An arbitrator recently awarded $4.1 billion in favor of the former chief marketing officer of iFreedom Communications Inc., finding that iFreedom breached his employment contract by firing him without cause. You read that right: $4.1 billion, with a "b." U.S. Dollars, not Zimbabwean. Don’t believe us? You can read the opinion yourself: Chester v. iFreedom Communications Inc.
$4.1 billion dollars. That’s a ton of money. Boatloads of money. In fact, that’s so much money, we are awarding Mr. Chester our First Annual Dr. Evil Award! Congratulations!
So, how did Chester rack up $4.1 billion in damages? The employment agreement guaranteed him a salary of $12,000 a month plus commissions of 5 percent of gross sales; if he was fired without cause, he would continue to receive commissions. iFreedom also was supposed to provide Chester with 1.1 million shares of common stock upon hiring and another 600,000 shares if he met certain sales targets . Apparently, iFreedom did really, really well. Sales, stock and interest added up, and in a big way.
How can employers avoid owing an ex-employee billions? First, be careful drafting employment agreements! A carefully drafted agreement could have avoided this massive liability. Second, if the agreement requires "cause" for termination, make sure such cause actually exists before pulling the trigger on someone. Finally, if you get sued and the other side is seeking billions of dollars, hire a decent lawyer and don’t try to represent yourself. It turns out the founder of iFreedom (a non-lawyer) represented the company by himself. Oops.