Clawing Back Compensation From the “Faithless Servant” Under Current New York Law
The faithless servant rule is grounded in the law of agency and provides a tool that employers can use to try to claw back all compensation paid to a former employee upon demonstrating that the employee repeatedly engaged in disloyal and unfaithful conduct during the term of his or her employment. Read more.
Issues Arising in Negotiating Severance Agreements
At the risk of stating the very obvious, a severance agreement should contain a release which protects the former employer from potential lawsuits and other legal proceedings that could otherwise be brought by the former employee and his or her heirs. Severance compensation can serve as an important transition financial resource for a former employee. Thus, it is often in both parties’ interests to reach an agreement. Read more.
Current State of Restrictive Covenants (other than Non-Competes) Under New York Law
What is a Restrictive Covenant?
Our last blog article provided an update on the state of New York law concerning non-compete provisions. This article focuses on the state of New York law concerning restrictive covenant provisions other than non-competes. As our readers are almost certainly all well aware, a restrictive covenant is a contractual provision that many employers include in employment and severance agreements as well as in contracts with respect to the sale of a business. Such provisions are designed to limit the activities of a former employee or a former owner of a company for a fixed period of time following the end of the employment relationship or after the sale of a company to protect the former employer’s or buyer’s supposed legitimate business interests. In addition to employment, severance, and agreements concerning the sale of a business, these covenants can often be found in stock option agreements. Read more.
As all of our readers undoubtedly know, a non-compete provision is a type of restrictive covenant that many employers include in employment and severance agreements. The purpose of a non-compete provision is to restrict a former employee’s ability to work for a competitor after the cessation of his or her employment.
The Importance of Dissolution Provisions for New York LLCs
The limited liability company (LLC) has become one of the most commonly used business entities in New York because of the many benefits it provides to its members and managers. LLCs allow members to satisfy their business needs while still providing them with the same limited liability protection that limited partnerships provide. Although the flexibility of an LLC can be very beneficial, it is this commentator’s view that members of a New York LLC should not rely on New York’s Limited Liability Company Law (LLCL) to govern the activities of an LLC. If persons choose to form an LLC, it is essential that they have a clearly written operating agreement that provides explicit terms for, among other things, the LLC’s dissolution. A number of New York cases illustrate issues that arise when an operating agreement is vague on how to dissolve the LLC. Indeed, as discussed below, an LLC can be difficult to dissolve if the operating agreement is not explicit in this regard.
Corporate dissolution proceedings in New York are governed by strict procedural rules. When litigation is pending between the owners of one or more closely held companies, it is not uncommon in my experience for the defendant(s) to want to assert a counterclaim seeking dissolution of the relevant corporation(s). However, filing a separate dissolution proceeding is generally a better tactical move. A would-be dissolution petitioner recently found this out the hard way.
NY Business Divorces: Rights of Minority Partners and Minority Members in LLCs
Minority members in New York limited liability companies (“LLCs”) often did not prevail in actions brought under section 702 of the New York LLC Law for judicial dissolution. One of the reasons was that the statute’s “not reasonably practicable” requirement for dissolution was interpreted by many courts to require a showing of the LLC’s failed purpose or financial failure. Oppression, fraud, and other overreaching conduct by the majority directed at the minority were not considered grounds for dissolution. Similarly, minority partners have often faced substantial obstacles in seeking to dissolve New York partnerships. Read more.
Employer Best Practices for Conducting Sexual Harassment Investigations
A female mid-level employee walks into her employer’s Human Resources (“HR”) Department offices and states that she would like to file a sexual harassment complaint against a senior executive. The employee then lays out her story and describes her fears of retaliation from the executive. This situation can be very difficult for in-house counsel because they are presumably concerned about the well-being of all employees, promoting a suitable company culture, and providing a safe and positive environment which hopefully helps the company to thrive. Read more.
The Advantages of Litigating in the Commercial Division
Since its inception in 1995, the Commercial Division of the Supreme Court of the State of New York has expanded to become the preeminent forum for resolution of complex commercial disputes in New York State due to the expertise of its judges and rules designed to promote efficiency. Among other things, the Commercial Division is noted for its Commercial Division Advisory Council, which is composed of experienced commercial litigators, judges, and in-house counsel who have been judicially appointed.
Clawing Back Compensation from a Sexual Harassment Predator in the #MeToo Era
The September 9 resignation of CBS Chairman, President, and Chief Executive Officer Les Moonves after six women accused him in the New Yorker of engaging in sexual harassment years ago, which came about six or so weeks after the New Yorker had published an article in which six other women had made the same accusations, brings to mind two questions that some companies, particularly public ones accountable to their shareholders, will confront as the #MeToo movement continues to have a wide impact on Corporate America: can a company claw back compensation from a former executive found to have engaged in sexual harassment and, if so, is it in the company’s interests to try to do so? This article will briefly discuss two cases in which the faithless servant doctrine was invoked under New York law this year to try to claw back compensation with varying results.