Few companies in our country need to be told that the number of claims by employees against employers is constantly growing. The number of federal employment law claims increased by 2000 percent from 1969 to 1994. Between 1992 and 2003 the number of federal sexual harassment claims grew by 70 percent. A more recent phenomenon that may not be as familiar involves the ever-increasing possibility that corporate mangers, supervisors and human resource professionals, as individuals, can be the targets of these lawsuits. Executives don’t realize that they can be sued by their employees and held personally liable for just doing their jobs. And that’s an eye-opening realization, says Daniel Green, a local attorney who specializes in employment litigation.
People think they are protected personally by the corporate veil when it comes to anything they do on the job, but that’s not always the case. When you’re talking about employment litigation that corporate veil may not shield an individual from personal liability for actions based on their conduct while performing their job. Unhappy employees have a long list of possible claims against an employer. Depending upon the state law involved or the federal law they may choose, employees can bring claims that an employer discriminated based on age, race, national origin, sex, sexual orientation, or other listed factors. Executives, supervisors and human resource employees have been held personally liable in cases involving failure to pay wages or overtime, failure to allow unpaid leave, failure to make pension contributions, wrongful termination, wrongful hiring, infliction of emotional distress, defamation, failure to deposit withholding taxes, and on other theories, as well. It’s sobering to realize that so many types of claims are out there, and it’s even more worrisome to realize that certain individuals can be held personally liable on many of these types of potential claims.
Consider the lawsuit by Anuka Brown Sanders against Isiah Thomas, former head coach of the NY Knicks, and Madison Square Garden. Sanders was an executive employee of the Garden. She claimed that Thomas made unwanted sexual advances towards her involving physical contact, invitations to meet with him off site. and referring to her as the “bitch” and the “ho”. Sanders claimed that she complained about Thomas’ behavior to Garden executives, but that nothing was done to rein in Thomas’ behavior. She then consulted with an attorney. She was fired by the Garden and brought her lawsuit, which eventually settled for $11.5 million dollars. Thomas was a corporate employee, but Brown Sanders sued him individually. Although there was no verdict against Thomas personally, many in the basketball community site it as one of the reasons he lost his job as head coach in April.
Targets of suits that claim personal liability for employee-related issues have included employees’ direct supervisors, managers, human resource professionals, others given the responsibility for delivering bad news to employees and even presidents of companies. Someone who simply communicates to an employee that he or she is being demoted or fired could very well be a target for litigation even if they are not the decision maker. Just following orders is not an excuse, nor is acting unintentionally.
Going after individuals personally is nothing new. It’s a proven tactic for creating pressure to settle because such suits can be publicly and personally damaging and can threaten an individual’s financial well being. Verdicts in employment cases can often be for hundreds of thousands of dollars, or even more. The thought of being individually liable can cause executives many a sleepless night. When faced with such a prospect, an executive might be tempted to settle and cut his or her losses.
What makes such claims difficult for individuals to defend is that they typically involve one person’s word against another. For example, suppose a terminated employee claims she lost her job because of her age and was therefore discriminated against. Even if the HR person says the employee was terminated for other reasons, the employee could still file a discrimination suit against the HR executive personally. Settling such an issue could fall into the hands of a jury who would have to decide who to believe. The risk to both the employer and the individual could be significant. It’s going to be one person’s word against another in this kind of suit and you never know the basis upon which jurors are going to make a decision, regardless of the legalities. The law may be on your side, but a jury might decide against you based on sympathy for a plaintiff, or because they feel the company’s witnesses were obnoxious.
Supervisors need to know the right time to fire or discipline an employee. Firing the worst employee in America at the wrong time can lead to personal liability. Suppose an employee has been late to work for two months and has made crucial mistakes on the job. The same employee has complained to the employer about a supervisor’s conduct or about claimed illegal conduct by the company. If the employee’s supervisor fires or disciplines the employee (whether for good reason or not) soon after the employee files such a complaint, the supervisor and the company can expect to face a claim by the employee that the job action was taken in retaliation for his having filed the complaint.
Retaliation claims represent a growing segment of employment litigation and they are often coupled with discrimination claims. Two recent decisions by The United States Supreme Court increased their likelihood by expanding the list of plaintiffs who can make retaliation claims. It now includes federal government workers and non-white employees seeking to enforce contracts under a statute enacted after the Civil War. The Supreme Court’s willingness to recognize retaliation claims in these new areas may energize disgruntled employees to assert retaliation claims against you, even in the types of cases in which individual retaliation liability has not been previously recognized.
What can employers and their executives do to protect themselves? Here are a few suggestions:
- Know the law – Federal and state employment laws are numerous, complicated, and sometimes inconsistent. An employer needs to know what laws apply, what they provide, and whether they allow for personal liability. Ignorance in these areas can lead to financial disaster and it may arise indirectly. For example, the law requires that certain employers provide training to managers concerning sexual harassment. Assume that the president of a company neglects to provide training and a manager sexually harasses another employee. The employee sues and recovers a large verdict. The company has to pay the verdict and, in addition the president could be sued by corporate shareholders for breaching his fiduciary duty, as an officer of the company, to provide the training that might have prevented the problem entirely. An employer should seek professional advice, on an ongoing basis, so that educated decisions can be made on the frequent occasions when employment law issues arise.
