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The Effect of the Pandemic on Executive Employment in Finance, Media and Higher Education

“The life of the law” wrote legendary Supreme Court Justice Oliver Wendell Holmes, Jr. in The Common Law (1881), “has not been logic, it has been experience.” More than half a century ago, in his book The Historical Foundations of the Common Law (1969), the British legal historian S.F.C. Milsom elaborated on Holmes’ maxim by demonstrating that our law developed from the Middle Ages not as a result of some overarching plan or theory, but by ordinary practicing lawyers trying to solve their clients’ problems. If a client had a problem where the facts did not fit neatly into either of two acknowledged legal categories “A” or “B”, but fell somewhere between the two, lawyers and judges, sometimes with painstaking slowness, would develop a new legal category “C” to address the problem.

This required attorneys to be constantly creative, and, in a favorite formulation of my old boss, the noted trial lawyer Louis Nizer, “resourceful” (I shudder to think of the number of times when Mr. Nizer told me, always in a courteous tone, that I was not being resourceful enough).

This preface is by way of emphasizing that the law is reactive rather than proactive. If, as we are told, the stock market is a “leading indicator” — meaning a number of months ahead of what market wisdom believes is going to happen — the law is a lagging indicator. If the law cannot tell us where we are going, it can, however, sometimes frame our current problems.

As executive employment attorneys, what have we seen as the pandemic which began in late winter in the United States rolls into late summer and early autumn?

Leadership Is in Demand and Needs To Be Compensated.

Thoughtful, courageous, flexible and innovative executives are needed now more than ever, and companies remain willing to hire them. Whether these same companies are willing to pay their prized executives what they are worth at a time of widespread unemployment and economic uncertainty remains to be seen, but a mixture of deferred compensation and performance and incentive bonuses should be more appealing than ever to boards and employers desperate for vigorous and creative leadership but fearful of looking like they are overpaying for it during difficult times.

Symbolic Gestures May Have a Hidden Cost.

Our senior executive clients, particularly in the non-profit sector, such as leaders of colleges, universities and art institutions, are being asked, on a purportedly voluntary basis, to take significant pay cuts or even work without pay for a period of time. These cuts, which cost the executives but will not solve any institution’s economic problems, are largely symbolic, made in order to demonstrate to the employer’s constituency that these executives, who may be forced to terminate or at least furlough numbers of lower paid employees, are willing to “share the pain” by sacrificing some of their own compensation. The value of these symbolic acts — other than to give the Board of Trustees “cover” against the anger of their constituencies (like the faculty of educational institutions, who always think that the president or head is overpaid) — is less clear. To penalize the leaders who are being asked to work even harder than usual — if that is possible — in order to get the institution back to productive and profitable operation, may well be counterproductive.

Age Discrimination Is On The Rise But Legal Protections Are Weak.

In response to the economic pressures on many companies and other institutions as a result of the global pandemic, the number of mass layoffs has risen, many of them positioned as a RIF, or “reduction in force,” which gives an employer terminating a significant portion of one or more units of its work force some additional legal protection so long as the employer complies with certain specific requirements, primarily (1) allowing anyone being terminated 45 days to review and consider the employer’s severance offer (as opposed to the customary 21 days accorded to employees who are 40 or older when they are terminated individually) and (2) providing the terminated employees with a full, unit-based list of the ages of both those employees being let go and those being retained. These requirements are supposed to reveal improper age discrimination, but, in fact, they usually add no real protection for older workers since they do not strengthen, indeed, may weaken, already weak Federal laws against age discrimination. This is a serious problem which will only get worse as the general population continues to live and work longer. If AARP is not addressing this issue in its lobbying efforts, it is not serving its members well.

Frequently Asked Questions

1.    Q:     “Is anyone hiring top executives?”

A:     In tumultuous times, there is always a need for leaders and these days candidates with diverse backgrounds are particularly sought after. Accordingly, executives should not always take the first job offer they receive, and their executive employment lawyers should make certain that these new leaders are well compensated, and even better protected, as they enter what will no doubt be hard and challenging jobs.

2.      Q:     “If I am a top executive and am asked to take a pay cut which reduces my salary to less than my contract or offer letter specifies, how do I protect myself?”

A:     By making a written record, to be carefully reviewed by your executive employment attorney, which makes it clear that any such reduction is temporary, does not affect the executive’s other contractual entitlements and, hopefully, offers some future reward for this current sacrifice.

3.      Q:     “Why is the Federal age discrimination remedy so weak?”

A:     Due to a Supreme Court decision which held that because age discrimination was made illegal by a different statute than the one which makes other types of discrimination (sex, race, religion, ethnicity, etc.) illegal, it is harder to prove a case of age discrimination, at least under Federal law, than it is to prove sex or racial discrimination. Of course, in a larger sense, the law has had a harder time grappling with age discrimination than with other forms of discrimination because companies are often motivated to fire older workers, at least in part, because they are making higher salaries, not merely because they are aging.

4.      Q:     “Is this why victims of age discrimination often sue in state court under state or local law rather than by bringing a Federal age discrimination case in Federal court?”

A:     Absolutely. I have heard Professor Sam Estreicher, NYU’s distinguished employment law scholar, threaten his students that if they start a discrimination lawsuit in Federal court as opposed to state court, he will come to their homes to repossess their law degrees, and he is not entirely joking!

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.