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Don’t Resign!

A few years ago, I was irritated by a spate of futile and often damaging acts of public contrition and wrote an article entitled “Never Apologize!” Noted “public intellectual” Cass Sunstein recently jumped on the same bandwagon (see “Apologies Are For Losers” in The New York Times of Sunday, July 28, 2019).

I offer this piece in the hope of heading off another piece of counterproductive behavior.

Want to make your executive employment attorneys’ hearts sink in their chests? Just tell them that you have an employment problem which you have dealt with by tendering your resignation: “I couldn’t take it anymore, so I told them to take their big job and big salary and stick it. I feel better already.”

I assure you that any experienced lawyer hearing those words will not feel better, since the executive’s precipitous action in resigning, no matter how understandably motivated by the desire of an unhappy and frustrated employee to do something — anything — has removed or disarmed a major (often the major) weapon in the attorney’s arsenal of means to rectify the executive’s problem.

Here is an illustrative hypothetical example, drawn from a composite of situations we have actually experienced:

Evelyn Executive has been recruited to leave her secure position at a major media company in order to move her family from New York City to Akron, Ohio in order to accept employment as Senior Vice President of the Crouse Clay Products Manufacturing Co.

With the aid of her executive employment attorneys, she was able to negotiate a comprehensive (and lucrative) employment agreement: base salary of $450,000 and a target annual bonus in an equal amount (in order to get below the total compensation tax surcharge threshold of One Million Dollars); a substantial deferred compensation package, including both cash and equity; 18 months of severance if she is terminated without “Cause”; a fair definition of Cause for termination, as well as a provision which allows her to voluntarily depart from the Company and still receive severance pay in the event of several specified “Good Reasons” (one of which would be the death, disability or departure of her mentor, Claude CEO, who preceded her to Akron as Chairman and persuaded her to make a major career switch and geographical relocation in order to work with him).

Evelyn also received a sign-on bonus, which is hers to keep unless she voluntarily leaves without Good Reason or is terminated with Cause within the first two years of her employment, and the Company paid her moving expenses from New York to Ohio (and back in the event of her termination without Cause or if she elects to depart on the occurrence of Good Reason). In sum, Evelyn has obtained a contract giving her the sort of prospective rewards and protections we routinely seek for our clients.

But after only six months at the new job, Evelyn is having significant problems. Charlie CFO, despite company-wide, mandatory, interactive sexual harassment training, keeps insisting that he and Evelyn should take adjoining hotel rooms on their frequent business trips. Additionally, the President of the Company, accustomed to screaming at male executives when he receives any bad news about the business, has decided, despite the prohibition of such behavior in the Company’s handbook, to become an Equal Opportunity Bully and frequently scream at Evelyn as well. On a hot summer day, she reacts to one particularly vile and unfair display of the President’s temper by telling him, “I quit.” She then calls her executive employment attorneys.

What is wrong — perhaps tragically wrong — with this sequence of events? No prize for recognizing the obvious: Evelyn should have consulted her attorneys before resigning.

The Company can now argue that Evelyn voluntarily gave up many if not all of the protections of her employment agreement, including her bonus and deferred compensation packages as well as her severance, and may even have to pay back her sign-on bonus as well! Her lawyers are left arguing that she actually was forced out as a result of gender discrimination, sexual harassment and improper conduct by her immediate superior, all of which are decent arguments given the factual circumstances, but lack the force and certainty of Evelyn’s contractual entitlements. Even if she has not completely snatched defeat from the jaws of victory, she has materially and unnecessarily weakened her position. This is what ages lawyers prematurely.

Clients have understandable, though often irrational, fears about incurring legal fees, but a call to counsel before doing anything, let alone something as dramatic as resigning, would have been the best investment Evelyn could have made. She will now pay more — perhaps much more — to achieve a decent termination package.

Wishing all my readers a fine Autumn, as Keats said, the “season of mists and mellow fruitfulness.”

About the Author

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George Birnbaum

Since 1980, sophisticated business people have relied on George to apply the meticulous preparation, attention to detail, and devotion to his clients he learned from fabled trial lawyer Louis Nizer. A graduate of Harvard College and Harvard Law School, George has over 35 years of distinguished deal-making, litigation, mediation and arbitration experience which he has used to negotiate high-stakes agreements for senior executives and select business clients throughout the United States.