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McDonalds issues proceedings against former CEO

Barry Walsh
26/08/2020

Locations

Ireland

Ex-McDonald's CEO, Steve Easterbrook, is being sued by his former employer in the US for allegedly concealing evidence of misconduct prior to his separation from the Company. On the foot of these allegations, the fast food giant is seeking to clawback the attractive exit package which was made to him in late 2019.

The Company claims that it would have dismissed Mr Easterbrook 'with cause' had it been aware of his behaviour at the time.
 

Background

In late 2019, Mr Easterbrook agreed to 'separate' from the Company following admissions that he violated Company policy by engaging in a consensual relationship with a subordinate employee.

The recent filing by the Company claims that, Mr Easterbrook gave assurances at the time that this was the only relationship of an intimate nature that he had with an employee. Based on this assurance, the Company agreed to terminate his employment "without cause" and approved a substantive severance package of €675,000 in addition to stock options and benefits.

What happened next?

A subsequent internal investigation allegedly revealed that Mr Easterbrook had lied about three additional relationships with subordinates to secure a more lucrative severance package.

In light of the new evidence, the Company is seeking to recover the package from Mr Easterbrook, arguing that the company would not have agreed that his termination was 'without cause' had the truth been disclosed.

However, Mr Easterbrook denies the allegations and stated that the Company had this information when it negotiated his separation agreement.

What does this mean for Employers?

Lawsuits of this nature are extremely rare as employers tend not to engage in proceedings of this nature against former employees in order to prevent negative publicity (particularly in cases involving misconduct of senior employees) and to avoid expensive litigation costs.

However, the Company's decision to issue proceedings against Mr Easterbrook is, perhaps, indicative of a shifting landscape towards transparency and accountably for senior management. This course of action will undoubtedly put pressure on other employers to ensure that senior executives are sanctioned, or at least not be seen to be rewarded, if they breach internal policies.

This case also highlights the importance of a carefully drafted separation agreement that will specify when an employer is entitled to recoup any payment made to the employee on the termination of their employment or sue for damages. 

While consensual relationships in the workplace are not unlawful, a prudent employer will have a robust policy in place which is effectively and regularly communicated to employees indicating what is and is not acceptable. Employers should also review their grievance, bullying and harassment policies to ensure that they are adequate to deal with situations where relationships in the workplace make other employees uncomfortable or where a consensual relationship later becomes non-consensual.

Wriiten by Barry Walsh, Maeve Griffin and Cillian White. 

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Employment