The Exciting Times of Family-Owned Businesses

The intertwined, emotion-bound relationships within a family business are often a source of employment law lessons if not downright entertainment. I suspect the entertainment value arises from the fact that we all presume a certain amount of affection exists within these family businesses that precludes the kind of cold-blooded opportunism permeating normal corporate structures. 

So it's a surprise when relatives go after each other like the lieutenants of Genghis Khan. A case in point- the top-level shenanigans at Adroit Medical Systems, a family heating pad manufacturing business. 

Apparently, the minority shareholder son of the owner was unhappy that his father's 80% ownership was passing to his wife, the son's stepmother.  What to do? Well, just have your father declared incompetent by a probate court, establish a conservancy for the estate naming yourself as conservator, and then proceed to take over the company, firing stepmother, other relatives, and changing the locks on the company doors. 

Oh, and before you kick this off, also make a surreptitious report to the IRS that your family members are engaged in tax fraud and embezzlement. You do that to give yourself some top cover just in case your coup attempt doesn't work. Specifically, the IRS complaint technically makes you a whistleblower. 

The whole Snidely Whiplash (that's him, above) plan fell apart in a matter of days once the probate court realized the old man was not incapacitated. The re-established company leadership promptly fired the son, who then leveraged his whistleblower status to sue his parents for retaliatory discharge. 

The Tennessee federal court, and ultimately the 6th Circuit, was having none of this silliness. The 6th Circuit panel noted that the bona fide reason for the termination- a phony claim of mental incapacity directed at the principal shareholder, followed by a complete takeover of the company and removal of its officers- was more than supported by the evidence. As one judge said, “ Who wouldn't think he would be fired?"

Entitlement and Layoffs--A Case Study

 

The Brittany Peach (her real surname is Pietsch)  viral video contains a couple of lessons for companies and employees, or soon-to-be-former employees (for the terminally unhip, Ms. Peach videoed her participation in a Zoom call terminating her employment from Cloudfare, an internet security company).  

Much of this has been discussed in various HR forums, so I will keep this brief. 

For employers: 1. Usually, but especially for entry-level positions like this one, a supervisor should provide the termination notice directly. Hiding behind human resources representatives, as Cloudfare did here, is classless and pointlessly humiliating for the employee. 2. Employers should also be prepared to provide some specifics to the employee as a basis for the termination decision-another reason to have the supervisor involved-so that even if there is not agreement as to the decision, there might be understanding. Even in at-will circumstances such as this one, an employee is entitled to know what they did wrong, which may allow them to remedy the problem with their next employer.  3. In any type of meeting like this you should expect to be recorded. 

For employees: Unless you have a firm expectation of financial solvency for the next 20 or 30 years of your life, don't do this. Ever.

Surprise: Race discrimination violates the law, regardless of when the statute was written

Those of us in the employment law business who were not wearing ideological blinders and closely followed the corporate rise of what is now referred to as DEI  were sounding alarms from the very first days of these programs. Specifically, we noted that the language of intersectionalism, DEI, ESG, CRT, and the rest of the acronym diversity universe was going to create real problems for companies that put these programs into effect. That's because the terms in which these programs are and were couched are unavoidably racist, sexist, and violative of every US civil rights law at every level.  I'm not sure why businesses believed that they could institute racial and gender-based incentive plans, hiring practices, and the like without consequence but I put it down to the ideological blinders mentioned above. 

Given these manifest legal issues, it comes as no surprise that DEI programs are being challenged regularly because they discriminate based on some protected factor such as race, gender, religion etc. There has been significant pushback on these challenges, including this one, which implies that anti-DEI efforts are so out of touch that challengers are reaching back to Civil War-era statutes to support the claims. 

This is, as we say in the legal business, “hogwash”. The 42 USC 1981 claims noted in the article have been part of the civil rights litigation picture in the United States for as long as I have been litigating cases. The main difference between 1981 claims then and 1981 claims now is that the plaintiffs referenced in this article are white. Rather than some desperate contortion of antiquated law, what this article identifies is the straightforward application of laws that prohibit race discrimination to situations in which race discrimination- specifically DEI programs- is manifest. There was nothing mysterious or novel about this situation and DEI accolytes should expect to see more of these claims in the future. 

