Severance Pay: A Detroit Variation

When Turkia Awada Mullin applied for and received the position of CEO of the Wayne County [Michigan] Airport Authority in August 2011, she was hired at a salary of $250,000.  Even though she left her old employer, the County Executive of Wayne County, Michigan, voluntarily, she also received $200,000 in severance.  But wait, there’s more!

The Wayne County Airport Authority operates Detroit Metropolitan Airport and Willow Run Airport.  The Airport Authority is entirely self-sustaining.  Its crown jewel, Detroit Metropolitan Airport, has ranked (2009) as the 11^th airport in North America and the 16^th in the world in terms of “aircraft operations.”   It employs about 600 Airport Authority personnel.

Ms. Mullin’s detractors claim that she is a poor choice for CEO of the Airport Authority because as Wayne County’s former appointed Economic Development Director she lacked direct experience with airports.  Assuming that the board of the Airport Authority conducted an honest search and objectively chose the best candidate for the position, even over others with airport management experience, there is little to dispute here.  Others complain that she received a severance simply by leaving one Wayne County office for another.  That, however, is incorrect, given the nature of the two agencies.  Still, the situation has raised a local firestorm, because of the appearance that she received a $200,000 severance (one year’s pay) not by being downsized or otherwise let go by Wayne County but because she herself voluntarily chose to depart.

Our compensation practice shows that severance agreements are not unusual in non-corporate settings, such as within non-profit hospitals, large public charities, foundations, and research institutes.  Therefore, it would not be unheard of for Wayne County to use them with certain non-elected executives.  Severance provisions are usually applicable to senior executives with an extended history with the organization and commonly pay a multiple of one or more components of annual compensation.  And they are governed by an employment contract.

Severance payments are provided to executives in the event of change in control of an organization or termination of employment, actual or constructive.  In Ms. Mullin’s case, there is clearly no change in control.  Further, it appears that she left the employ of the Wayne County Executive of her own volition.  Could she have been constructively discharged by Wayne County?  She has claimed that she suffered through a 10% pay cut during her tenure there.  We haven’t seen her Wayne County employment contract, but it is possible that it contained a provision treating a detrimental change in compensation as a severance trigger.  We simply don’t know.

Robert Ficano, the Wayne County Executive, has defended Ms. Mullin’s severance, stating that Milu Birru, her predecessor as Wayne County Economic Development Director, received the same severance.  But it’s not quite the same: Mr. Birru did not leave his post voluntarily, and his payment appears to have been a settlement, not a severance.  And, oh yes, Ms. Mullin apparently has a severance provision of six months pay in her contract with the Wayne County Airport Authority that kicks in if she leaves her position “for any reason.”

You can be forgiven for looking at all this and saying:

What were they thinking?

Or

Where can I get some of that?

Paul Creasy

Update – Friday, September 30, 2011: Turkia Mullin has decided to return her $200,000 severance payment to Wayne County.

Update – Tuesday, November 1, 2011: On October 31, 2011, the board of the Wayne County Airport Authority voted to terminate Turkia Mullin as CEO.  The board apparently fired her for cause, although the reasons are unclear, pursuant to the contract under which she worked for two months.  With a termination for cause, Ms. Mullin would not be entitled to severance under her new employment contract.