A “Fair and Balanced” Look at a Salary Claw-Back Against an Alleged Serial Sexual Harasser

by Bond Schoeneck & King PLLC
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One of underlying themes of the now defunct “O’Reilly Factor” was that the liberal elites have brought about the “wussification” of America.  In Mr. O’Reilly’s world, personal responsibility has given way to excuses and coddling, begging the question:  where is good old fashioned comeuppance when it is needed?  We can answer that question.

While Mr. O’Reilly was a lynchpin to Fox News’ highly rated nightly line-up, he was still an employee subject to all of the common law duties and liabilities as everyone else.  As an employee, he owed his employer a duty of loyalty.  Employed in New York, Mr. O’Reilly is subject to “the mother of all” employer remedies, the so-called “faithless servant doctrine.”  Under this doctrine, if Fox News decided to play the very type of hard-ball championed by Mr. O’Reilly, it could — if it proves the misconduct — recoup from him every stitch of compensation paid to him during the period of time that he was allegedly sexually harassing Fox employees, every penny owed to him as part of any “parachute,” and punitive damages.  Fox may also be able to recoup from Mr. O’Reilly the investigative costs it recently paid to its outside law firm.

In New York, the faithless servant doctrine is more than one hundred years old.  This doctrine, a subspecies of the duty of loyalty and fiduciary duty, requires an employee to forfeit all of the compensation he/she was paid from his/her first disloyal act going forward.  The doctrine has a deliberate harsh deterrent purpose and public policy goals.  Important here, the fact that Mr. O’Reilly brought in millions of dollars of revenue to Fox is irrelevant to a salary forfeiture against him, if the disloyal acts can be proven.

The doctrine has been applied in the specific context of sexual harassment.  In Astra USA Inc. v. Bildman, the Massachusetts Supreme Court interpreted and applied New York law, holding that New York’s Faithless Servant Doctrine permitted an employer to recover compensation it had paid to a high level executive who had been the subject of numerous sexual harassment complaints by other employees.  Under Astra, the doctrine can reach misconduct that does not involve theft or financial damages to the employer.  In upholding a $7 million complete forfeiture, the court aptly stated:  “For New York . . . the harshness of the remedy is precisely the point.”

The Astra court relied on the New York Appellate Division, Second Department’s decision in William Floyd Union Free School District v. Wright (argued by the author of this article without any “spin” or “pinhead” elocution).  In that case a multi-million dollar forfeiture was obtained by a public school district against two high level employees who had stolen from it.  In language now cited in other cases, the Court held:  “Where, as here, defendants engaged in repeated acts of disloyalty, complete and permanent forfeiture of compensation, deferred or otherwise, is warranted under the Faithless Servant Doctrine.”

Despite Astra and William Floyd, disloyal employees have tried to limit the scope of the forfeiture.  On June 2, 2016, the Appellate Division, Third Department added strength and vigor to the faithless servant doctrine in a case where an employee committed repeated acts of theft.  In City of Binghamton v. Whalen (also argued without spin by the author of this article), the Court reaffirmed the strict application of the faithless servant doctrine:  “We decline to relax the faithless servant doctrine so as to limit plaintiff’s forfeiture of all compensation earned by the defendant during the period of time in which he was disloyal.”  The Court specifically noted that the faithless servant doctrine is designed not merely to compensate the employer, but to create a harsh deterrent against disloyalty by employees.

Published reports indicate that Mr. O’Reilly is parachuting out of Fox with tens of millions of dollars.  Under the earnest moral convictions and biblical brimstone that were the hallmark of Mr. O’Reilly’s long tenure with Fox, he should forfeit it all back if the allegations of sexual harassment can be proven by Fox.  Mr. O’Reilly famously closed his show with a “word of the day.”  We offer two such words:  “Faithless Servant.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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