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.