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- Beware the Deadlock: Delaware Courts Step in on Corporate Dysfunction
- Insider Trading and Related Risks for Executive Branch Employees: Pay Attention to the STOCK Act
- From New York and Delaware Courts, a Double Blow of Bad News for Sergey Aleynikov
- Headed for Overtime? Trump Administration Will Decide Fate of New Time-and-a-Half Rule
- A Closer Look at the New Lawsuit By Baylor Football Coach Art Briles
- Can an Employer Back out of a Promise to Provide Advancement by Claiming That the Employee Committed Fraud?
- Suits by Suits Named to Blawg 100
- “Change of Control” Case Isn’t Governed By ERISA, Court Rules
- Court Nullifies CFO’s Employment Because of Prior Extortion Conviction
- The Yates Memo’s Illusory “Extraordinary Circumstances” Exception
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Blogs We Like:
The AmLaw Daily
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Connecticut Employment Law Blog
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DeNovo: A Virginia Appellate Law Blog
The Employer Handbook
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Screw You Guys, I’m Going Home: What You Need To Know Before You Scream “I Quit,” Get Fired, Or Decide to Sue the Bastards
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Showing 36 posts in Severance Agreements.
Hold on to Your (Top) Hat: ERISA Section 502(a)(3) May Be Used to Enforce the Terms of a “Top-Hat” Benefits Plan
Thanksgiving is typically a time for gratitude, gathering with family, and acts of kindness among fellow men and women. But in one recent case, a bank used Thanksgiving to force-feed a separation agreement to its outgoing president.
The bank later claimed that the ex-officer had released his rights to benefits under a “top-hat” benefits plan, even though it was not mentioned in the separation agreement. In Buster v. Compensation Committee of the Board of Directors of Mechanics Bank, the plaintiff alleged, and the court agreed, that the bank’s interpretation of the separation agreement did not fly.
Steven Buster worked as president of Mechanics Bank between 2004 and 2012. During his tenure, Mechanics Bank had two retirement plans. The first was the Supplemental Executive Retirement Plan (SERP), a so-called “top-hat plan” because it was available only to a few, select senior employees. The accrual of benefits for the SERP was frozen in 2008. In that year, the bank adopted a separate Executive Retirement Plan (ERP). Read More ›
What happens when an employer tries to change the basis for terminating an employee?
Recently, the Supreme Judicial Court of Massachusetts considered whether an employer could change the basis for the termination from “without cause” to “with cause” and withhold severance benefits otherwise owed the former employee. In EventMonitor, Inc. v. Leness, the employee won the battle, but the cost may have consumed the spoils of war. Read More ›
When an executive has an employment agreement and his company doesn’t pay, the company might offer a number of excuses based on contract law. One of these contractual defenses is called “impossibility of performance.” Under this defense, when a party enters into a contract and circumstances later change such that the party can’t perform it, the party can be excused from performing.
The Virginia Supreme Court’s recent decision in Hampton Roads Bankshares, Inc. v. Harvard provides a timely example of how this defense actually works in practice. In the Hampton Roads case, the organization established a relationship with government regulators that affected its ability to pay severance. The court held that this change made it impossible for the company to perform an employment agreement, excusing performance. Read More ›
The turn of the calendar is always a good time to reflect on what has come before and preview what lies ahead. In this post, we count down our most popular posts of 2015 about executive disputes. Later, we’ll look at what to expect in 2016. Read More ›
When an executive and a company enter into a lucrative severance package, those benefits aren’t necessarily ironclad.
As we covered in this June 2014 post, when a company declares bankruptcy, its trustee can ask the court to allow the company to avoid its executives’ severance rights.
F-Squared Investments Inc. is now seeking to do precisely that. In late October, F-Squared moved to reject its separation agreement with former CEO Howard Present, seeking authority “to avoid the financial burden” of making a $500,000 payment to him and to cease the accrual of his COBRA payments.
Mr. Present and F-Squared have had a troubled couple of years. Read More ›
Transition for corporate leadership is frequently complex. When the transition involves a charismatic founder, this step can be even more stressful. Planning well in advance for the inevitable segue between leaders and outlining the respective roles of both new and departing management can help, but may not fully resolve the issues. A recent decision involving Crystal Cathedral Ministries, the megachurch founded by famed televangelist Dr. Robert H. Schuller, reflects how nuanced this process can be. Because this case presents many issues of corporate succession, it provides a gateway for discussing various employment issues that may crop up in a corporate reorganization. We will focus on the case in a series of articles designed to spotlight these issues.
Dr. Schuller founded the Crystal Cathedral in the 1950s. Later, Crystal Cathedral Ministries was formally incorporated in 1970 with Dr. Schuller as the senior pastor. During his 36-year tenure in this position, Dr. Schuller wrote numerous books and gave countless sermons and other talks, particularly in his role as the executive creator and director of content for The Hour of Power, a weekly television show produced by Crystal Cathedral Ministries. In exchange for these services, Dr. Schuller received a salary and benefits, including a housing allowance and health insurance. Read More ›
Who doesn’t love the year-end countdown? We’re here to offer you one of our own – our most-read posts in 2014 about executive disputes. The posts run the gamut from A (Alex Rodriguez) to Z, or at least to W (Walgreen). They cover subjects from sanctified (Buddhists and the Bible) to sultry (pornographic materials found in an executive’s email). Later this week, we’ll bring you a look at what to expect in 2015.
