Wal-Mart Discounts Severance Package to $0?

As reported in Advertising Age, Julie Roehm, the former Wal-Mart senior VP-marketing communications, filed a lawsuit alleging that Wal-Mart breached her employment contract when it fired her in December 2006. Roehm has a high profile in the advertising world and her dismissal garnered much attention. There were allegations of ethical misconduct in the selection of an advertising agency and an "inappropriate" relationship with a subordinate, all of which Roehm denies. Her dispute with Wal-Mart over her severance, however, is one that any executive might encounter.

Roehm's contract provided that she would receive base pay of $325,000, a signing bonus of $250,000, annual incentive-based payments and restricted stock worth up to $300,000. The agreement also included severance in the amount of one-year of base pay in the event her employment was terminated. According to Roehm, Wal-Mart fired her ostensibly because she had not "been fulfilling the expectations of an officer of the company." But she claims that Wal-Mart never identified any conduct that failed to meet that standard. She has not received any compensation from Wal-Mart since she was fired, according to the complaint. Presumably this includes the promised severance payments.

Typically, a "failure to meet expectations" is insufficient to qualify as a reason not to pay severance under a termination for "cause" provision of an employment agreement. That kind of language would give the employer far too much leeway to avoid paying severance. It is likely that this case will settle fairly quickly unless there is some unusual language in Roehm's employment contract that gives Wal-Mart more leverage.

Note for Pennsylvania executives: In Pennsylvania, the employer's failure to pay severance due could open the employer up to a lawsuit under the Wage Payment and Collection Law ("WPCL"). If the executive can prove that severance was owed, the court could order the employer to pay the executive additional damages equal to 25% of the severance amount plus the executive's attorneys' fees.

The Ad Age article with more details is here.