I had grossly overestimated the school district's legal fees in defending against Steve Goldschmidt's claim for his severance package, figuring that the district must have spent at least $150,000 on attorneys and defense costs. Today's Oregonian reports that the district has paid only $59,540 to the law firm that tried the case, one recognized for expertise in labor and employment law. (Which means that its legal fees cost only about as much as one teacher, instead of three teachers.)
Though I'm pleased that Portland Public Schools was so thrifty here, I can't help thinking that it could have been even thriftier by buying perhaps $1000 of its outside firm's legal advice before terminating Mr. Goldschmidt: it would have saved not just the next $58,000 of legal costs but also the $250,000 in damages for defaming him.
And in response to a comment on my earlier post, I've clipped the portion of the arbitrator's decision that explains his reasoning and posted it in the continuation below, putting in color the points I think are most salient to the decision and using asterisks to show my deletions. Willamette Week has posted the entire decision as a PDF.
Reasons for this Award
In their hearing memoranda, the parties dispute the allocation of the burden of proof. It is unnecessary to decide which party has the burden of proof because the evidence is clear that Respondent did not have a basis for terminating Claimant for gross neglect of duty.
The employment agreement: Highly experienced and capable legal counsel represented the parties in negotiating the terms of the employment agreement over several months. By the spring of 2001, Claimant had served as human resources consultant for Respondent on a consulting basis since January of 2000, some 16 months. He had been recruited to the consulting position by Respondent’s Superintendent Ben Canada and had not solicited the engagement.
By the time Respondent opened discussions in late 2000 about Claimant taking a full-time position as Executive Director of Human Resources, Claimant’s consulting for Respondent had evolved into a nearly full time job. Claimant had taken an unpaid leave of absence from his tenured Associate Professor position at the University of Oregon in Eugene to commute to work for Respondent in Portland. His wife had a satisfying career in Eugene and his daughter was thriving in the Eugene school system. He would have to give up the tenured faculty status at the University of Oregon and uproot his family to move to Portland into a fulltime position with a school system that was in a constant state of turmoil in many respects. He would also be putting at risk a separate labor consulting practice that was earning him $50,000-90,000 per year. Respondent was willing to do so only if he had extraordinary contractual safeguards against the move failing.
The evidence showed that Respondent recognized Claimant’s value in the area of human resources and labor negotiations. Respondent needed strong leadership in this aspect of its organization, something that had gone wanting for many years. In the first four months of 2001 during which Claimant and Respondent and their counsel negotiated the employment agreement, many terms changed, but the constraints on grounds for termination for cause were consistent from a late January draft through the final version.
The phrase “gross neglect of duty” is not defined in the agreement. There are analogies available in other areas of the law and some within the world of education. The term is sufficiently ambiguous that the arbitrator allowed introduction of evidence by the parties as to its meaning in the specific context of Claimant’s employment agreement.
Claimant testified to a discussion with counsel for Respondent before Claimant had retained legal counsel to represent him in the negotiations. The draft agreement under consideration at this time included the restrictive language about cause for termination, i.e., conduct involving “moral turpitude or gross neglect of duty.” With respect to the latter, Claimant testified that counsel for Respondent observed that Claimant would have to virtually fail to show up for work for there to be a basis for termination on this ground.
The Chair of Respondent’s Board also recognized the likelihood that restricting the basis for termination for cause would guarantee that Respondent would be owed severance at termination. In an email dated March 13, 2001, the Board Chair observed:
First, the definition of “for cause” under Steve’s contract is significantly narrower than the statutory definition for contract administrators. This means that there is virtually no way that Steve could be terminated for cause (except for moral turpitude or gross neglect of duty). Virtually any severance of Steve’s employment by the district would be not for cause and would render the district liable to Steve for Steve’s salary and benefits remaining under the term of his contract (at least a year, but more likely at least 18 months).
This email responded to an email from Respondent’s counsel to Board members, some of whom were lawyers, analyzing the proposed employment agreement and soliciting their comments. Counsel’s email to Board members notes that the Fair Dismissal Law applicable to certified administrators allows for termination for cause based on “neglect of duty” and “inadequate performance.” By contrast, this law does not govern Claimant’s employment contract and the grounds on which a certified administrator could be terminated were not applicable to Claimant.
