Health / Safety / Risk Mgmt
Whether you work in human resources, or simply read the newspaper, it’s easy to recognize the frequency with which employers get sued. In 2004, the EEOC recovered $251.7 million on behalf of complainants for the over 85,000 charges it resolved. In addition, the EEOC collected $168.3 million for the cases that the EEOC was involved in litigating. Court records indicate that twenty-five percent, or one-quarter, of all the litigation matters in federal court are employment-related disputes, and even more cases alleging discriminatory acts in employment are brought in the state courts.
The frequency of employment claims means that many employees are feeling mistreated in the workplace. And for every complaint alleged in the workplace there are managers and others who carried out those actions. Do you have any responsibility in hiring, discipline, granting leaves of absence, salary and benefits? As you are going through your daily business, do you think about how your actions may subject you to liability? Honestly, in the heat of a workplace investigation, or disciplinary action, do you really have time to sit back and ask yourself, “could what I’m doing land me in court?” Yet, a disturbing trend in employment litigation is the increased prevalence of suing individual supervisory employees in their personal capacity, including Human Resource professionals and/or company officials. You may ask: How can that be? Why is it necessary? Or more importantly – How can I avoid it?
In an effort to decrease the risk of individual HR professionals being named personally in employment lawsuits brought by disgruntled employees, this article informs you of the types of issues affecting HR professionals’ personal legal liability, helps to prepare you and your colleagues to stay out of court, and guides you in thinking through HR practices before they become the subject of a legal matter.
Section I: Why is this an issue? Reasons why individual managers are sued personally.
HR professionals and individual supervisory employees may be sued in their individual capacity for several reasons, determined based on the employment actions at issue and litigation strategy employed. The first and most obvious reason is when the HR professional or supervisory employee is accused of engaging in unlawful conduct. For example, the HR manager who denied leave to an eligible pregnant employee requesting Family Medical Leave in an effort to force her to resign, or a small business owner who altered time sheets to avoid overtime payment in violation of the Fair Labor Standards Act. As obvious as these violations are to most, such illegal behavior still exists and subjects these individuals to legal liability.
Other examples of violations may have occurred unintentionally, but nonetheless are illegal. For example, a manager who deducts exempt employees’ pay for time out of work during a day, thus treating the exempt workers as hourly, nonexempt workers. Unintentional violations do not excuse wrongful behavior, but it may play to the defense in the case. Nonetheless, the individual is still involved in defending a lawsuit based at least in part on his or her workplace decisions.
Other reasons individual employees get sued are not as predictable. Sometimes the messenger of the bad news, such as a layoff, termination, denial of leave benefits, gets targeted as the “wrong doer” when he or she was not, in fact, the decision maker but is considered an agent of the decision maker. For this reason it is important for those who implement adverse employment decisions to not simply follow orders. As noted in Susan Pulliam’s article, “How Following Orders Can Harm Your Career,” CFO.com, October 3, 2003, “[i]n a recent speech to Wall Street executives, James Comey, the U.S. Attorney prosecuting the [Worldcom accounting fraud] case, said that ‘just following orders’ is not an excuse for breaking the law.” If you are delivering employment communications that could lead to employee complaints, you must be fully aware of the rationale and justify all decisions before delivering potentially adverse information. Where this becomes problematic is in situations where the actor lacks intent to discriminate but his or her actions result in unlawful discrimination. Courts find that no intent is necessary for liability as an aider and abettor. “The conduct prescribed is simply conduct that assists others in their performance of prohibited acts and when conduct being assisted is patently discriminatory, one need not have intent to be considered an aider and abettor.” (Civil Rights Comm'n v. Travelers Ins., 759 P.2d 1358 (Colo. 1988)).
Beyond the actual events that transpired in the work environment, plaintiffs’ lawyers may have strategic and tactical reasons for including individual supervisory employees in the lawsuit. Scott Fredericksen’s SHRM Legal Report “Personal Liability of Human Resource Professionals in Employment Litigation” points to one of the “perceived tactical advantages” of suing individual managers as exerting greater pressure on the company to settle the case and avoid publicity and embarrassment. In addition, plaintiffs’ counsel may hope to create sufficient conflict between the employer and the manager to complicate the defense and necessitate separate counsel for the individual managers.
A further strategic reason for suing individuals along with the organization is the potential to create more opportunity for discovery and evidence. For example, if there is a question as to the agency relationship between the accused and the employer, then by suing the individual accused of wrong-doing separately, the plaintiff is more assured to collect all evidence. On the other hand, if they only sued the employer and the accused was an independent contractor, the employer may not have access to all relevant evidence. Also the addition of individual plaintiffs may ensure the continuation of a case where the employer alone may be able to successfully avoid litigation. Moreover, the motivation may be monetary. While we typically think of the employer as having the “deep pockets,” if you add individual plaintiffs to the lawsuit and can recover separately for their wrongdoings, you may possibly recover more on the lawsuit.
These tactics may also backfire for plaintiffs. Individual plaintiffs settle less often than corporate defendants, leaving less opportunity for the plaintiff to reap financial rewards before trial. Also, dealing with multiple defendants and defense attorneys decreases the efficiency and increases the cost associated with the lawsuit. Jury research also indicates that juries tend to be more sympathetic to an individual defendant than a corporate defendant and are less likely to assess damages against an individual. (“Personal Liability of Human Resource Professionals in Employment Litigation”)
Some might question why this is important, given that the organization has legal counsel to defend them. It is important to recognize that while most employers do chose to indemnify or provide corporate legal counsel to supervisory employees sued as individuals, there is generally no requirement that an employer offer such legal assistance. If the employer assesses the situation and decides not to afford a manager legal counsel, they may opt to drop representation of the individual manager and that would necessitate the manager defending the lawsuit on his or her own or hiring legal counsel.
It may be financially devastating for an individual expected to foot a legal bill on his or her own. The estimated cost of defending a lawsuit, excluding trial costs, is $150,000. For example, failure of the corporation to indemnify a company official occurred in one expert witness case involving EPS. The manager’s deposition unearthed additional information regarding employee misconduct by the manager and the employer subsequently made the decision to cut the manager loose, requiring him to find his own legal representation. Thus, unless you have a contract to the contrary, be aware that corporate support and indemnification is a privilege and not a right.
The bottom line is that many legal and tactical reasons support including individuals in employment-related lawsuits. Statistics show a growing number of individuals being sued in employment cases. Who exactly can be held liable or responsible?
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