Military Justice Debacle

 

The SECARMY removed a senior Army prosecutor from his position because of an email that he sent to his defense attorneys in 2013, esssentiually telling them that they were now in the crosshairs of a political movement that was seeking to influence the military justice process to get more convictions for sexual misconduct in the military.

Some thoughts from someone who has both prosecuted and defended sexual assault cases in military courts.

Although it is a difficult concept for most civilian attorneys to grasp, the military justice system that was put in place in the early 1950s (as the Uniform Code of Military Justice) is designed to accomplish two, sometimes contradictory, tasks. The first is to provide constitutional due process to service members accused of any of a specific list of crimes delineated by the UCMJ. Military defense counsel are obviously crucial in this process because they are frequently the only individuals with the capability to adequately overcome the tremendous advantage possessed by the prosecution on a military installation. Prosecution authority rests ultimately in a series of commanders at various levels. These individuals have unlimited resources at their disposal, including the ability to select potential jurors and to influence proceedings in any one of a thousand different ways, some obvious but most not. Military defense attorneys are generally removed from the formal chain of command so that local commanders cannot affect the career of a zealous defense counsel working to protect the interests of her client.

The second purpose of the military justice system is to promote good order, morale, and discipline within the ranks. This means that commanders have available to them procedures short of a formal trial proceeding by which they can enforce discipline. Article 15 of the UCMJ is one such mechanism that allows for a quasi-judicial proceeding before the commander, with or without the presence of a defense attorney, that is designed to quickly deal with the minor criminal infractions occurring in units every day. Commanders have significant autonomy and authority under this system and may elect to charge, ignore, or otherwise deal with issues that would normally be a matter of criminal concern to their military legal advisors. My recollection is that perhaps 5 or 6 times a year I confronted situations where my recommendation was to charge an individual under the UCMJ and the commander rejected it in favor of some other type of less severe action. Less frequent were the circumstances where a commander was adamant that we convene a court-martial even in circumstances where the evidence was less persuasive and I was much less confident of a guilty verdict. But in all circumstances, it was the commander who made the call, frequently in conjunction with advice and counsel from her own commander higher up in the military food chain.  

It's the second purpose that was creating heartburn for a number of female senators back in the 00s and early teens when this Army JAG wrote his e-mail. Commanders are given wide discretion in terms of the charges and the disposition of those charges. Military juries are perhaps some of the most educated and discerning groups before which I had the pleasure of practicing. They are also well-versed in military culture and generally have a wealth of experience dealing with disciplinary issues in their own units, either as observers or as actual commanders themselves. Perhaps just as important, the military population is not comparable to the civilian population in terms of conduct and bad motivation. Most of those people never make it past the initial recruitment process and are generally weeded out over the term of their first few years in service.

All of which is a long-winded way of saying that sexual assault and rape in the military looks completely different than it does in a civilian criminal court setting. Outright, predatory, sexual assaults are relatively rare; the vast majority of cases that I dealt with as a prosecutor and the few cases that I dealt with as a defense attorney involved ambiguous conduct on the part of both parties, almost always fueled by excessive consumption of alcohol.  Cases of forcible rape were noteworthy and got the immediate attention of military law enforcement and command.  

Given the less straightforward aspects of most of these sexual assault cases, commanders frequently found themselves trying to assess guilt or innocence with highly equivocal evidence. Those cases that went to trial confronted those military juries with the same issues. Often the accused was a person with an exemplary record who was alleged to have acted in a way that was completely inconsistent with their prior years of service. Accordingly, commanders would make a “split the baby” kind of analysis, electing to not formally charge individuals, reduce sentences imposed by juries, or figure out some other mechanism to deal with the problem short of formal criminal charges.

Progressives will say that much of this reluctance was due to some type of old boy network and that the males who predominate in the service are unlikely to hold their fellow men culpable except in the most extreme circumstances. Over the course of perhaps 30 or 40 sexual assault investigations during my JAG career, I never saw anything resembling this type of bias. It probably occurs, but my experience is that it is very limited.

