Do Paterno And Spanier Have Golden Parachutes At Penn State?
The Sandusky child molestation scandal at Penn State continues to be the biggest legal news in Pennsylvania. One lawsuit against Penn State and the Second Mile has already been filed, presumably because the victim was either nearing, or had already passed, the statute of limitations. A civil lawsuit can be filed at any point after a criminal act, though in that case the civil litigation is usually put on hold until the criminal case is finished.
I’ve already discussed most of the issues in the cases that could be filed by sexual abuse survivors in my previous post, linked above, but a new issue has started to bubble up: what happens to former football coach Joe Paterno, president Graham B. Spanier, athletic director Tim Curley, and university vice president Gary Schultz. Paterno and Spanier avoided criminal prosecution but were swiftly fired by the Board of Trustees for their roles in the scandal. (Technically, Spanier was given an ultimatum: resign or be fired, an effective termination that may have been given to Paterno as well. Spanier chose to resign.) Curley and Schultz were indicted for perjury and failing to report child abuse, after which Curley voluntarily went on administrative leave and Schultz retired.
Plenty has been written about the criminal prosecution about Curley and Schultz. As this Reuters analysis points out, prosecution on the failure-to-report-abuse claim might be tricky, but perjury is perjury, and it’s Curley’s and Schultz’s word against Mike McQueary’s over what exactly McQueary told them.
Outside of the criminal aspect, there’s an important civil litigation aspect just starting to gain traction, and that’s whether Paterno, Spanier, Curley or Schultz might have their own claims against Penn State. Consider this article about the PSU Trustees and Pennsylvania’s Sunshine Law:
[Q]uestions arose about whether the board had complied with the state’s Sunshine Act, because there was no evidence of required public votes on the matters. So the executive committee – nine of the 32 board members – decided to hold a brief telephone conference call Friday morning to resolve questions and formally approve those three major decisions.
The changes in status for Spanier, Paterno, and Erickson were the result of the questionable handling of child-sexual-abuse allegations against former assistant football coach Jerry Sandusky, whose arrest came five days before the departures of Paterno and Spanier.
“Due to the extraordinary circumstances” during the week of Nov. 6, Penn State spokesman Bill Mahon said after the executive committee’s five-minute phone call, “the board of trustees needed to act swiftly and decisively regarding personnel. While the board believes immediate action was necessary [three weeks ago], it is holding this special, preannounced public meeting of the executive committee to reaffirm and ratify the board’s prior personnel decisions.”
He added that the trustees “wanted to dot all the I’s and cross all the T’s.”
He said the firing, the resignation, and the naming of the new president were effective the week of Nov. 6. The full board will meet in January to “reaffirm” the action taken by the executive committee Friday, he added.
Even apart from the Sunshine Act, there are issues here worth exploring: what legal rights, if any, might Paterno and Spanier have against Penn State? I’ve seen news stories indicating that, at least for Spanier, they are “working out” a “multi-million dollar” severance package. Let’s look a little more deeply into that.
The issues relating to Curley, Schultz and McQueary are all pretty simple: either McQueary or Curley & Schultz lied to a grand jury. If Curley or Schultz are convicted, they can quite rightly be fired for criminal conduct in the course of their employment. If they’re not, and Penn State believes their version of events, McQueary himself can be fired even if he isn’t prosecuted for perjury. See, e.g., Rossi v. Pennsylvania State Univ., 489 A. 2d 828 (Pa. 1985)(“An employer may rid itself of a troublesome employee, without liability for wrongful discharge in the absence of a violation of public policy.”)
Of the many economic disparities in America, one of the most important is the differing employment rights of most employees versus upper management. The vast majority of employment in America is “at-will,” such that “an employer may terminate an employee for any reason, unless restrained by contract.” McLaughlin v. Gastro. Specialists, Inc., 750 A. 2d 283 (Pa. 2000) citing Henry v. Pittsburgh & Lake Erie Railroad Co., 139 Pa. 289, 21 A. 157 (1891). [There are the limited exceptions created by federal and state anti-discrimination laws — i.e., you can’t fire someone for racial, gender, religious, or similar reasons — but those obviously don’t apply here.]
Most employers are not “restrained by contract” from firing employees for any reason, unless the employee is part of a union that negotiated some limitations (like requiring arbitration of all terminations) or if the employee is part of upper management. In those realms, the situation changes, and executives at large corporations, universities, and quasi-private public agencies (like housing authorities) routinely have “golden parachute” clauses in their employment agreements that provide them with substantial severance payments even when they’re terminated.
Paterno and Spanier are undoubtedly upper management, with favorable contracts, and for the moment, the Board of Trustees still hasn’t said what Paterno and Spanier did wrong. I doubt they’ll fill in too many details, not until the victims’ lawyers force them to explain themselves in the lawsuits. But the details might not even matter; Paterno and Spanier might be entitled to severance even if they covered up sexual abuse of children.
Around here in Philadelphia, we seem to have some sort of chronic problem with golden parachutes, with former Philadelphia Housing Authority chief Carl Greene suing for his own more-than-one-half-million payout and former Philadelphia schools Superintendent Arlene Ackerman collecting a $905,000 public buyout, plus unemployment benefits. As I discussed in the my post on the Greene case (linked above), Greene’s contract is among the more favorable contracts I’ve ever seen, limiting the circumstances under which they can terminate Greene “for cause” to:
(i) A material act or acts of dishonesty on MR. GREENE’S part, which is criminal in nature, intended to result directly or indirectly to MR. GREENE’S substantial gain or personal enrichment at PHA’S expense, and which results in demonstrable material injury and damage to PHA;
(ii) MR. GREENE’S willful and intentional misconduct, recklessness, gross negligence and failure to substantially perform his duties hereunder, other than a failure resulting from MR. GREENE’S incapacity or illness, if MR. GREENE’S willful and intentional misconduct, recklessness, gross negligence and failure results in demonstrable material injury and damage to PHA;
I would not be the least bit surprised if Joe Paterno, which Sports Illustrated called “arguably the most unfireable person in all of sports,” and Graham Spanier, who negotiated the fifth-highest university pay in America, both had extraordinarily favorable contracts that similarly guaranteed them substantial severance payments in the absence of a blatant fraud on the university or a dereliction of duty.
Which means Penn State might still owe Paterno and Spanier, even if it turns out both knew or suspected Sandusky’s crimes and then covered them up. Unless Penn State simply paid the golden parachutes that Paterno and Spanier likely had, then Paterno and Spanier likely have claims to them. If they have any sense, they won’t raise those issues now, but they have four years to sue under Pennsylvania’s statute of limitations for breach of contract.
All of which, together, raises an even larger issue: alumni at universities and stakeholders in other large institutions should press for more transparency in the terms of their upper management employment agreements. Considering that the vast majority of people work without any guarantee they’ll still have a job tomorrow, it should raise more than just an eyebrow when an upper-level employee of the company demands a clause that arguably allows them to cover up sexual abuse of children without losing their “multi-million dollar” severance package.