Without further ado, let the countdown begin!
8. The Basics: Dodd-Frank v. Sarbanes-Oxley
This post is an oldie but a goodie. It includes a handy PDF chart that breaks down the differences in the Dodd-Frank and Sarbanes-Oxley whistleblower laws. Each of these laws continues to be a hot-button issue for plaintiffs and employers.
7. When Employment Relationships Break Bad
America may have bidden adieu to Walter White and his pals on Breaking Bad, but employment relationships continue to spin off in some very unpleasant ways. Such was the case with Stephen Marty Ward, who ended up in federal prison after he threatened his employer with disclosure of its trade secrets, as we covered in this post. Read More ›
Helen of Troy isn’t just a famous mythological beauty. It’s also a publicly-traded maker of personal care products. And now, it and its directors are defendants in a suit by Helen of Troy’s founder, Gerald “Jerry” Rubin.
Executives who bring suit against their former employers frequently want to show that they were terminated for reasons other than performance, and Rubin is no different. In his complaint, as reported by El Paso Inc., Rubin describes the history of Helen of Troy and its staggering growth. From humble origins – a “wig shop in El Paso, Texas” – Helen of Troy grew into a “global consumer products behemoth, generating revenues in excess of approximately 1.3 billion dollars.” And then the roof caved in. Rather than “celebrating [Rubin’s] extraordinary success,” Rubin alleges, Helen of Troy’s directors turned on him in order to save their own skins, and eventually forced him out of the company.
Why did the directors need to sacrifice Rubin to save their positions? According to Rubin, the answer lies with an entity called Institutional Shareholder Services (“ISS”). ISS is a proxy advisory firm that conducts analysis of corporate governance issues and advises shareholders on how to vote. Because shareholders often follow ISS’s recommendations, it can have substantial influence over the affairs of publicly-traded companies. Indeed, some participants in a recent SEC roundtable suggested that ISS could have “outsized influence on shareholder voting,” or even that it has the power of a “$4 trillion voter” because institutional investors rely on it to decide how to vote.
Rubin alleges that if ISS decides a CEO is making too much money, it will demand that the compensation be cut or that the CEO be fired. If its demand isn’t followed, it will “engineer the removal of the board members through [a] negative vote recommendation.” Board members then will cave to ISS’s wishes to preserve their own positions.
Rubin claims that this is what happened in his case. Read More ›
In honor of Halloween, we are looking over our shoulder at some of the most frightening news that we have brought to you this year on Suits by Suits:
- Earlier this week, we told you the tale of a CEO who was hauled into court thousands of miles away and slapped with an employee’s wage bill. That’s the kind of stuff executive nightmares are made of.
- Bonfires are part of what makes Halloween special. Unless they involve torching a laptop, destroying evidence, and getting hit with an adverse inference for spoliation at trial, which is what happened to one unhappy executive.
- The SEC announced its presence as a boogeyman for employers who punish whistleblowers, filing its first Dodd-Frank anti-retaliation action against one company and ordering a $30 million bounty for another employee.
- Terror babies are scary, as anyone who’s seen Rosemary, Chucky, and Damien on screen knows. Now, we have more terror babies to add to the mix, thanks to the bizarre saga of Rep. Louis Gohmert and fired Texas art director Christian Cutler.
- Ever been lost in a hall of mirrors? Just think how confused this executive was, after her employer told her that she wasn’t releasing her claims for a shareholder payment and then defeated those same claims based on … her release.
- And perhaps the scariest story of all: the company that lost a non-compete dispute and then had to pay $200,000 of its opponent’s legal fees. That’s like finding a razor blade in your Mounds bar.
Today, we discuss taxes – specifically, the taxation of severance payments. It has long been recognized that severance payments are “income” to an employee, and that employers must withhold federal income taxes from the payments. Earlier this year, the Supreme Court made clear that severance payments also are “wages” subject to FICA taxes, and that an employer must withhold FICA taxes as well. The case, United States v. Quality Stores, 134 S. Ct. 1395 (2014), resolved a split among two federal appellate courts that had led many employers to seek a refund of the employer share of FICA taxes paid to the IRS on severance payments.
FICA is the federal payroll tax on wages that funds Social Security and Medicare. The tax is paid by both employers and employees. Each pays 7.65% on the first $106,800 of the employee’s annual wages and then 1.45% on amounts exceeding that threshold. Employees never see their share of the tax – employers are required to withhold and pay the employee’s share to the IRS.
In the 2008 case of CSX Corporation v. United States, 518 F.3d 1328, the Federal Circuit agreed with the IRS that a form of severance called supplemental unemployment compensation benefits (or SUB payments) falls within the broad definition of “wages” subject to FICA taxes. But several years later in Quality Stores, the Sixth Circuit reached the opposite conclusion, holding that SUB payments are not wages subject to FICA taxes. 693 F.3d 605 (2012). The court reasoned that because section 3402(o)(1) of the Internal Revenue Code states that SUB payments shall be treated “as if” they are wages for income-tax withholding, they are not in fact wages. Read More ›