- Establish clear policies – Develop clear policies so that employees will be on notice and managers can follow the policies to protect themselves and the company. For example, you need to unequivocally state that sexual harassment in the workplace won’t be tolerated and that hiring decisions won’t be made on protected factors possibly including race, sex, age, religion, creed, age, sexual orientation, marital status, ancestry, mental ability, or learning disability. Employers should arrange for periodic audits of company policies, handbooks and practices to assure continuing compliance as the law evolves.
- Prevention beats law suits every time – Employers need to make it a policy to actively prevent situations that can generate employee claims of discrimination by having a program of preventative training in place. Scheduling periodic training sessions to remind employees what conduct is prohibited is required by certain laws and can be helpful in the defense of employment-related claims.
- Prompt response makes a difference – Employers with the mechanics for preventing unwanted behavior and responding promptly to claims are less likely to put their employees (and themselves) at risk based on employment claims. As Isiah Thomas and the owners of Madison Square Garden found out the hard way, allowing a sexually charged atmosphere to exist, and not taking an employee’s complaints seriously, can be costly. The size of the settlement should remind all employers and executives of what’s at stake. Make sure employers have a set procedure for quickly investigating and responding to all claims of undesirable employee behaviors. Such policies should expressly forbid harassment, discrimination and other prohibited conduct, should encourage employees to report such conduct without fear of retaliation, and should provide meaningful mechanisms for investigating the complaint and taking disciplinary action, where appropriate. The existence of policies and procedures for dealing with complaints can save the day for managers facing discrimination or other employment claims.
- Be consistent – Corporate supervisors and human resource professionals should be consistent when they hire, fire, or discipline employees. Assume a white employee is late for work on three occasions and is suspended for two days without pay. Subsequently, a black (or older, or gay) employee is late for work on three occasions and is fired. The employer will no doubt claim that the fired worker’s performance in general was not as good as the suspended white employee’s performance, but the fired employee will certainly claim that he or she was fired because of race, or some other legally protected status. Employers should avoid starting employment litigation with two strikes against them by avoiding such inconsistencies whenever possible.
- Create detailed records – Whenever an employee engages in conduct that may affect his or her job status, a record of the incident should be recorded, and consideration should be given to discussing the problem with the employee. Records created whenever a problem arises will help to overcome the claim commonly made by disgruntled former employees that an employer’s stated reason for a negative employment decision was an after-the-fact attempt to hide the employer’s illegal motivation.
- Be familiar with new hires and people already in your workforce – This is a particularly touchy subject, but one that must be taken seriously. If you haven’t adequately investigated those you hire or employ, you open yourself up to wrongful hiring claims. Such a claim might be based on the employer’s not looking into the background of an employee formerly convicted of a violent act. If such a person attacks another employee, an executive could be personally liable for damages resulting from such a claim. Or, if you keep someone in your employ who has been accused of sexual harassment by six women, you open yourself up to a personal suit filed by the seventh. She could claim that such an individual should never have been hired or should have been disciplined and/or terminated.
- Look at the surrounding circumstances when making employment decisions – Before you consider disciplining or firing an employee, look at the circumstances under which your decision is being made. Suppose an employee has regularly shown up late for work. The same employee has complained about the company’s policies or about being discriminated against. In deciding whether to discipline or fire the employee you need to evaluate whether such a decision will provoke a retaliation claim. Ask yourself both “How bad was the conduct that makes me want to fire the employee?” and “Will a jury conclude that I fired the employee because of the previous policy or discrimination complaint?” Like so many areas of employment law, you need to exercise careful, reasoned judgment.
- Look into employers’ professional liability protection coverage – Many employers mistakenly believe that their general liability policies provide coverage for most employment-related claims. Such policies cover claims for personal injury and property damage but the fact is they typically don’t cover things like sexual harassment claims. These issues are more likely addressed by an employers’ professional liability insurance plan (EPLI). The challenge in picking such a plan, cautions Green, is that there is no standard EPLI policy. All of these policies are different so you need to know what you’re buying. You need to learn about the plans out there and choose one that matches your needs and budget.
What all this boils down to is that this is a huge and complicated area of the law. A responsible employer needs to know the law and should consult with legal counsel for preventative advice and for assistance when a claim is made. There is a jumble of laws on the federal and state levels that at times are contradictory. The laws are changing every day. The bottom line is this: anyone in a management position has the potential for personal liability when it comes to dealing with employees. Protect yourself with clear policies, preventative training, and prompt response mechanisms. Be familiar with those you hire and those already in your workforce, and look into insurance protection. By all means, work with legal counsel to protect yourself and your company.