London Featured in Private Funds Management on Limiting Termination-Based Lawsuits

Private Funds Management interviewed Tax & Private Clients partner Jeffrey London for its article “When It’s Time To Say Goodbye” covering the best practices private equity firms should employ to limit potential lawsuits after terminating an employee.

London describes how consistent documentation can minimize the risk of lawsuits and retaliations. Without documenting employee progress, an employee may sense their termination in advance and file a complaint. London explains that there are “statutory protections that force you to refute that this was due to discrimination,” as the termination will appear retaliatory in court. By documenting and discussing performance concerns in advance with an employee, firms can establish a methodology for measuring performance and a paper trail for employee progress.

Similarly, London stresses the importance of establishing severance terms before termination. He advises looking “to what the firm gave a similar ranking executive with similar tenure and use that as a guideline in devising the severance terms and package.”

He added: “In the case of managing directors, they may be contractually obligated to receive carry, they may be an investor in the existing funds, and they may have close ties with major investors.”

To conduct such conversations, London concludes that many firms delegate it to their HR department, but if it’s a partner, he thinks that senior executives need to be involved. In doing so, the discomfort of a termination conversation is mitigated by preparation and sufficient respect for employees to ease transition.