An Employment Lawyer's Take on Disgruntled Financial Industry Professionals

The tell-all Op-Ed published by Greg Smith in the New York Times on March 14, 2012, accusing Goldman Sachs of having a rotten corporate culture, reverberated across Wall Street and beyond.  Damage to the reputation of Goldman Sachs and the reputation of the Street as a whole?  Yes.  One of many related issues is what employers – including brokerage firms and others in the financial industry -- can do to avoid or mitigate a similar reputational and public relations disaster.  I spoke with Betty Olivier, a partner in Preti Flaherty’s employment law group to explore the topic.

Sig:      What are the legal considerations for an employer when faced with a potentially disgruntled employee’s departure?

Betty:  If the employer has any control over the exit itself, it may have the ability to enter into a separation agreement with the employee that can address post-employment conduct.  This type of arrangement typically would involve the employer having to pay the employee severance in exchange for the employee’s agreement to do or refrain from doing certain things.  This type of agreement often includes non-disparagement language.  However, it is most typically used with involuntary separations, and may not provide a viable option when the employee just walks out the door. 

Sig:      So when an employee just walks out the door, up and quits, are there options available to an employer in addressing that kind of situation?

Betty:  Often written employment agreements executed at the beginning of employment include language that can reduce the risk.  It will always be difficult for an employer to dictate what an employee does after the relationship ends, but there are provisions that can be included in employment agreements that address some types of post- employment conduct.  For example, many employers have written confidentiality and non-disclosure agreements with their employees, and the language in those agreements can regulate the kind of things an employee can say about a company on the way out the door. 

Sig:      Those agreements don’t typically restrict opinions about the company, do they?

Betty:  No, they are generally designed to protect confidential information, but may be of some use in limiting what an employee says about a company or in limiting the assertion of certain facts as supporting opinions.

Sig:      If ongoing compensation is owed, that would be potentially an incentive for the employee to abide by those terms or risk forfeiting compensation.

Betty:  Not necessarily. If the compensation owed is for services provided while the employee was employed, the employer can’t condition payment on an agreement to behave after the relationship ends. If there is an agreement to make a post-termination payment and that payment is conditioned on the employee abiding by confidentiality and nondisparagement obligations, among other things, that payment might provide the incentive.  Employers have to be careful about imposing certain types of restrictions on certain employees, and avoid claims of improper restrictions on those employee’s right to speak.  There has been a lot of activity with the National Labor Relations Board regarding employer policies that restrict employees from talking to each other about terms and conditions of employment.  One would have to look very closely at any restrictions proposed to make sure that language is not construed to be overly broad or violative of an employee’s right to engage in concerted activity.

Sig:      In this situation, presumably to convince the New York Times to publish his Op-Ed, Mr. Smith presumably took with him internal company emails and documentation to confirm the accuracy of the facts that he reports in his Op-Ed.  What’s your reaction to that?

Betty:  That, hopefully, is the kind of behavior most employers take action to protect against when they hire employees.  Email on an employer’s server is the property of the employer, not the employee.  Many e-mails may contain confidential proprietary information. Employers  should have some arrangement that prohibits employees from taking Company property with them when they leave employment. 

Sig:      The situation with Greg Smith is extreme both in terms of the highly public nature and content of the article is published.  The New York Times Op-Ed page is about as public as one could get.  The accusations themselves are harsh.  You get a call from the HR director or CEO of a client saying have you read this morning’s local paper, have you seen the article by my former Vice President?  It contains harsh accusations about the company’s culture or its treatment of clients.  What options are available to the company from an employment perspective.

Betty:  If the statements are false and defamatory, the employer may be able to pursue a defamation claim.  There can be downsides to that course of action, however.

Sig:      One of the issues there is whether a legal claim or response further risks damage to reputation by keeping the story in the news and creating a forum for more back and forth over what really happened.  What are your thoughts as to what should be done from a public relations standpoint?

Betty:  You raise a very important point. Companies should consider whether the commencement of a lawsuit might carry with it certain risks, and weigh those risks against the benefit of pursuing a claim. If a company is considering using the media to respond to a disgruntled former employee’s claims, it should consider the very issue you raise – that is, whether they will only draw more attention to a bad situation. There are firms that can help companies deal with this kind of public relations nightmare, and it may be worth a company’s while to retain professional assistance.  The point is that the response is not strictly or even primarily a "legal" one.