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Thursday, April 23, 2009

Government endorses pre-dispute employee waivers . . . at least sometimes

Contract law types are aware that employers are more and more using the idea of contractual waivers as a way of getting employees to surrender rights, often in advance of any accrual of the actual right.  Well, what's good for Hooters Restaurants (see Hooters of America v. Phillips) is apparently good for the United States Government.

Worried that they might get sued by employees whose contracts are being rewritten new Treasury regs on executive compensation, the government asked Chrysler Financial (a sister company of Chrysler Motors) to get their employees to sign waivers of their rights to sue as a condition of additional aid under the Trouled Assets Relief Program:

Treasury asked Chrysler Financial to obtain waivers from the top 25 Chrysler Financial executives that would have waived legal claims against Treasury and Chrysler Financial resulting from the recent changes in executive compensation requirements for TARP recipients. Chrysler Financial’s management, however, informed Treasury that it was unable to obtain waivers from all 25 executives, therefore the request for additional funding was denied.

Two interesting points to this.  First, employees were asked to sign waivers without knowing exactly what limits their compensation would be subject to, since the applicable regulations aren't final.  Second, Chrysler Financial, which is privately held, is controlled by its shareholders, Cerberus Capital Management, who apparently aren't much interested in reducing the amounts they're paying their executives.

By the way, Chrysler Financial, which is struggling but isn't yet in its death throes, is denying that executive compensation is the reason it didn't take the money.  It says it didn't need it

[Frank Snyder]

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