ordinary dictionary meaning - not the Black's Law Dictionary. Because it was unambiguous, extrinsic evidence (evidence outside of the four corners of the agreement) could not be considered to determine the meaning of the term.

The take away

Unfortunately, having reviewed a number of separation agreements in the recent past, both employers and employees would greatly benefit from re-reviewing with experienced legal counsel their separation agreements (or any employment agreements for that matter). Such a review could eliminate or at least reduce the risks that a party will later successfully claim the agreement's ambiguities preclude enforcement or requires a court to decide what the contract means.

Further, this review will also benefit employers in overlooking any of the numerous legal obligations that an employer must satisfy when an employee is terminated. The last thing an employer wants to discover is that a problem employment issue believed to have been resolved is now resurrected because of mistake in drafting. 

A Short Checklist to Avoid a Disgruntled Former Employee Costing Your Company $200,000

Virus Code.jpgA disgruntled former Gucci employee is reported to have caused in excess of $200,000 in damages to his former employer (as reported by Computer World) and now faces criminal charges.

Specifically, the New York District Attorney's indictment alleges that Sam Chihlung Yin fraudulently obtained IT access after he was fired. From there, the indictment alleges that Mr. Yin used his inside-knowledge of the Gucci IT infrastructure to cause damage that included deleting data, shutting down servers and leaving Gucci with an estimated $200,000 cleanup bill.

What Employers Should Take Away from this Incident

For Gucci, this incident is an expensive reminder of why it is critical to have a termination checklist that should be followed once a decision has been made to terminate an employee, especially an IT employee. For employers looking to avoid Gucci's mistake, a non-exhaustive checklist to consider includes the following:   

  1. Do not communicate the termination until the employer is prepared to escort the employee off the premises. It is generally better to pay the employee severance benefits with no expectation of receiving anything in return than to pay the price of a vindictive employee trashing or misappropriating company information.
  2. Coordinate with IT personnel to remove all access to the IT systems, e-mail, remote access, or any other means to access the employer's network. Ideally this will be done while the employee is being terminated. Or, if the terminated employee is a member of IT, eliminate access after working hours and then complete the termination process the next working day. Companies could also consider covertly transferring the IT employee into an IT "sandbox" until all normal IT access can be severed.    
  3. Obtain custody of all employer owned PCs or laptops as well as all company owned external hard drives or other portable media before the employee is terminated. 
  4. Remove any rights the employee may have as administrator of the organization's Web site and extranets. While you are at it, remove the employee's page or profile, if any, from the organization's Web site.
  5. Take an inventory of all of the files or projects on which the employee was working, and make sure that all such materials have been returned. This is particularly important for employees who work remotely.
  6. Even after going though a termination checklist, an employer should monitor its network to ensure that the former employee has not regained access and to make sure that company information has not been compromised. 
  7. Employers should also remind employees that assisting former employees to access the company's IT systems is prohibited. It is important that current employees are aware of this policy, especially at or around the time of a termination.
  8. If there is concern that the former employee has taken steps to destroy or steal data, careful consideration should be given for retaining a forensic computer examiner to take necessary steps to properly preserve evidence of wrongdoing.

The Gucci incident illustrates that it only takes one lapse in security to severely destroy or cause significant damage. It is better to be vigilant than a statistic.