In November 2019, we reported that Steve Easterbrook stepped down as the CEO of McDonald’s allegedly due to having a consensual relationship with an employee.
According to The Telegraph, the Company has a business conduct standards policy which sets out that managers cannot have romantic relationships with subordinates and, as such, it was considered by the McDonalds’ Board that the consensual relationship compromised Mr Eastbrook’s position in the company, requiring his departure.
Following further investigations McDonald’s have discovered photographic evidence supporting the allegation that Mr Eastbrook actually had three additional relationships with staff. They contend Mr Eastbrook denied this at the time of his departure from the Company so that he would be able to secure a more generous exit package. McDonald’s is not letting this go away lightly and have confirmed that they are now taking legal action against Mr Eastbrook to recover the $40m (£35m) he received. In a response filed at Delaware Chancery Court, however, Mr Eastbrook submits that McDonald’s had instructed external lawyers to investigate his conduct, including interviewing employees and reviewing electronic information, before authorising his exit package and so they would have discovered this new evidence at the time.. He set out that “McDonald’s is improperly attempting to get out of its bargain nine months after the fact and despite admitting it always possessed the information upon which it is now relying”.
It is quite common for parties to enter into what is known as a “settlement agreement” if the termination of employment concerns a senior executive or is one that is complex. The intention is that the employee will waive all and any claims he/she may have against the employer and in return will receive a termination payment. Such a payment is often contingent on a warranty (a contractual promise which the other party can rely on) that the employee is not aware of any circumstances that would justify his/her summary dismissal; therefore, upon discovering any circumstances that would justify summary dismissal, an employer will have reserved their right to take action to recover any payments they have made.
It would appear that this is what McDonald’s are now doing due to their allegations that Mr Eastbrook has breached his fiduciary duties as an officer and director of the Company. It remains to be seen what stance the courts will take, especially given that Mr Eastbrook will be defending his position vigorously.
Our employment team has extensive experience in advising on these issues, so if you have any questions or need more information, please get in touch.
