Ep 37: The Law Behind Donald Sterling’s Ban & Firing Annoying Employees

May 6, 2014

Nasir and Matt discuss the legalities behind the NBA banning Donald Sterling and answer the question, “One of my employees is very annoying. He does great work but I can tell he is not liked by most coworkers. I also know he will sue if I fire him. How can I handle this best?”

Full Podcast Transcript

NASIR: This is Legally Sound Smart Business and this is Nasir Pasha.

MATT: And this is Matt Staub.

NASIR: This is where we cover business news with our legal twist and answer some of your business legal questions that you, the listener, can send in to ask@legallysoundsmartbusiness.com.

MATT: All right. Well, let’s just dive in here. I’m a big NBA fan and it’s been a great playoffs so far but, unfortunately, there’s this underlying issue that’s kind of taken the headlines. Even if you’re not a sports fan, you’ve probably heard about this.
Donald Sterling, he’s the owner of the Los Angeles Clippers. I believe he’s the longest-standing owner in the NBA. I think he bought it in 1981. He’s been involved in a lot of lawsuits throughout his life – a lot of which are based on racial discrimination, other forms of discrimination – just all sorts of terrible things. But, finally, I think it looks like it caught up to him. There was a bunch of legal things with this but let me get the story first.
He was recorded – a private conversation – without his knowledge or consent was recorded of his where he’s just saying terrible things to – I don’t know exactly what the relationship is because I believe he’s still married. Maybe he’s not married. I don’t know.
Basically, this young woman recorded this conversation where Donald Sterling said all these pretty bad things from a racial standpoint and then it got leaked. The NBA finally said, “Enough is enough.” There’s a new commissioner in the NBA who just took over in February so this is his first big task here. He came out and banned him from the NBA – showing up to games, being part of anything with the organization.
Now, he still gets payouts. He still owns the team but they just banned him. That’s another legal issue there – whether he could do that. But what it comes down to also is, if they get three-fourths of the remaining owners to vote that they want to kick him out of the league, they can – which is kind of crazy, but that’s what the NBA constitution I think is what it’s called says.
I don’t know what you want to talk about this because there’s so many legal issues going on but I assume you at least heard about it.

NASIR: Yeah, there are a ton of legal issues here but one legal issue that I think is missing that I think people are talking about but is just not there – is it legal to be a racist? The thing is you can. Everyone’s talking about, oh, like, some kind of labor law, discrimination or anything like that. First of all, understand that there’s no allegations that he took action or some kind of discriminatory act. It’s just these comments are, of course, reprehensible in itself.
But the point is that there’s no labor law violation. There’s no statute that he’s broken. The reason it’s a legal issue is because there’s some contractual obligations that he has to abide by under what Matt described as this NBA constitution which the name in itself is kind of funny to me but oh well…
And so, that’s really the issue here. Did he violate the constitution? If he did, what can they do about it and can the rest of the owners – was it three-fourths or two-thirds’ vote?

MATT: Three-fourths, yeah.

NASIR: Three-fourths – can they basically kick him out of the league by forcing him a sale. I think there is some kind of provision but I’m not sure how clear it is – whether his actions or his comments here warrant such an action under the constitution – the NBA constitution that is.

MATT: I’m glad you brought that first point up because it really isn’t being talked about. Obviously, all the things he’s done are terrible and he shouldn’t be involved in the league. No one really thinks he should even be around anymore or associated with the NBA. He didn’t break any laws. He just says bad things.
From that standpoint – and Mark Cuban I think nailed it with what he said – he said, “It’s a slippery slope if they’re just going to try to ban him,” and this was before they even announced anything. But he’s right; he didn’t do anything wrong. He didn’t break any laws. Obviously, what he said is bad and there are broad powers. The commissioner did have apparently broad powers to do what he did. He took a firm stance. I think, from what I’ve read and what some sports law experts have said, if they do get a three-fourths vote of the owners – which seems like a lot that they’re going to do that – then they will be able to kick him out and there’s really nothing he can do about it is what they say.
Now, this guy is very litigious. He’s definitely going to appeal. He’s definitely going to stick around and try every single thing he can to prevent this from happening but it’s just kind of crazy how things have sorted out.

NASIR: Yeah, and I don’t know if Sterling’s actually – I know he’s litigious – if it’s even worth for him to fight because I think the repercussions if he tries to fight this will be even more than what it is now. At least he can sell his team for top dollar right now, I think.
But here’s the thing about this constitution though. I think they’re having trouble hanging their hat on a provision within this constitution which would allow them to force a sale. I think the closest thing they found was a provision which they could force a sale if an owner should “fail or refuse to fulfil its contractual obligations in such a way as to affect the association or its members adversely.” I think the argument is that there’s some kind of morals clause within the contract with the owner and he violated that and that violation has an effect to the association and its members adversely so that’s where they’re hanging their hat as far as trying to kick him out.

MATT: I haven’t read through the constitution and bylaws but I’m looking at it right now.

NASIR: Neither have I.

MATT: Like I said, he still owns the team so he still makes money off it. We’ll assume he’s going to be forced to sell. He bought it for $12 million. From what everyone says, he’s going to be able to sell it for at least $1 billion so he’s going to make out pretty well. But the thing with these NBA owners is it’s not about the money because they’re all making a ton of money. It’s about the prominence behind owning an NBA team. It’s a very exclusive club that is very, very hard to get into. So, I think it’s more that sort of issue that he doesn’t want to give up that.

NASIR: That’s true.

MATT: You can sit front row, center court, right in the center every single game. Everyone sees you and that’ll be gone. For him, I guess he’s banned from going to any games and I guess that’ll be gone for him – forever.