In that March 13, 2001 email, Counsel specifically brought to the Board’s attention the limited grounds of moral turpitude and gross neglect of duty as the permissible bases for a dismissal with cause. Also highlighted were the severe financial consequences of a dismissal without cause and another unusual feature of the contract that relieves Claimant from the normal duty to mitigate damages in the event of breach.
To summarize, Respondent’s Superintendent, its Board and its legal counsel were fully aware of the potential financial cost to Respondent of entering into the employment agreement and the very limited basis on which it could be terminated for cause.
Respondent has never contended that there was anything illegal about the terms of Claimant’s employment agreement or that it was tricked into entering into it. Whether or not Respondent made a bad deal is irrelevant. It made a deal and must stick by the deal it made.
Gross neglect of duty: The law concerning “gross neglect” or its kin in tort law – “gross negligence” - is clear in requiring something more than “neglect of duty” or “inadequate performance.” Gross neglect of duty requires a showing of a nearly complete disregard for performance of the duties of the position, without concern for the consequences.
Claimant’s job performance: Based on the evidence presented at the hearing, even if gross neglect of duty were deemed the equivalent of neglect of duty, as current Superintendent Phillips testified she (erroneously) believed it to be when she terminated Claimant in February, or the equivalent of inadequate performance under the Fair Dismissal Law, the arbitrator would find Claimant guilty of neither.
From the beginning of his consulting work through his termination, Respondent worked diligently to implement programs that supported Respondent in its educational mission.
Specifically, the evidence showed:
1. Claimant worked extraordinary hours on behalf of Respondent. Although his employment agreement allowed him to continue his outside consulting work for others, over the nearly four years of his employment, his income from outside consulting work approximated $5,000 in total, all from one engagement roughly 18 months prior to his termination. There was no evidence that he abandoned his work for Respondent at any point, nor did he ever fail to show up for work.
2. Claimant came to the job with Respondent fully aware that he was a lightning rod for the teachers’ union. There was a wealth of evidence about objectionable tactics pursued by the union in its negotiations with Respondent, some of which were designed to discredit Claimant in his role as Respondent’s labor negotiator and advisor. Despite these and other hurdles, Claimant was a contributing member of Respondent’s team that achieved significant gains in its negotiations with the teachers’ union.
3. The documentary evidence and the testimony show that Claimant was heavily involved in bolstering the quality of principal and other administrator hiring. * * * Relations with principals improved during his tenure.
4. Claimant was instrumental in developing strategies to improve diversity throughout Respondent’s organization * * *.
5. Under his leadership, Respondent went from a manual method of teacher hiring that relied on files kept in folders at the Central Office * * * to a streamlined computerized online system that greatly reduced the time spent to hire and allowed for improvement in the breadth of recruiting. * * *
6. Claimant was instrumental in re-ordering the series of negotiations with the teachers’ union, administrators, and custodians in a way that improved both the financial outcome for Respondent and morale among administrators.
7. The timing of teacher hiring was advance by several months, which directly resulted in Respondent’s ability to select from more qualified applicants. This also allowed more hiring from the pool of student teachers that Respondent had, in effect, trained during the school year, but had routinely been lost to districts which were able to make earlier offers of employment.
Pay for Performance Evaluations: A routine part of Claimant’s employment involved evaluations of his performance for the purpose of determining his entitlement to pay conditioned on achievement of specified goals. Most telling of these is the last one he received, which was completed by Superintendent Phillips’ predecessor Jim Scherzinger whom she replaced in August of 2004.
Mr. Scherzinger completed this evaluation in December of 2004, less than two months before Claimant’s termination by Ms. Phillips. A fair reading of the evaluation reveals no indication of dissatisfaction with Claimant’s job performance, despite noting a few areas where continued improvement was called for. Certainly, there is no indication of concern that Claimant had grossly neglected his duties.
Mr. Scherzinger’s Pay for Performance Evaluation in December of 2004 covered the areas of Labor Negotiations (concluding that $3,500 of a possible $4,000 would be awarded to Claimant), Recruitment and Hiring ($3,000 of a possible $4,000 awarded), Improve Human Resources Services ($6,000 out of a possible $6,000 awarded), and Improve Human Resource Systems, Policies, and Customer Service ($2,000 out of a possible $6,000 awarded). Claimant was awarded $14,500 out of a possible $20,000.
