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Employee Behavior and Severance

McDonald’s CEO May Have to Hurl His Severance.

McDonald’s Corp.’s former CEO appears to be experiencing what a lot of the restaurant chain’s customers do when dining there: intense cravings, temporary satisfaction, then extreme regret

McDonald’s filed a lawsuit August 10 in Delaware seeking to recover the generous severance it paid to its former CEO, Stephen Easterbrook, after discovering he had been involved in a consensual relationship with an employee.

McDonald’s claims in the lawsuit that after it learned of the CEO’s relationship with the employee, it investigated the situation and Easterbrook reported that “he had never engaged in a physical sexual relationship with any McDonald’s employee.” Trusting in his response, McDonald’s agreed to terminate him without cause in late 2019, even though he had violated company policy and exhibited poor judgment. As a result, the company paid him a separation package estimated to be worth millions.

Soon after the termination and payment, McDonald’s learned that Easterbrook had told quite a “Whopper.” In fact, the company says, he had sexual relations with three other McDonald’s employees in the year before he was fired, he approved an extraordinary stock grant worth hundreds of thousands of dollars to one paramour, and he sent “dozens of nude, partially nude, or sexually explicit photographs and videos of various women,” often using company e-mail. In short, this guy acted more like a sex-starved Ronald McDonald clown than a CEO.

McDonald’s, having discovered that it was burned by the grill-master, is now seeking to “ketchup,” as it were. The company claims in the complaint, “[h]ad Easterbrook been candid with McDonald’s investigators and not concealed evidence, McDonald’s would have known that it had legal cause to terminate him in 2019 and would not have agreed that his termination was ‘without cause,’” which allowed him to receive the generous severance package. The company claims he engaged in “fraud in the inducement” and, therefore, must disgorge the payments (back to the diner metaphor).

So, is this all true? Hold the pickles, we don’t know yet. Easterbrook has yet to file a response, but we have serious doubts that it will cut the mustard given McDonald’s assertion that it has “indisputable evidence” of his violations.

Lessons for employers: don’t give in to the temptation of doing a “drive-through” investigation of alleged misconduct by a high-ranking officer before paying him or her severance. Instead, eat your vegetables as it were, conduct a thorough and complete investigation, and consider spreading out severance payments over an extended period to keep the ex-employee in line and/or cut off payments if new wrongdoing comes to light.

Lessons for employees: even a consensual relationship at work that is not harassing can compromise one’s professional judgment and end in termination and disgrace. Try to avoid the convenient “fast food” at the company café when feeding your carnal appetite.

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