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How the #MeToo movement has affected executive agreements

by | Jan 29, 2019 | Firm News |

Businesses have made changes of all kinds to their practices and policies since the #MeToo movement put sexual harassment in the spotlight. The issue has become an important one for employment agreements, especially those geared toward top executives.

Protection from claims

As a result of the Harvey Weinstein allegations of sexual misconduct, businesses have begun taking a closer look at their own policies. Many have boosted employee training on the subject of sexual harassment in the workplace. Some have added a #MeToo representative who sits in on deal negotiations to ensure there is no impropriety. Other companies have revised employment agreements for top executives to contain more explicit language about termination “for cause.” This is an effort to save the company from having to pay severance or deal with stock options if an executive is terminated on sexual harassment charges.

The Google scare

In 2014, Google executive Andy Rubin left the company under a cloud of sexual misconduct claims, but with $90 million in severance pay. Though he denied the claims along with “wild accusations” about his compensation, companies nervously began thinking about reputational harm and mega payouts. As a result, many companies have expanded upon the “for cause” severance provisions in employment contracts, making the terms clearer so executives, especially, feel more comfortable signing these agreements.

The matter of legal meaning

Some companies ask potential executives to confirm they have not engaged in sexual misconduct or harassment previously and that they have not been the target of such claims. Still, allegations can be difficult to prove, partly because the #MeToo focus does not have real legal meaning. It could stand for many things. However, many employment agreements, including those for high-ranking executives, contain specific language about cause to terminate due to the violation of company policies. For example, if a sexual harassment policy is present in a company’s code of conduct, an employee’s violation of that policy will likely translate to justifiable reason for termination.