When one reads the comments under the last category in which Claimant received only one-third of the possible award, one is hard put to understand why this category was graded down. By no stretch of even the most fertile imagination can one find any hint that Mr. Scherzinger was concerned that Claimant was neglecting his duties in this area, let alone grossly neglecting them. The same is true for the rest of the evaluation.
Respondent’s evidence of Claimant’s job performance: Respondent concedes there is no documented record of inadequacies in Claimant’s performance. This in itself is somewhat shocking when contrasted with the documented criticism of the job performance of other administrators, including one administrator whose job performance Superintendent Phillips conceded was grossly inadequate, who wrote emails to colleagues that would have infuriated even the most mild-mannered administrator, and yet was given a six-month notice of termination without cause by Superintendent Phillips.
Superintendent Phillips made the decision to terminate Claimant’s employment. She testified she did not become familiar with the negotiations that led to the limited grounds available for termination for cause or the specific meaning of the phrase “gross neglect of duty.” She based her assumption about the meaning of “gross neglect of duty” on the practices she believed prevailed in the profession concerning termination of administrators. She offered four grounds for reaching the conclusion that Claimant had grossly neglected his duties to Respondent:
1. Data management.
Much was made at the hearing about Human Resources’ shortcomings in responding to the City of Portland/Multnomah County audit for the ITAX in the fall of 2004. The ITAX is the special income tax voters had approved to support the schools. The ITAX audit that was the focus of the hearing was the fourth ITAX audit in which various departments of Respondent had participated, but the first for HR and also for the first time the auditors wanted to analyze Respondent’s use of substitute teachers and its relationship to use of leave by regular teachers.
The auditors had set a late September deadline by which they hoped to finish their work. This deadline preceded the November, 2004 election in which the voters would cast ballots on a measure seeking to repeal the ITAX. An auditor witness testified at the hearing that the law enacting the ITAX required the audits, but the law did not set a deadline for issuance of the audit reports.
In September of 2004, Human Resources was in the middle of a conversion from an old substitute teacher system that relied on an unstable computer software that had crashed in the past. The new system was expected to be online in late September. The software provider, whose participation was essential to the conversion, was in Florida. Hurricanes in Florida caused delays in the provider giving support for the conversion. These delays were beyond any control of HR or Claimant.
Human Resources did not meet the auditor’s initial deadline for production of the information. An extended deadline of October 11 was met, albeit primarily through the efforts of personnel in a different department. It was later learned that the information provided by the other department was wrong.
There are many mystifying aspects to Respondent’s claim that Claimant and Human Resources grossly neglected the effort to develop information for the ITAX auditors:
1. HR had every reason to want to provide the information, if it could be obtained from the system, and assigned personnel to the effort. In other words, there was no motive not to cooperate and no lack of effort to do so;
2. HR communicated with the auditors, although perhaps imperfectly, about the difficulties it had in getting information from the old system
3. Respondent’s witnesses from the County Auditor’s department received information from Respondent (from the source outside HR) by the extended deadline, but did not proceed with issuance of the report before the election. Respondent’s witness from the County Auditor’s department could not explain the urgency to get the information when it had not committed to, and ultimately did not, issue the report prior to the November election;
4. When HR analyzed the information given the auditors from the source outside the HR department, it found errors that overstated Respondent’s use of substitute teachers by a material amount. The source of the information later admitted that errors had been made. Respondent made much at the hearing about how HR could have gotten this information to the auditors earlier, but how can the failure to provide erroneous information become a basis for termination for gross neglect of duty?
Beyond the ITAX matter, there were only general statements about weaknesses in HR’s ability to manage and provide data. What seems true from the testimony as a whole is that the more data HR could provide, the more data people throughout Central Office and beyond wanted, and it was being generated by a system that was undergoing improvements through the time of Claimant’s termination.
2. Customer service.
Superintendent Phillips cited deficiencies in HR’s customer service as a basis for termination for gross neglect of duty. However, the weight of the evidence showed that Claimant made customer service a priority, sometimes to the upset of personnel in the department. Claimant decided that better customer service could be delivered if the people answering the phones knew what they were talking about. He dispensed with a regular receptionist and rotated knowledgeable personnel to the front desk to respond to inquiries that came to the department.
Claimant also enforced a blackout vacation policy to ensure that the office was adequately staffed during periods of greatest demand. Nobody like the blackout policy very much, but even Respondent’s witnesses admitted it was necessary given the cyclical nature of Respondent’s ‘business.’
