McDonald's CEO Fired for Relationship With Employee

Author: Robert S. Teachout, XpertHR Legal Editor

November 8, 2019

The board of directors of McDonald's Corporation fired the company's CEO and president, Stephen Easterbrook, last week after concluding that he had violated a company policy prohibiting managers from engaging in relationships with employees.

The company stated that Easterbrook, who had taken the helm of the organization in 2015, had shown "poor judgment" by having a consensual relationship with an employee. The board took the action despite Easterbrook's role in reversing falling revenues by improving sales and restructuring the company to cut overhead costs by hundreds of millions of dollars.

Under the terms of his separation agreement, Easterbrook will receive 26 weeks of pay six months after his termination date. A noncompetion clause prohibits Easterbrook for two years from working for any company in the restaurant industry, such as Burger King, Yum! Brands and Starbucks, as well as convenience stores that provide ready-to-go food, such as 7-Eleven and Wawa. The separation agreement also includes nondisparagement and nonsolicitation clauses.

The Equal Employment Opportunity Commission (EEOC) guidance on employer liability for supervisor harassment makes clear that an employer is liable for unlawful harassment when a manager is sufficiently high enough in rank to be deemed an "alter ego" or proxy for the organization, even if no tangible employment action was taken.

Attorney Kate Bischoff of Minneapolis-based tHRrive Law and Consulting pointed out on her blog that when a CEO engages in sexual harassment, the organization is vicariously liable for the conduct. Vicarious liability means the organization has no defense to a harassment claim and is automatically liable if the conduct was indeed harassment, Bischoff explained.

"The best thing an organization can do is prohibit CEOs (and other C-suite individuals) from having relationships at work. Period," said Bischoff. "Institute a policy. Talk with the board and leadership. Explain you will enforce this. Then, if it happens, take action. This was what happened at McDonald's."

An attorney speaking on behalf of Easterbrook stated that Easterbrook acknowledges his error in judgment and supports the company's decision.