The former CEO of McDonald’s is being sued by McDonald’s to recover his $US 40m termination package for allegedly lying about his relationships with other employees, which highlights the risks of failing to manage employees having inappropriate workplace relationships.

Background

In November 2019 the former CEO left McDonald’s after it was revealed that he had been in a “consensual” relationship with another employee, which was a breach of the company’s policies. The former CEO had denied that he had been involved in any other consensual or inappropriate workplace relationships during the investigation.

The board voted to terminate his employment, agreeing to a termination package comprising of severance pay and stock-based benefits worth approximately $US 40m. At the time of the termination McDonald’s had put out a press release stating that it was due to “the Board’s determination that he violated company policy and demonstrated poor judgment involving a recent consensual relationship with an employee”.

In its latest press release, McDonald’s has publicly alleged that the former CEO “lied and destroyed evidence regarding inappropriate personal behaviour” and that consequently he “should not have retained the contractual compensation he did upon his exit”. Prompted by the receipt of an anonymous report alleging that another employee had engaged in a relationship with the former CEO, McDonald’s conducted a further internal investigation into the extent of the former CEO’s inappropriate workplace relationships.

The investigation found proof of the former CEO engaging in inappropriate workplace relationships with three other employees, finding dozens of sexually explicit photographs and videos that he had sent as attachments to emails from his McDonald’s account. The former CEO had also approved a stock grant to one of the employees worth hundreds of thousands of dollars in the middle of their relationship, which he had not been disclosed during the initial investigations.

McDonald’s is now seeking to claw back the costs of the exit package, relying on a repayment clause in the terms of the agreement which allows for McDonalds to cease payments where there is “dishonesty, fraud, illegality, or moral turpitude” or “serious, reckless or material violation of McDonald’s Standards of Business Conduct or other employment policies”. The terms of the agreement also did not contain a release clause for any claims that McDonald’s had against the former CEO.

Relationships in the workplace

Avoiding relationships in the workplace is next to impossible, given that employees spend most of their time during the week interacting and forming close bonds with their co-workers. Relationships between co-workers are not immediate causes for concern just by the fact that they exist, but relationships between managers and subordinates can stray into the territory of inappropriate workplace relationships.

Inappropriate workplace relationships are more likely to occur where there are power dynamics which prevent people from speaking out, as highlighted by the #metoo movement. Even where the relationship is consensual, inappropriate workplace relationships trigger legitimate questions around the potential for sexual harassment as well as conflicts of interest.

It is imperative that employers have in place adequate policies, procedures and training to manage the risks of sexual harassment, particularly in the context of relationships between managers and subordinates. As the McDonald’s example demonstrates, even where relationships may be consensual, there is the very real possibility that conflicts of interest will arise, particularly where remuneration and other personnel decisions are being made.

Key takeaways

• Workplace relationships are difficult to avoid or prevent.
• Every employer should have a conflict of interest and workplace behaviour policy.
• It is crucial that employers have policies in place to manage the risks of employees engaging in inappropriate workplace relationships.

People + Culture Strategies