Section II: Who can be liable in employment litigation? The issues affecting HR professionals’ personal legal liability.

Who can be liable in employment litigation? The typical legal answer applies: “it depends!” Human resource managers, supervisory managers, and company officials may be liable in employment cases if they committed an act of discrimination or had some role in the employment action giving rise to the lawsuit. However, personal liability depends on the statute which forms the basis for the lawsuit and on the jurisdiction the lawsuit is brought in. Breakdown provides some clarity:

Title VII, ADEA, ADA

Title VII prohibits employers from discriminating on the basis of race, color, religion, sex (including sexual harassment, pregnancy, childbirth, and abortion), and national origin. The ADEA prohibits discrimination against workers age 40 and over and the ADA prohibits employers from discriminating on the basis of disability. Each of these laws is written to prevent “employers” in engaging in discriminatory practices. The challenging legal question, and source of much legal debate, is determining the meaning of the term “employer” in these statutes. The majority of the Circuit Courts of Appeal addressing this issue find that the term “employer” does not include individuals. Thus, the philosophy is that a supervisor is not personally liable because the supervisor is not the employee’s “employer” as defined by the law. However, the courts are split on this issue, so depending on where you are sued, you may or may not be subject to individual liability for Title VII, ADA, or ADEA violations. Eventually Congress or the Supreme Court will have to provide a definitive answer to individual liability for federal discrimination law violations.

Despite the fact that individuals may be immune from lawsuits under the federal anti-discrimination laws, many state discrimination laws do allow for individual liability. For example, The Colorado Discrimination Act (Colo. Rev. Stat. 24-34-402) prohibits discriminatory or unfair employment practices and applies to employers, employment agencies, and labor organizations. However, it takes away the contest regarding the definition of employer and allows for individual liability by stating:

It shall be a discriminatory or unfair employment practice: For any person, whether or not an employer, … or the employees or members thereof … to attempt, either directly or indirectly, to commit any act defined in this section to be a discriminatory or unfair employment practice.

So, before you breathe too big a sigh of relief, if the legal challenge involves discrimination or harassment under a state law, that state law may allow for personal liability based on the definition in the statute.

Fair Labor Standards Act

The Fair Labor Standards Act covers, among other things minimum wage payment, overtime pay, and child labor. The FLSA includes the Equal Pay Act which prevents employers from paying different wages to men and women for equal work. This law affords plaintiffs the right to sue individuals by using the definition of an employer as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” (29 U.S.C. §203 (emphasis added)). The individual must have had control over conditions and terms of the employee’s employment, such as power to hire, fire, discipline, determine rates of pay, and/or make schedules.

Courts are holding that employees may seek damages against individual supervisors as well as the employer. This is especially poignant because of the recent changes in the FLSA regulations and the watchful eyes evaluating employers’ efforts to comply with the regulations that went into effect in August 2004. Individual managers or supervisors challenged for not comporting with the law may be named as individuals in any lawsuit arising from the alleged wage and hour violations.

Family Medical Leave Act

Most courts confronted with the issue have ruled that individual liability attaches to those involved with FMLA decisions that affected the aggrieved employee because the Family Medical Leave Act’s (FMLA) definition of “employer” is modeled after the one used in the FLSA, which allows for personal liability of managers and company officials. Many HR professionals find this troubling because of the difficulties employers face in understanding and properly implementing the rights and protections of the FMLA.

Everyday HR professionals and organization officials grapple with FMLA issues having little definitive guidance and legal precedence; yet, based on the FMLA’s definition, individuals making these challenging decisions may face liability for their involvement. In one pending case, an employee is suing her company over alleged violations of the FMLA in her request for leave due to her own pregnancy. In addition to suing her employer, she has named the Benefits Coordinator, the Human Resource Manager, the employee’s direct Supervisor, the Supervisor’s Manager, and the District Manager. The defendants’ attorneys are asking the court to dismiss the Benefits Coordinator from the case and remove any personal liability from her but the court has yet to agree to such dismissal without the benefit of more information. The case clearly shows the example of how each of us can be affected by employment law suits and must be confident in our work decisions.

State Law Claims and Personal Liability

As mentioned earlier, some state discrimination statutes expressly permit individual managers and employees to be named personally in law suits. Other states, such as Virginia expressly limit personal liability by defining the employer as “any employer employing more than 5 but less than 15 employees.” (Va. Code Ann. §2.1-716). However, even in states where an “employer” does not include an individual, an individual company representative may be held liable for discrimination based on a public policy wrongful discharge theory. (John F. Buckley and Ronald M. Green, State by State Guide to Human Resources Law, Aspen Publishers). Refer to Wrongful Discharge section below. Essentially, protection from individual liability for discrimination charges existing at the federal level may erode if the lawsuit also includes state law claims.

