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What’s a bad firing cost? For one company, $4 billion

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in Firing,Human Resources

Yes, you read right. Four billion dollars. Billion—with a “B”!

A California superior court recently confirmed an award of $4.1 billion against a Chinese company, its U.S. affiliate and its founder after an arbitrator found them liable in a compensation dispute with a former executive.

Judge Teresa Sanchez-Gordon of the Superior Court of California in Los Angles County confirmed the final award against China’s iFreedom Communications International Holdings Ltd., which provides voice over Internet protocol services.  iFreedom’s former chief marketing officer, Paul Chester, brought the suit. The company fired him in September 2005.

Chester didn’t go down without a fight. He claimed iFreedom and its founder, Timothy Ringgenberg, had failed to pay him commissions and overrides on gross revenues and other compensation as promised. When Chester demanded the money, he says, that’s when iFreedom fired him.

In January, an arbitrator found iFreedom and Ringgenberg liable for breach of contract and a variety of other offenses against Chester.

Under Chester’s contractual commission structure, if he were fired without cause, he would be entitled to 5% of the company’ gross sales on an ongoing basis. The arbitrator determined that iFreedom used fraud and false pretenses to obtain services and property from Chester. He also found Chester was terminated without cause. However, he cut off the commission payments at seven years after the termination.

The $4.1 billion total included compensatory damages to recover unpaid salary, commissions, travel expense reimbursements, unissued company stock and unreturned intellectual property. Then there were statutory penalties, interest, attorneys’ fees and the real kicker—punitive damages equal to three times the compensatory damages!

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