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BFV Perspectives, Sports Fans Guide 2 HR, | Oct 11, 2017

Don’t Sell your “Sole:” 3 Key HR Lessons from the NCAA Shoe Scandal

The recent FBI probe into college basketball corruption has led to the arrest of 10 people so far. These arrests include four college coaches and an Adidas representative accused of taking kickbacks in exchange for sending recruits to certain financial advisors and managers. The conditions that fuel sports scandals, such as the Adidas shoe scandal, also exist in our workplaces. Coach Rick Pitino, for example, will likely be terminated by the University of Louisville following a board of directors meeting on October 16.

The shoe scandal not only shows the dark underbelly of college athletics, but also provides three important lessons for employers:

  1. Employers Must be Proactive to Create an Ethical Culture. Companies implement Business Ethics policies to prevent self-dealing and conflicts of interests. An organization that commits to a high ethical standard is not only doing the morally right thing, but it is protecting its long-term reputation and profitability. Implementing a Business Ethics policy is a good start to creating a culture of compliance. Having a policy alone, however, is not enough. Leadership must “walk the walk” and employers must train their employees about their ethics policies, the employer’s expectations of employee conduct and the consequences for non-compliance.  
  1. Employers must Deal with Problems. On October 2, 2017, the University issued a notice letter to Pitino initiating the process to terminate his employment for cause. The letter to Pitino references prior scandals that impugned the integrity of the University. As the FBI investigation unfolds, the University will likely be scrutinized for how it handled prior incidents involving Pitino. Questions will be asked about whether the University knew of Pitino’s actions but looked the other way because of his high winning percentage. Too often, employers make an improper cost-benefit analysis when faced with allegations of misconduct. This is especially true when claims of misconduct are asserted against a highly-valued employee. Employers are often tempted to ignore misconduct for fear of costs to the company when the cost of allowing the misconduct to continue outweighs the cost of losing a revenue generator. When faced with misconduct, employers must act.
  2. Carefully define Cause under Employment Contracts. The termination letter charges Pitino with violating numerous provisions of his employment contract related to more than one scandal, the latest of which involves his alleged involvement in the shoe scandal that has implicated the Louisville basketball program. It is critical that the University can establish cause, otherwise it will be compelled to keep Pitino employed or terminate his employment and pay him millions of dollars. The definition of cause under his employment contract will be at the heart of any such dispute. This case highlights the importance for employers to thoughtfully define what constitutes “cause” if it enters into a written employment agreement. “Cause” should be defined as broadly as possible to give the employer the most protection. 

As fans, we often judge and point fingers at officials, teams, players and others who do not act the way we want. It is important to remember that sports are a microcosm of society. The conditions that fuel sports scandals, such as the Adidas shoe scandal, also exist in our workplaces. Employers who wish to run an ethical business need to take proactive steps to create a positive culture.  Moreover, they must be willing to take appropriate disciplinary action against employees who violate company policy, even if the employee is a high-profile revenue generator. To enable such action, employers should maintain flexibility in their ability to issue discipline and avoid contract language that unduly hampers its ability to get rid of bad employees for cause. 

BFV Perspectives, Sports Fans Guide 2 HR, | Oct 11, 2017
Kenneth N. Winkler
Kenneth N. Winkler

Kenneth Winklera shareholder at Berman Fink Van Horn, helps employers navigate the employment laws and regulations that govern the workplace.