Funds for groups associated with the Teamsters union have sued McDonald’s, demanding documents related to the board’s discussions on gender discrimination and sexual harassment dating back to 2006.
The funds sued the Chicago-based burger giant in a Delaware state court, arguing that the company is withholding “highly relevant” documents associated with their investigation into sexual harassment at the chain in the aftermath of former CEO Steve Easterbrook’s departure in 2019.
Easterbrook was fired in November of that year after it was revealed that he had a consensual affair with an employee. The Teamsters funds demanded documents in April, and then in August McDonald’s sued Easterbrook, seeking to claw back a severance that the union says could be worth $85 million now. The burger giant said in that lawsuit that Easterbrook was later found to have had other relationships that he withheld from the company’s board.
The Teamsters argue that Easterbrook should have been terminated “for cause” in November and not sued in August.
“The board had the authority to terminate Easterbrook ‘for cause’ and consequently, to claw back at least [a] portion of his exit compensation,” the lawsuit says. “By terminating Easterbrook ‘without cause,’ the board allowed him to unjustly receive a lucrative exit package that could be worth up to $85 million.”
In a statement, a McDonald’s attorney says there is “no basis” for the union’s claims.
“The McDonald’s board took swift and decisive action to address Easterbrook’s misconduct, sending an unmistakable message that McDonald’s will not tolerate behavior inconsistent with its values at any level of the company,” said Ron Olson of Munger, Tolles and Olson. “The Teamsters’ complaint second-guesses the board’s actions based on a fictional narrative developed in hindsight after Easterbrook’s cover-up was exposed as a result of the board and management’s reinforcement of the company’s speak-up culture. There is no basis for any derivative claim against the board.”
The lawsuit is only the latest issue between labor advocates and McDonald’s that dates back several years. The advocates have been pushing for higher pay and the ability to unionize workers, and in the process have been highlighting problems in the chain’s restaurants and elsewhere.
But it also highlights the tricky path McDonald’s has taken since Easterbrook’s departure. The board at the time let its former CEO keep his severance payment, including stock options and grants, even though it fired him over the relationship. McDonald's sued Easterbrook in August after saying he had other affairs with employees, including one who received a stock award. McDonald’s has been in a bitter fight with Easterbrook since then.
Shareholders, including some associated with labor groups, have been pushing hard against the company’s board since then, arguing that Easterbrook should not have kept his severance to begin with.
The Teamsters, however, argue that the Easterbrook situation is part of what it sees as an overall pattern of sexual harassment and gender discrimination inside the company’s restaurants.
“McDonald’s suffers from a toxic work culture marked by sexual harassment, bullying and abuse of the company’s female employees at the hands of their supervisors, coworkers and customers,” the lawsuit says. “To make matters worse, victims who object to sexual harassment are ignored, mocked and otherwise retaliated against, including being terminated, while their abusers continue working with impunity.”
The funds, which are shareholders of McDonald’s, sought documents to investigate potential wrongdoing around the decision. The two sides spent the summer negotiating terms of the company’s production of the documents.
The Teamsters argue that the board started investigating just as the union was pushing for documents. It also argues that McDonald’s has refused to provide any documents past April, despite that renewed investigation.
The union “is left with no other recourse than to seek the court’s involvement.”