Rod St. Aubyn: Should Contracts For Public Officials Even Exist?

In the past few years news reports have brought to light activities that resulted in the resignation/termination of several public officials. As the stories evolved it was reported that based on contract terms or negotiated settlements these public officials were awarded some types of severance payments.

Some recent examples –

• According to a Forum News Service article, former North Dakota University System Chancellor Hamid Shirvana’s 3-year contract was bought out in an amount over $800,000 not including his health insurance.
• Fargo Police Chief Keith Ternes agreed to resign amid some complaints about staff morale and other management issues. The City Commission decided to pay Ternes his current salary until July, technically placing him on paid administrative leave for about eight months.
• Also from the Forum, it was recently reported that Doug Mayo, the head of the NDSU Development Foundation and Alumni Association resigned amid reports of staff morale, high staff turnover and other issues. The Forum states “Mayo’s speedy removal comes with an estimated $70,000 buyout and a 2014 Ford Expedition XLT, which was his foundation-owned vehicle.”

For me personally, it has begged the question – why does a contract even exist for these people? An employment contract clarifies certain rights afforded to both the hiring entity and the contracted “employee”. Based on my limited research, every state except Montana is what’s called an “at will” state, meaning that the employer can terminate an employee at any time for any reason, unless specified by a contract or written policy. There are some state and federal laws that limit some reasons for termination (such as age discrimination, ect), but suffice it to say that unless stipulated otherwise the employer can terminate an employee without cause.

This brings me back to my original issue – employment contracts for public officials. We have seen several incidents where terminated public officials were provided generous severance payments based on these contracts or other negotiated settlements. Why??? If we are an “at will” state and things are just not working out with that public official, why must the public be obligated to pay for some severance payment? I am not passing judgment on any of the individuals listed in this article. Are we saying that NO ONE would take the job unless a contract is established? I fully understand the employee wanting the contract, but is there an obligation for public entities such as schools, universities, and other government entities to provide them? I know some of the arguments people will say:

• We will never be able to get qualified people unless we provide some protection in a contract.
• This is how the business world works and it should also work in public service.
• These settlements would be cheaper than the legal costs to fight them.
• These contracts protect the entity from future false claims and higher legal fees.

Many times these settlement offers include “non-disclosure” language that often protects the public entity from embarrassing information that could become very damaging if disclosed. But is that in the best interest of the public? I don’t advocate that Boards and others should be arbitrary in their dismissal processes. Look at your everyday employee who has no contract. If they do something wrong, they are either handed some type of progressive discipline or terminated depending on the issue. Maybe I just don’t see it, but mass terminations based on this “at will” provision just are not that prevalent in the business world.

Boards should make clear what the expectations are for their CEO. These expectations should be reviewed periodically (not just annually). If changes need to be made, it is only fair to bring this to the attention of that CEO so he/she can address the issues. If changes are not addressed satisfactorily, the Board or governing body needs to make a decision about whether to dismiss the individual. It does not have to be based on cause. If a public entity is being unfair about their hiring/firing practices, it will become abundantly clear and that entity will have difficulty in finding replacements. They will have to make changes to rectify the situation, but it is self-correcting.

And the argument often made about it being cheaper to pay the settlement than the legal costs to defend the actions, how do we know?

Perhaps there are some good reasons for these employment contracts, but for “public entities” as defined in state law I think they should be considered very sparingly. After all, it is the public’s money that is being paid for these severances.