Sexual Misconduct and the Definition of “Cause”

The Balles v. Babcock Power Inc. decision sheds light on whether sexual misconduct constitutes “cause” and provides go-forward guidance to all parties drafting and negotiating (or re-negotiating) “for cause” language in employment and compensation agreements.

In the spring of 2017, before the emergence of the #MeToo movement, the case of Balles v. Babcock Power Inc. was decided in Massachusetts. The case involved a company’s “for cause” termination of an executive upon learning of his sexual conduct with a subordinate. The judge ultimately sided with Eric N. Balles on the issue of “cause” under the stockholder agreement, and ordered the employer to return his stock and pay all dividends.

Click here to read the full article, published on FEI Daily.