A customer survey by an independent organization using “secret shoppers” completed immediately after Claimant’s termination rated HR very high in customer service. The rating reflected improvements in customer service instituted during Claimant’s tenure.
3. Problems internal to HR
Superintendent Phillips testified that a morale problem in HR was another basis for her determination that Claimant was guilty of gross neglect of duty. At this point it should be mentioned that much of the hearing dealt with personnel matters involving employees other than Claimant and, for that reason, the hearing was not open to the public. The following is a summary of relevant testimony without revealing the identity of the witnesses.
One of Respondent’s witnesses testified about an extended effort to get leave for a personal matter and how the witness felt ‘unsupported’ by HR. The fact that the witness eventually got the requested leave seems to have gotten lost in Respondent’s and the witness’ attempts at the hearing to describe the personal inconvenience to which the witness felt put. Claimant played virtually no role in any of the events that led to the witness getting the leave requested.
Another witness testified to feeling belittled and ignored, but did admit to missing deadlines in completing work. This witness described her work as “impeccable,” a description at odds with the evaluation of her performance by others.
There was other testimony about various administrators in the HR department being “mean and nasty” in their dealings with both subordinates in the department and others outside the department. Some witnesses said they feared retaliation, but what was missing from their testimony was evidence on which the fear could be founded. Two witnesses were moved to different desks, but could not say how these moves were retaliation, rather than the efforts to improve efficiency in the department that Claimant’s witnesses said they were.
No doubt there were times when personnel in the HR department didn’t feel they were being treated just right. HR had a very big job to do and needed people who could get it done. The arbitrator was impressed that the witnesses who testified on this point suffered criticism directed at their job performances and not their personal attributes. Even in this age when all communication must start with some form of compliment or thanks it is not “gross neglect of duty” to criticize employees when the criticism is believed warranted.
Superintendent Phillips’ predecessor agreed to accept the position in 2001 only if Claimant were a part of his administration. Others testified that they, too, either agreed to come to work for Respondent only if Claimant were part of the team, or stayed primarily because of Claimant’s presence. In fact, some left Respondent in part because of Claimant’s termination and there was testimony that turnover in the Human Resources Department has been much higher since Claimant’s departure.
* * *
4. Lack of trust
Superintendent Phillips cited lack of trust of Claimant as a basis for her conclusion that he had grossly neglected his duties. Precious little testimony was offered on this discrete part of the four-part “pattern” of gross neglect that she described. Her efforts to support this basis on cross-examination were not successful.
One of the witnesses, a current member of Respondent’s Board, offered testimony that led him to conclude Claimant could not be trusted in his dealings with the Board. This witness related an incident where Claimant advised Respondent’s outside labor counsel to change the elements of an oral offer that had been made to the teachers’ union in the follow up letter labor counsel intended to send the union representative to memorialize the conversation. The union representative had rejected the offer.
The arbitrator pressed this witness to more clearly state whether he perceived Claimant’s advice to be in the nature of a suggestion for negotiation strategy or a suggestion to rewrite the history of the conversation labor counsel had with the union representative, at which Claimant was not present. After much probing, the witness gave unconvincing testimony that he perceived Claimant to be asking labor counsel to mischaracterize the offer that had been discussed.
The arbitrator simply doesn’t accept this testimony as credible. There would have been a wealth of testimony produced by Respondent had Claimant’s trustworthiness in his capacity as Executive Director of Human Resources ever been genuinely questioned during his tenure.
One of Respondent’s witnesses, who sought at various times to assume a position in a reorganized structure that would have had Claimant reporting to the witness, testified that Claimant’s conduct of the Human Resources department had not varied in its quality since 2001. So, what was acceptable and commendable management of that department under two previous superintendents only became gross neglect of duty under an unstated definition of that term adopted by Superintendent Phillips.
Reasons for Claimant’s termination: On November 19, 2004, Claimant met with Superintendent Phillips and a Board Member to discuss the prospect of Claimant renegotiating his contract. Respondent was in the process of standardizing administrator contracts during this time and the first reading of the new contract form was scheduled for early December. The Board Member and Claimant testified at the hearing that Superintendent Phillips gave assurances at this meeting that Claimant’s job performance was good and that he need not be concerned that changes in his contract would have any impact on his tenure with Respondent. These assurances were consistent with what Phillips had been telling Claimant from the start - that he was like her, effective at getting things done. Respondent agreed to consider renegotiating the terms of his agreement.
