Workplace Ethics

Your company is a mid sized corporation with its corporate offices in a
state that is generally deemed to be an "at-will" state. It is a privately held corporation.

However, there is state case law, which holds that, under certain conditions, an employee handbook may be deemed to be an employment contract.

You are the Senior Vice President of the Company.

Several years ago, it was decided to write an employee handbook. Upon
the advice of the corporation's attorneys, a statement that the handbook
was not to be interpreted or deemed an employment contract was included
in the front of the handbook. The handbook also sets forth progressive
discipline in connection with resolution of employee problems.

Each employee also receives a copy of the handbook and signs a form,
stating that "s/he has received the handbook and understands that such
is not a contract of employment."

Larry is the Assistant Comptroller of your Company. He is a forty eight
year old white male. 

He has been a loud, aggressive and a truly not nice employee for many
years. 

It has been recently learned, and verified, that he has been having a
sexual relationship with a co-equal and has been using company property
and possible company time for his escapades. Larry is getting a divorce from his wife, since his “friend” is now pregnant by him.

However, everyone admits that Larry does a truly great job with regard to finances. He is quite adept in legally increasing cash flow and maximum benefit from investments.
Nonetheless, the newly appointed President/ CEO has decided that Larry's
conduct has now crossed the line of acceptable behavior. She wants to terminate Larry immediately.
Larry has also learned through the grapevine that he is on the verge of
being terminated. He comes to your office and tells you that, if the
company elects to terminate him, he will start a wrongful termination
lawsuit and will also share with the media and the Board of Directors
copies of certain files, which show a pattern of long-term questionable
dealings and pay-offs by the company. He tells you that his former boss,
the Vice President of Finance, had told him that he should always gather
up these documents and photocopy them over the years as his "insurance
policy" for such a situation. He informs you that he has no qualms in
using them against the company, if needed. 

What the documents would show is that the company has regularly settled, through large cash payments, claims of sexual harassment of employees, both male and female, against various supervisors/managers of the company. The company has also required the “victims” to sign non-disclosure statements about the facts of the case as well as the amount of compensation.

He requests that, in consideration of settlement for him not starting a
lawsuit and returning the copies to you, that he be allowed to keep his
job or, as he rather prefers, to be paid $1,000,000 in severance. His
yearly salary is $125,000.00 plus benefits. 

He has told you that his lawyers have advised him that he can testify in court about the fact that he processed the settlement payments for such claims and that he probably can testify in generic terms about the company- bad acts, that necessitated the processing of the settlement checks. 

In spite of Larry's proposal to you, the President decides to and has fired Larry. 

Larry- attorneys have commenced a lawsuit in the appropriate trial court, alleging that management has failed to adhere to the various levels of discipline, as set forth in the Employee Handbook and that he should be rehired.

Your outside employment litigation counsel have advised you that, based upon the case law of the jurisdiction, there is a strong likelihood that the court would find that you have wrongfully terminated Larry and that Larry would have to be rehired. However, the attorneys also note that, based upon the case law, if you follow the rules and go through the discipline process, Larry can be successfully terminated. However, they note that there is a problem concerning grounds. The fact that Larry has had an extra-marital affair with a co-equal, who is now pregnant by him, is a not sufficient ground for termination. There is a proof question as to how you can prove “theft of time” by reason of Larry- sexual encounters on the job. However, as your company is located in an “at will” state, the fact of his conduct may be more than enough to terminate him.
Larry- lawyers have contacted your outside counsel and have said that they are going to request a temporary restraining order, requiring that Larry be restored to his job or else be paid his salary. They have also informed the lawyers that they are going to ask Larry in open court about some of his duties. They tell the lawyers that obviously Larry is going to tell the truth and inform the world, including the media that he is planning to invite, as it is in open court- a public event, about the company- “dirty deeds.”

Your outside counsel have informed you that Larry might be able to testify a little bit about his job function. However, even though they do note that they can limit damaging testimony, there is no guarantee as to how far the Court will allow him to testify.

Fortuitously, Larry has called a Board member and said to her that he wants to settle. He said that  “if the price is right” he would return the documents, sign a non-disclosure agreement and end the lawsuit.

This Board Member has called other Board Members and has told them that she believes that the price of public disclosure about the company- prior problems is worth paying Larry a reasonable settlement.

As you are the point person on this issue and the Board is aware that you are a doctoral candidate in management, they request your opinion as to the legality and ethics of “settling with Larry,” specifically SHOULD THEY SETTLE?

What is the legal support for your answer?

200 words