Lessons for Employers When Terminating Employees with Written Contracts
Posted on July 1st, 2013 | Categories: News
Rutgers University fired men’s basketball coach Mike Rice on April 3, 2013, which made national news. Rutgers fired Rice after ESPN broadcast a video that showed Rice throwing basketballs at players and hitting them in the back, legs, feet and shoulders, harassing and intimidating players and yelling obscenities and slurs at players during practices. Employers in all industries can learn valuable lessons by reviewing the facts surrounding the firing of a basketball coach by his employer.
Rutgers and Rice had a written employment contract with two years remaining. Rutgers owed Rice more than one million dollars under the contract. The contract provided that Rice could be terminated for “cause” and “without cause.” The contract defined “cause” for termination as follows:
Material breach of this contract (won-loss record shall not constitute material breach), neglect of duty, willful misconduct, act(s) of moral turpitude, conduct tending to bring shame or disgrace to the University as determined in good faith by the Director of Intercollegiate Athletics, violation of University regulations, policies, procedures of directives not remedied after thirty (30) days written notice, . . . criminal conviction, or unapproved absence from duty, other than for a bona fide use of sick leave in accordance with University policy, without the consent of the director.
The contract provided that Rutgers would owe Rice nothing if it fired him for cause. Rutgers and Rice settled on April 18, 2013. Rutgers agreed to pay Rice and release him from his contract in return for $475,000.00. However, since Rutgers chose to fire him “without cause,” it abandoned (during settlement negotiations) its best argument that it owed Rice nothing.
The decision to fire Rice “without cause” had a significant effect on later settlement negotiations to resolve the dispute and probably cost the university a large sum of money unnecessarily.
The Rice termination is a reminder that employers should consult with experienced counsel before making a decision to terminate an employee who has a written employment contract.