But for several female lawmakers, caught up in the early stages of the “believe all women” movement, any acquittal, any resolution short of providing complete relief to a complaining party meant that the system was rotten and needed to be overhauled. From holding up or threatening to hold up all promotions for a particular service (yes, this was long before Senator Tuberville's actions, check out Senator Schroeder's threats following Tailhook) to working to remove the commander's discretion in dealing with these cases, these officials worked to eat away at the protections for accused service members, both by altering procedural protections and by working to send a message to the command team that "not guilty" verdicts would endanger careers and funding for much-desired weapon systems and support.

It was into this environment that this Lieutenant Colonel sent his e-mail. Perhaps the most pernicious and dangerous issue within the military justice system is something called "command influence." Command influence occurs when a commander or someone with significant authority intervenes in the judicial process by ordering jurors to vote for a specific result, or by establishing policies mandating particular results in military legal cases, or by threatening service members' careers if specified results are not achieved. The actions of these female lawmakers and their threats to senior military leadership were clearly aimed at eliminating "not guilty" verdicts in sexual assault cases and limiting the discretion of commanders to deal with these issues in any other way than a trial, where the results would be effectively guaranteed. In other words, command influence at its very worst.

The Secretary of the Army doesn't understand her job. She fails to grasp the idea that civilian control of the military does not mean that military lawyers must act to abrogate the statutory and constitutional rights of their clients in service to a particular ideology or political philosophy. I'm sorry that this general did not stand up and act like a big dog, telling this SECARMY that she cannot undercut the ability of defense counsel to zealously defend their clients, even in Army courts. With any luck, the story will be offered as evidence of command influence on upcoming sexual assault trials and will be sufficient to overturn guilty verdicts. 

DoD Accountability

 I have no particular insight into what is going on with the Secretary of Defense and his doctors,  but as a former military officer and corporate executive I make the following observations: 

- a subordinate officer with command authority in any branch of the armed forces who failed to inform his commander that he would be offline, in the hospital, and unable to respond to calls or requests for information would be fired. Likewise someone in a corporate position of similar responsibility. 

- a second in command who failed to adequately apprise herself of the circumstances involving her boss's absence, and who failed to immediately make herself available by being physically present in her boss's stead, and who failed to notify the people to whom she was ostensibly reporting that she was ready for duty, would be fired. 

- Anyone in the organization with knowledge of the boss's absence and the fact that this had not been communicated to the command structure, along with no communication of the process for decision-making in the boss's absence, who failed to remedy the situation, would be fired. 

- a senior commander who tolerates the above behavior in her subordinates without removing them or taking other comparable disciplinary action is not a competent leader or manager and should be removed. 

Update:  Given that it now appears that deception and disguise concerning his condition was the game from the very outset, the SECDEF should be removed forthwith.  

Horrible Harvard Hiring

 I know this topic has been beaten to death but I thought I would throw my two cents in on the Claudine Gay situation. As an employment lawyer, what jumps out at me first is the fact that her situation is exactly what you would expect when your primary criteria for hiring are something other than merit or past performance. Harvard's corporate board obviously weighted Gay's race and gender, and perhaps her political philosophy, much more highly than it did prior academic performance or even job performance in previous administrative positions. She had not distinguished herself academically and in her previous administrative roles presided over several high-profile and dubious decisions by Harvard leadership. Does it come as any particular surprise that her performance in front of Congress and since has been substandard? 

What is even more interesting, again from an employment lawyer's perspective, is that Harvard has moved Gay from a position where she was likely unqualified into a position where she is almost certainly unqualified. The plagiarism examples in her past written work, apparently accompanied now by claims that she actually falsified data, may or may not indicate a lack of qualification for an administrative position at Harvard. But these examples are surely disqualifying for a full professor teaching courses to students held to a rigorous and punitive anti-plagiarism standard. How does Harvard now justify either disciplining or not hiring anyone with plagiarism or equally serious conduct in their background? The Harvard Corporation BOD has lowered the bar on standards of conduct quite a bit.