11.07.11 4:34 AM ET
What Brooks Severance Buys Murdoch
Taking a hit for News Corp. may be the best-paying gig in journalism. Rebekah Brooks, former CEO of the group’s News International unit, reportedly got £3.5 million, or about $5.6 million, for stepping down. Colin Myler, News of the World’s last editor, received £2 million. All told, News Corp. is believed to have paid £8.5 million to departing senior staff.
Don’t chalk it up to Rupert Murdoch’s generosity. He may not have had much choice in the phone-hacking scandal. Britain’s strong employee-protection laws mean that unless employers can prove they have a reason to dismiss an employee, they must either give the person advance notice or pay him or her.
News Corp. likely wanted Brooks gone in a hurry. It didn’t want to wait for a full investigation into her conduct, and it didn’t want to end up mired in litigation, so it paid her and sent her away. Seen in the light of U.K. employment law, says Samuel Estreicher, director of New York University’s Center for Labor and Employment, the payoff may not have been as extravagant as it seems.
Nevertheless, it was a large severance package for Brooks, and it likely got News Corp. more than just her resignation. Erika Collins, a partner in the employment department of the Paul Hastings law firm in New York, says Brooks almost certainly had to sign a waiver of any claims against News Corp., confirming she could never sue the company.
News Corp. likely also demanded a nondisparagement clause, saying Brooks could never speak ill of her former company. Such a clause could apply forever, so not only would Brooks be barred from running to The Guardian and trash-talking her former employers now, she’d be prevented from writing a scandalous tell-all decades from now. Brooks may have asked for a mutual nondisparagement clause, says Collins, but it’s not clear that News Corp. would give it to her.
Brooks likely also signed a confidentiality agreement, says Robert Bartlett, a professor at Berkeley Law. Not only would it keep her from talking about her employment at News Corp., it would keep her from talking about the settlement agreement that keeps her from talking about her employment at News Corp.
Neither the confidentiality obligation nor the nondisparagement clause will help Brooks before Parliament. There’s usually an exception for legal process written into these clauses, says Bartlett, and even if there isn’t, no settlement agreement would be able to prevent an employee from cooperating with the law.
But a jilted employee is under no obligation to cooperate with her former employer, unless it’s written into her agreement. Estreicher says Brooks likely signed an agreement to “cooperate with reasonable requests for assistance,” which might include reviewing documents, being available for interviews with company lawyers, telling News Corp. about any subpoenas she receives, and generally helping the company defend itself after she’s left.
If News Corp. really distrusted a former staffer, it might stagger her severance payments, says Estreicher. If she broke her agreement, the company could cut her off. But even if she didn’t sign such an agreement, News Corp. could always sue her for breach of contract if she broke a nondisparagement or confidentiality clause.
News Corp. has other, friendlier ways of ensuring its former employees’ cooperation. The company could, for example, attach a consultancy clause to her severance agreement. “They wouldn’t be buying a particular message,” says Estreicher. “That would be terrible.” The consultancy clause would be a way of maintaining a positive relationship with Brooks while still distancing her from the company. “It would be in effect buying her availability,” he says.
But keeping a disgraced employee on as a consultant would be politically hot, says Estreicher. As would swearing her to secrecy. In the end, the most important part of the agreement may be the lavish severance package itself—and the good will it buys.