NASIR: I was thinking, what I first said about his comments aren’t illegal in itself, I should probably preface that in the sense that I don’t want employers out there pretty much saying whatever because just because let’s say you are a racist and you make those comments out loud – especially in the workplace – it could be construed as harassment. If you end up terminating one of your employees and that employee happens to be of a certain race, it could be construed that the only reason that you terminated that person was because of their race and they were going to use that evidence of your previous comments against you.

MATT: Yeah, and we don’t even have time to talk about this, but that was an angle I wanted to take, too. The question of the day kind of gets into this. Like, what do you do if you have, obviously, if someone is saying comments in the workplace, an employee, then that’s an issue, but what if you have someone who says things outside of work, just blatantly racist comments, but never says it at work? You know that it’s underlying and that it’s there but then they come in the office and they’re fine. It’s just probably not the type of person you want to have around. I mean, what can you do about that?

NASIR: Are you talking about the employee or the employer? Because, even if the employer is – in private – a racist, I think that information alone, the evidence alone can be used against them if there is an action of wrongful termination or harassment based upon discrimination.

NASIR: Let’s get to our question of the day. I think this is applicable.

MATT: All right, let me read it here. You’re going to make me read – like always.

NASIR: Yeah, sorry.

MATT: “One of my employees is very annoying. He does great work, but I can tell he is not liked by most coworkers. I also know he will sue if I fire him. How can I handle this best?” From a billboard company in Sacramento.

NASIR: Okay. What I was kind of getting at is, when you terminate somebody, some people are just going to be angry and it doesn’t matter if there’s legitimate reasons – whether they’re a poor employee – they may just want to sue you back for whatever reason and they’ll find a reason to base their lawsuit on and it could be some very seemingly innocent joke that you made years ago and that may be a little bit too colorful for the workplace and take that and make a connection to why they were terminated. It happens all the time and, sometimes, there’s some truth to it. But, when there’s not, it’s going to come back to haunt you. I guess that’s always going to be a problem.

MATT: It’s a tough call. That’s what I was kind of getting to before. What if you have someone like a Donald Sterling type of character that is working for you. Though they’re annoying at work but they don’t really do anything wrong, they’re just kind of an annoying person and then, outside of work, you know, everybody doesn’t like them but they do great work, you’re kind of stuck between a rock and a hard place.

NASIR: I think at least, when you actually do the termination, you have to go through the right process and we’ve talked about in the past how to do that. A good legal counsel can do that but let’s assume that you know how to terminate somebody the best way possible. Assuming that you’re going to get some kind of blowback – whether it’s a lawsuit or whatever – I think one of the best ways is to insure against it. There’s a number of types of policies in which cover not only wrongful termination allegations but also labor law violations. They’re not for everyone and they’re a little bit more pricy than other types of employment-related insurances but, in this case, it might be worth to get, especially if you have any kind of high turnover.

MATT: Yeah, that’s a good point. That’s a great way to add a layer of protection.
What would you do? Would you keep this employee or would you fire him?

NASIR: Sterling?

MATT: No, this hypothetical – I guess it’s not hypothetical – this real person that you know nothing else about other than they work for a billboard company.

NASIR: Yeah, well, you know me. If someone annoys me, I’m not going to put up with them. I don’t have a very high tolerance, especially if they work for you, you know, but that’s just me, I suppose.

MATT: You have to be around them every day. It takes a toll after a while.

NASIR: Yeah, it brings the whole company down, the culture down, and nobody wants that. It’s not a very fun thing. And, it’s true, what’s the saying? One bad apple ruins the bunch?

MATT: We’ve made it pretty clear on this podcast, you don’t need to be coming up with all the…

NASIR: I know, but what is it? It’s some kind of a poison apple falls… I don’t know. What is it? Tell me!

MATT: One bad apple will spoil the whole bunch? I think that’s what it is.

NASIR: Yes. See?

MATT: Spoils the whole barrel? You can take it a couple of different ways.

NASIR: No, no barrels. Just… I searched it and there’s “one bad apple spoils the bunch” in Snopes to see whether there’s truth to it or not. Well, anyway, you get my point.

MATT: Yeah, I always understand it. the only correct phrase, about 90 percent of the time is incorrect.

NASIR: Oh, well, I’ll work on that.
Okay. So, we answered the question.

MATT: From a legal standpoint, we did. It’s kind of a judgment call for the person – whether they want to actually fire the annoying employee or not.

NASIR: It’s a common problem though. You have an employee you want to get rid of and you know there might be blowback, what do you do? I think really focusing on that transition – whether it’s going through performance reviews or whatever, even if it’s an at-will employment where you can fire them for any reason that’s not illegal – having a basis that is based upon performance is always going to help as a defense and building that evidence so that that’s more clear. Even though you can fire them because they’re annoying, perfectly legal. But, with this extra evidence, so to speak, it makes it much easier to defend any kind of lawsuit in that respect.

MATT: You have a couple of options. You can (1) plant what you think is drugs on the employee but it’s actually a salad – like Michael Scott did – or you can (2) be like Jim and just prank Dwight all the time. So, those are your two options.

NASIR: No, I agree with that, but I prefer the Jim pranking just because it’s a little bit more funny whereas calling police into your office is a little bit too dramatic for me.

MATT: All right. Did we tell people where to send their questions in?

NASIR: Yeah, but we can say it again.

MATT: Did we? Okay, ask@legallysoundsmartbusiness.com.

NASIR: All right, well, that’s our show! Have a good day!

MATT: Keep it sound and keep it smart!

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The Podcast Where Nasir Pasha and Matt Staub cover business in the news with their legal twist and answer business legal questions that you the listener can send it to info@legallysoundsmartbusiness.com.

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Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
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