Instead of pursuing renegotiation of the agreement, Respondent told a local newspaper that Respondent was insisting that Claimant renegotiate his contract. The newspaper also was told, and printed in the article, that ‘other avenues were available to it’ (meaning Respondent) in the event Claimant wasn’t willing to renegotiate. Respondent never sought to continue good faith efforts to renegotiate. On the other hand, Claimant never wrote or said he was unwilling to do so, right up to his termination.
What was very real to Superintendent Phillips in her dilemma about what to do with Claimant’s employment agreement was that any publicity about paying yet another terminated/ “resigned” employee substantial severance would be politically disastrous for Respondent. Phillips was relatively new to the job, having begun her duties in August of 2004. Earlier high profile departures of high-level/ low performing personnel with substantial severance payments had been damaging to Respondent.
She admitted there is no documentation of any warnings to Claimant that he was being grossly neglectful in his job performance and needs to ‘course-correct.’ She admitted that she did not know the meaning of “gross neglect of duty” in the context of this agreement. She admitted knowing that one very influential Board member had vowed never to vote for payment of severance again. She knew that if she issued a six-month notice of termination without cause, she could be assured of at least six months of controversy about whether and how much of the severance to pay Claimant, stiff resistance at the Board level to any payment, and adverse publicity in the community.
Claimant’s counsel suggested in closing argument that Superintendent Phillips decided to ‘let the arbitrator take the heat’ by not paying severance and forcing Claimant to an arbitration hearing.
Respondent’s publication of information about the reasons for Claimant’s termination: Claimant seeks recovery for defamation and the arbitrator has concluded that he is entitled to a substantial award on this claim. The parties agree that Claimant is a “public figure” for purposes of the defamation claim. They disagree over whether the information published was capable of defamatory meaning and, if so, whether Respondent abused the privilege to publish false information about a public figure. To succeed, Claimant had to prove that the publication was false, was capable of a defamatory meaning and was published with actual malice, among other elements of the defamation claim.
Superintendent Phillips had no reasonable basis to believe that her termination was for the stated reason of gross neglect of duty. She failed to inform herself of the meaning of “gross neglect of duty” under the employment agreement, although she was aware that this was the applicable contractual standard. If not guilty of gross neglect of duty, the only other implication from a reading of the statement Respondent caused to be published was that he had committed acts involving moral turpitude. Respondent has never asserted that Claimant had, in fact, committed any acts involving moral turpitude.
The implication that Claimant was terminated for conduct involving moral turpitude or gross neglect of duty, as related to the press by Respondent, was false. * * *
Oregon’s public records law allows the fact of Claimant’s termination to be made public. Yet, the information that Respondent falsely published to the effect that Claimant was guilty of either acts of moral turpitude or gross neglect of duty concerned personnel matters, exempt from disclosure. ORS 192.501(12).
Respondent has failed to provide clear and convincing evidence that the public interest required it to publish information concerning the reasons for termination and has also failed to prove that publication did not constitute an unreasonable invasion of Claimant’s privacy. ORS 192.502(2).
The evidence was clear that the manner in which Claimant’s termination was publicized was designed to benefit Respondent in its public relations efforts. A former school board member testified at the hearing that the manner in which Claimant was terminated was “designed to maximize his humiliation.” At the same time it could be expected to inflict damage to Claimant’s reputation. Readers of the newspaper articles quoting Respondent’s representatives learned that Respondent was only entitled to severance payments if terminated without cause. He could only be terminated for cause if guilty of acts of moral turpitude or gross neglect of duty. Thus, the reader could only conclude that Claimant was guilty of gross neglect of duty or had committed acts of moral turpitude (as three witnesses testified they concluded, knowing that Claimant’s work ethic precluded him from neglecting his job duties).
Respondent knew that Claimant was highly vulnerable to any statement implying acts of moral turpitude given the pervasive publicity that had attached to his family’s name as the result of his brother’s recent, widely publicized and admitted conduct involving moral turpitude.
* * *
Evidence from Claimant and other witnesses provided ample proof that his reputation in his profession has been damaged by Respondent’s publication of the statements concerning his termination. * * * In the words of one witness, no school district can risk the adverse publicity that could come from hiring Claimant to consult on labor issues so long as there remains the damage to his reputation from the implications naturally drawn from Respondent’s statements concerning the reasons for his termination. An award of $250,000 is justified by this proof.