Fast-food retail giant McDonald’s reported a lawsuit against their former CEO, Steve Easterbrook, over accusations of sexual harassment, violations of company policy against relationships with subordinates, and using the company email to send pornographic pictures to himself. Find out what happens when company efforts to avoid public disclosure of sexual harassment problems backfire.
McDonald’s has faced more than one claim of sexual harassment in their fast food restaurants over the years. In 2018, workers walked out in protest of sexual harassment in the fast food industry. Last year, the Time’s Up Legal Defense Fund and other civil rights organizations brought 23 complaints against the company for sexual harassment of its employees, including several who were teenagers when their assaults occurred. However, all these complaints involved service-level employees at the business’s various franchise locations.
Then, in October 2019, a McDonald’s employee reported that she had been having a romantic relationship with the company’s CEO, Steve Easterbrook. The employee told the company that she and Easterbrook had been sending sexually explicit text messages, photographs, and at least one FaceTime call for a month, but that it had not been physical. She came forward because she was afraid that this relationship would violate company policy against fraternization and that she might get in trouble for consenting to the contact.
McDonald’s hired outside lawyers to review the complaint and Mr. Easterbrook’s situation. As required by Title VII of the Civil Rights Act, the fast food company investigated the claims of sexual harassment and questioned Mr. Eastbrook about his conduct. He confirmed what the employee had said. The lawyers involved searched Mr. Eastbrook’s company phone and cloud storage account, but said they found no evidence of additional misconduct.
The company’s board of directors decided to remove Easterbrook from his position. But they gave him a golden parachute by avoiding firing him “for cause.” This meant he received a severance package of more than $40 million, including stock options and other compensation. The board hoped that the compromise would avoid embroiling the company in a lengthy dispute and cause as little disruption as possible to the business.
But McDonald’s sexual harassment problem didn’t go away with Easterbrook’s removal. In July 2020, new accusations of sexual harassment arose against the former CEO from another employee. According to the company’s SEC disclosure, this time the investigation included a review of the company’s corporate servers, where Easterbrook’s emails were archived. It revealed “dozens of nude, partially nude, or sexually explicit photographs and videos of various women, including photographs of these Company employees, that Easterbrook had sent as attachments to messages from his Company email account to his personal email account.”
This new disclosure cast doubt on the company’s previous investigation. Even McDonald’s own filings say the company’s initial review did not include a thorough search of Easterbrook’s email account. As Brandon L. Garrett, a law professor at Duke University School of Law, told the New York Times:
“One would think that it would be internal investigation 101 to look at all electronic records right away. . . . The concern, if an investigation doesn’t look at emails, is that it was a halfhearted investigation.”
That concern is consistent with McDonald’s stated intent to resolve things quickly and quietly. In 2017, McDonald’s made an internal statement emphasizing that top executives needed to attend anti-harassment training. Then in 2019, it updated its anti-harassment policy in response to employee complaints.
When executives are called out for misconduct by groups like the #MeToo movement or Time’s Up, their companies often try to quietly remove the problematic executive, rather than risk the bad press that comes with public disclosure of the allegations of sexual harassment. They may also make adjustments to internal training procedures or announcements within the company about anti-harassment policies to placate employees who raise concerns, and avoid letting the issue go public. This can sometimes address the individual employee’s concerns, but it seldom makes significant changes to corporate culture or toxic workplace environments.
That is why McDonald’s public disclosure of its lawsuit against Easterbrook is so unique. On Monday, August 10, 2020, the company sued its former executive for lying to its investigators, covering up his inappropriate relationships with employees, and committing fraud by transferring hundreds of thousands of dollars in stock grants to one of those employees during their relationship. The company hopes to reclassify his firing as “for cause” and “claw back” the severance compensation Easterbrook received.
Even though it is unusual for a company to publicly air its dirty laundry, the SEC disclosure doesn’t mean McDonald’s has turned a new leaf. The complaint clearly demonstrates McDonald’s attempt to protect its reputation. It emphasizes the company’s integrity, ethics, and values, and lays out efforts the company had taken in response to previous complaints that it had a sexual abuse problem. By filing this lawsuit, in addition to recovering the money it paid to make Easterbrook go away, McDonald’s hopes to distance itself from Eaterbrook’s relationships, and the accusations of sexual harassment that they caused.
At Eisenberg & Baum, LLP, our sexual harassment attorneys understand the strategies large corporations use to cover up the sexual harassment claims. We know how to leverage companies’ desire for privacy to help employees receive quick settlements when appropriate, and we aren’t afraid to file formal litigation when settlement isn’t an option. If you work for a large corporation and are facing a sexual harassment problem, contact us today to schedule a free consultation.