Generally, executive employment separations negotiations focus on how much severance will be paid. After all, with employment termination, the executive will be between positions. This could be a long time or short time, but that gap in employment can mean economic hardship – so most often times the focus is on how much severance will be paid.
But there are times, when severance pay, and money paid are not the biggest issue.
There are occasions when disparagement and even defamation of the CEO, C-level or senior executive can be even more far reaching than how much severance will be paid.
The executive, who is the victim of such disparagement, may be blackballed. He or she may face years of setbacks to his or her career. It can potentially cause a major disruption or derailment of your career and future prospects from what had previously been a promising and ever rising career.
This article includes three examples from recent representations that highlight the risks of the blackball. In each instance, we were able to take decisive actions to overcome the disparagement in the course of separation negotiations. If you, too, ever face these risks to your career, hopefully the resolutions achieved in each of these cases as well as the further advice given on non-disparagement in connection with separation agreements, will be of benefit to you.
C-Level Executive Terminated for Cause
The first example of the blackball was a C-level executive to be terminated for cause. The executive was given one day’s notice of termination. It was then the intention of the Company to fire this executive in front of the entire staff on the next business day.
Fortunately, that day of termination was a Friday and the executive was able to gain a one-day reprieve. So the public termination for cause, when presumably the executive would then be walked out the door, would occur on Monday.
I was contacted that Friday and hired on Saturday. I ascertained the facts the same day on Saturday and had my letter drafted and ready by Sunday morning. The facts I ascertained were that my client had been hired by a near-unanimous decision of the hiring committee, but there was one holdout who had a different person in mind. Over the next few years, this senior executive used his influence to work ceaselessly to undermine my client and eventually bring the Board to his viewpoint so that my client would be fired for cause.
My letter, which my client approved on Sunday morning, asserted in no uncertain terms that the supposed cause was merely a pretext, and that this was a wrongful termination rooted in illegal discrimination, and legal action would be brought unless immediate Board action was taken to rectify the situation, including full restoration of the good name and reputation of my client.
The letter had the desired effect. In calls with the Board Chairman later Sunday and negotiation into Sunday night, the resolution we proposed was adopted. Essentially, instead of the Company firing my client, my client fired them. On Monday, my client gave two weeks’ notice of decision to resign for personal reasons, and the Company’s issued press release (that we drafted for them) praised all the many accomplishments of my client and wished my client well. The executive separation agreement negotiated over the next week was financially, quite considerable, including a further huge deterrence feature if the bad apple senior executive (who was later fired) dared to again defame my client, in any way, post-termination.
C-Suite Executive Defamed in Press Release
The second example of the blackball was much less willful than the first but for this executive, even more devastating to my client’s career and prospects.
In this case, the C-level executive’s separation coincided with negative results for the Company. A press release issued by the Company gave a clear impression of linkage between the executive’s employment termination and the significant corporate setbacks. Although the corporate setbacks were no fault of the executive, and the termination was coincidental, this termination and linkage was picked up in the industry press. The publication has made the executive toxic in the industry. Where there had been numerous C-level executive opportunities, all had dried up and even executive recruiters no longer expressed interest.
In this case, we readily settled matters over money, but the bulk of separation negotiations focused on disparagement and the need for the Company to remedy the situation they had created if they wished to avoid a potential lawsuit. I drafted a proposed corrective SEC filing that the Company’s securities law counsel approved and filed. After the SEC filing, a subsequent press company release and trade press coverage, the necessary amends were made.
Senior Executive Harmed By Clause of Separation Agreement
In this third example, the defamation came from a clause in the separation agreement.
In this instance, the senior executive had already negotiated a significant raise in his severance pay. When I was brought into the severance negotiations, I raised a number of new issues but there was no further give on money, so no more could be secured.
However, a much bigger issue than the level of severance pay was the issue of employability for the next position.
The separation agreement had an ironclad provision that the executive could never again apply for a position with the Company or any of its affiliates and would never again be hired. The executive was confident that this clause would make him toxic to recruiters and future employers.
Here again I was successful in achieving modification of the clause to remove the blackball. In place of the draconian ironclad clause, I was able to suggest and achieve company acceptance of a “waiver of any right to reinstatement, where any future employment would be by consent of both parties, with no such agreement being required if the Company merges with or is acquired by a company where the executive was previously working.”
Mutual Non-Disparagement in Your Separation Agreement
Beyond grievous disparagement cases in recent client representations cited above, even if you do not face such a risk to your career, there are still areas in your employment separation that you do want to watch out for.
The first items concern termination and your personnel file. You want your separation agreement to be clear that there is no termination for cause — you want to be sure of what will be said, if anything, about your termination and you want to check over your personnel file to assure that there is no defamatory material present there.
Beyond those, your separation agreement or executive employment agreement will likely have a non-disparagement clause to protect the company. That should be made mutual. The clause should obligate the company to instruct senior management and often named executives to not state or publish on the web or elsewhere, any statements that reflect negatively on your past performance. The clause should be a mirror image of the same non-disparagement covenant the company asks you to agree to.
In the course of your business career, we all hope each of our companies will be successful and that each position will be as long lasting as we would like. But that is not always the case. What we do want to be sure of is that no matter what results the company achieves and no matter how long your tenure in the position, there is no disparagement of your service and that nothing will be said or written that will harm you as you seek to continue your career to the next position. If you ever have concerns in this matter, it is wise to work with an executive severance agreement attorney experienced in this field to assure the necessary protections and remediation where appropriate. The assurance of your good reputation and continued employability must always be paramount.
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