On Wednesday, March 4, a jury in the District of Columbia found that former PBS talk show host Tavis Smiley violated his employment contract with the television network, assessing $1.5 million in damages against Smiley. More specifically, the jury found: (1) that Smiley was fired on account of allegations of sexual harassment against him, and not on account of his race, and (2) that PBS was entitled to damages of $1.5 million for money paid to Smiley for a season of his program that did not air. Read the recent Washington post news story here.
There are several take-aways here for executives and others with employment contracts:
- So-called “morals clauses” – clauses that prohibit an employee from engaging in conduct that may place the employer in a negative light or is injurious to the reputation of the employer – can be enforced and, in the era of “#MeToo,” likely will be enforced with more frequency.
- Executives may want to examine “for cause “definitions in their employment contracts with care, as many definitions contain a morals clause. When an agreement is negotiated at the time of hiring or renegotiated later, executives may wish to have a more clear definition of what alleged acts may trigger the clause.
- Executives may want to see clarity around the ability of a company to “claw back” payments previously made. In the Smiley matter, it appears that PBS was attempting to seek a return of monies paid to Smiley for a season of his show that never aired on account of his termination by the network. Executives may also want to examine other compensation agreements—such as supplemental executive retirement plans (“SERPs”), “mirror” 401(k)s, stock options, and bonus plans—to see whether such plans or programs allow for claw back of those payments if the company alleges an executive violated a morals clause or was terminated “for cause.”
Understanding employment and other compensation arrangement details can provide an executive the best chance of protecting themselves should the company attempt to terminate the executive or withhold promised compensation. In a recent case, Marcellino & Tyson attorney Bryan Tyson was able to use an executive compensation agreement (a “split-dollar” agreement) as both a sword and a shield to seek compensation for the executive while also defeating claims against him.
In Ravin v. Tyndall Federal Credit Union et al., Case No. 5:17-cv-160 (N.D. Fla.), a billion-dollar financial institution sued its former CFO for alleged financial issues; the financial institution also withheld retirement benefit payments to the executive. Using his knowledge of employment and ERISA law, Bryan sought the executive’s retirement benefits under ERISA, or the Employee Retirement Income Security Act, a federal law that often governs may executive compensation arrangements.
Bryan also argued that because the financial institution’s claims “related to” the executive compensation arrangement, they were “preempted” – or defeated – by ERISA. The case ultimately settled in the CFO’s favor with all claims against him dismissed.
As a result of the recovery in the Ravin matter, Bryan was inducted into the Million Dollar Advocates Forum, a group reserved for trial lawyers who have demonstrated exceptional skills, experience and excellence in advocacy by achieving trial verdicts, awards or settlements in the amount of one million dollars or more.