We recently represented an executive in higher education selected to be a first-time College President. During a thoughtful and productive negotiation, both the School’s counsel and I had to acknowledge that many—and perhaps most—of the legal provisions in the contract which we were trying to sharpen in order to reach an accommodation acceptable to both sides, involved prospective events which might never actually happen!
Of course, that is one of the things which lawyers do: create protections which hopefully may never be needed. Such contractual protections not only address events which are far from certain, but often “level the playing field” between the academic executive and his or her institutional employer.
The medical equivalent may be a recommendation for an elective procedure, even surgery, to prevent an uncertain but potentially bad future outcome. As opposed to the medical model, however, which customarily addresses only likely physical events, lawyers must draft certain contractual provisions on the assumption that the other lawyer’s client may act irrationally or that unwanted circumstances may intervene.
One example is the necessary inclusion of a strong indemnity provision to protect an academic chief executive when he or she is sued for acting (or not acting) in good faith within the scope of their authority. A related provision confirms that this same chief executive will be included under the School’s directors’ and officers’ insurance policy.
Of course, considering the current climate in higher education, it is no longer a remote occurrence for a College or University President or Head of School to be named as a defendant in a lawsuit. Even five years ago this would have been far less likely, but today it is a real possibility, even if only to give the plaintiff in such a lawsuit some genuine or imagined “leverage”.
Still, the relative likelihood that such provisions will be needed or come into play is slim, maybe once in 30 or more actual situations. Despite apparently favorable odds, if such a situation does occur, the potentially disastrous consequences for any individual executive who lacks these protections are such that the School’s inability (or rare unwillingness) to agree to them could be a legitimate “deal breaker”.
Here is another situation where favorable odds may lead the lawyers negotiating the contract to a different result. This is our frequent attempt to include in the President’s or Head’s employment agreement—and the School’s willingness to provide or pay for—a supplemental long-term disability policy for the individual executive who is our client. This is based on some historical assumptions:
1. That an individual in his or her 40s or 50s is more likely to experience an event of serious disability than they are to die; and
2. That any group disability policy which the School provides for its senior administrative staff (and/or faculty) is almost surely inadequate when it comes to the President or Head, both in terms of the amount of benefits (customarily “capped” at a number far lower than the President’s salary), and length of payout (limited to weeks or months instead of years).
There are a number of reasons why it makes sense for the institution to provide this extra coverage for its leader. At the same time, if all other aspects of the academic executive’s contract are adequate, the absence of this insurance coverage, by itself, may not be the sort of “deal breaker” which causes a potential President or Head of School to walk away from the offered position. The executive may already have their own disability policy, or may be willing to pay for it him or herself, or choose to play the odds against potential disability based on family history or other factors.
Don’t get me wrong. No employment (or other) contract can protect against every possible occurrence. I disdain the explosion of sports betting, but in 150 years of professional Major League Baseball, no one had ever hit three home runs on the first three pitches of a game, as the Yankees did on March 29, so there were very good reasons for betting against it. However, for those larger and more likely issues, there should be fundamental contractual protections in place, even as counsel crosses their fingers and hopes that they will never be needed.
Lisa, Terri and I wish our friends and clients a bright, balmy and enjoyable Spring.
