SEVERANCE PAYMENT SLIP AND FALL

BY G. A. FINCH

 

I was fascinated with a 22 December 2016 Crain’s Chicago article “Feud explodes at one of the city’s most connected PR firms” by columnist Greg Hinz.  The story intersected two worlds in which I practice law and work: executive employment and governmental affairs.  Although not personally acquainted with the antagonists, Leslie M. Fox and Guy Chipparoni, from my own circles, I have some familiarity with their respective body of work and reputations.

Let’s set the stage. In September, 2014, Greg Hinz pens a short Crain’s piece , writing “Two of the more colorful figures in Chicago’s world of media and politics are getting hitched – professionally, that is…. Neither Mr. Chipparoni nor Ms. Fox is a shrinking-violet type.  But both are capable of doing first class work.  We’ll see how they do together.” The hint of skepticism of Mr. Hinz was prescient.Boxing_gloves

Fox had helped organize and raise funds for Chicago’s hosting the 1996 Democratic National Convention and 1994 World Cup Games (the latter event yours truly had a bit part at the creation).  Chipparoni had been a flack for Illinois Governor Jim Edgar and founded his own successful public relations firm, Res Publica Group, of which he later asked Fox to become a part.

In December 2016, Fox filed a law suit against Chipparoni personally and his firm alleging that Chipparoni breached an employment agreement by not providing her severance benefits after she invoked a “Good Reason” termination provision  “because during her employment there was a consistent, persistent and continuous diminution of Fox’s contractual duties, responsibilities, powers and authorities which … were to be those customarily associated with the position of Executive Vice-President.”Bossth

Two of the most serious allegations were A) that Chipparoni diminished her ability to prevent Chipparoni from appropriating opportunities and assets belonging to the firm and B) that Chipparoni treated the firm as his alter ego and did not maintain the firm as a separate legal entity.  These allegations lay the foundation for a claim of personal liability of Chipparoni. Ouch!

Fox also has a more common variety breach of employment contract allegation that Chipparoni disparaged her to others.  We do not know from the complaint what alleged disparaging remarks were made.  We can assume that Chipparoni will file an answer to Fox’s complaint denying making disparaging statements or otherwise breaching the contract and file affirmative defenses to her claims.

In my executive employment blog, I have written that employers usually underestimate the destructive power that an angry, committed terminated employee can have on the morale, reputation, and resources of their organizations.  What many employers fail to understand in their not being reasonable in their severance offer is that the terminated, aggrieved employee may present a sympathetic image to a judge or arbitrator or the court of public opinion.  Moreover, the peeved employee may dig up bones of alleged legal and regulatory liability of which the organization’s higher ups may not even be aware.   The organization may have unintentionally birthed a whistle-blower.   A boss may have not ever thought of liability for the firm, let alone, his own personal liability

An employer’s having and abiding by a non-disparagement employment contract provision should be basic practice.  From the employer side, the employer does not want a disgruntled former executive trashing the company thereby diminishing the brand, reputation, and good will of the company.  The executive certainly does not want the executive’s ability to work effectively at the executive’s job to be made more difficult or to find new employment to be precluded by negative comments being made about the executive during the executive’s employment or after the executive’s employment.  In the Res Publica case, Chipparoni’s alleged disparaging comments has produced a claim of breach of contract.  A further take away for employers is that an employer must not say or write anything that injures the reputation of the executive that could form the elements of a defamation claim.

As I have blogged previously, severance payments are pragmatic.  Employers ought to consider providing for severance payment and a neutral letter-of-reference in separation agreements where there is no employee misconduct. These provisions often generate goodwill from a departing employee, thereby reducing lawsuits, and the provisions can be used to bind an employee to confidentiality, non-disparagement, and non-compete obligations as well as release most claims against the employer.  Severance payments demonstrate humaneness and compassion on the part of the employer.

courthouse

Employment lawsuits are expensive and generate bad public relations for a company. As long as the severance compensation is not excessive, it really is a no-brainer in terms of a cost-benefit trade-off for an employer.

Fox wisely obtained an attorney to review and negotiate her employment contract that sets the terms of her separation from Res Publica.  Among other things, it enables her to fire her employer when good reason is shown, namely, the diminishment of her executive responsibilities and receive a severance payment; it provides for non-disparagement of her to protect her reputation; and it sets out clearly the basis of her compensation. It remains to be seen whether she can prove her breach of contract claim, but protracted litigation creates bad optics for Res Publica and Mr. Chipparoni even if they prevail in the lawsuit.  After all, public relations and governmental relations are about achieving positive outcomes or damage control.  Neither positive outcome nor damage control has occurred here.  In my law practice I have seen that this kind of dispute probably will settle  sooner rather than later.

 

Copyright © 2017 by G. A. Finch, All rights reserved.

 

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