Tort Claims

What are “tort” claims? And we are not talking about pastries here! These are claims based not on statutes or written laws, but on case law that has developed from common law court decisions. A tort is a civil wrong or injury. Tort claims can be brought in federal court in additional to the federal issue or can be brought in state court. In employment law cases, these include issues such as: intentional or negligent infliction of emotional distress; defamation – libel and slander; wrongful discharge or termination; and, negligent hiring or retention. The plaintiff must show an actionable wrong and damages resulting from the harm.

Let’s consider how these are implicated in employment claims. To bring an emotional distress claim, the claimant must show that the employer exceeded all bounds of decency and exhibited outrageous conduct. The harm must be severe and be more than just anxiety or sleeplessness. (Edward Isler, Steven Ray and Michelle Brodley, Personal Liability and Employee Discipline, SHRM Legal Report, Sept.-Oct. 2000, reviewed Aug. 2002). Examples of workplace behavior leading to potential emotional distress claims include: lost time from work or wages for inappropriate reasons; observing porn or inappropriate website viewing; assault or battery; and harassment where state law allows.

These are a sampling of the individual tort claims an employee can bring against an individual acting in a professional capacity. Criminal sanctions and fiduciary responsibilities are also potential sources of personal liability for HR professionals.

Business Crimes

As if the fear of civil liability is not enough to make you think again about your career choice, criminal sanctions, including imprisonment, fines and other penalties, can be levied against individuals in the workplace. White-collar crime is a prevalent issue in the United States and the justice department is keeping a close watch on business law violators.

In business crimes, those in the management of the company whose employees actually commit criminal acts can be held liable if they authorized the conduct, knew about the conduct but did nothing, or failed to act reasonably in their supervisory capacity. The standard was set by the United States Supreme Court which stated that an employee could be found guilty of a business crime if he “by virtue of his position…had authority and responsibility” to deal with the situation…. (United States v. Parks, 421 US 658(1975)). Such was the case with Betty Vinson, a 47 year-old mid-level accountant and mother, who caved into requests by superiors to make false accounting entries into Worldcom’s books. She now faces possible jail time for conspiracy and securities-fraud charges. In another public case, a Texaco employee faced obstruction of justice charges for destroying records in a racial discrimination lawsuit. Employees destroying records, changing documents, or making false statements during the course of litigation face imprisonment and fines.

Also, many federal employment laws permit criminal sanctions for individual violators. Under the Occupational Safety and Health Act (OSHA), corporate officers may incur civil or criminal liability for violations of OSHA rules. Criminal penalties may result from violation of a rule, standard, order or regulation that causes the death of an employee or from making a false statement or representation regarding compliance. Another example is the Immigration Reform and Control Act (IRCA), which, in addition to civil penalties, imposes criminal penalties for knowingly hiring or continuing to employ unauthorized workers.

Finally, federal agencies such as the EEOC can pursue criminal sanctions against individuals impeding, resisting or opposing an EEOC representative while engaged in performance of their duties. Such violations could subject a person to a fine of up to $500 and /or one year in prison.

Fiduciary Responsibilities

A fiduciary has a duty to act primarily for another’s benefit in matters connected with such undertaking. The fiduciary acts as a trustee encompassing certain legal obligations, including the prohibition against investing the money or property in investments which are speculative or otherwise imprudent.

For example, in insurance issues, HR professionals responsible for benefit plan design, development and provider selection have a duty to investigate how brokers or consultants are compensated and how that comp structure affects the cost of the insurance policy, and a duty to confirm a fair bid selection process. If these duties are not fulfilled, the decision makers risk liability for breaching their fiduciary responsibilities.

A similar fiduciary concern is raised with respect to giving investment advice to employees. While most employers recognize that employees are not taking full advantage of retirement and savings plan options, employers are wary to provide too much guidance or advice on managing or investing money. A recent survey, titled Employer-Sponsored Investment Advice Survey Report, published by SHRM and co-authored with WorldAtWork, indicates that two-thirds of the employers not currently providing investment advice to their employees cite potential fiduciary liability as the top reason for not offering such services. The fear of breaching fiduciary responsibility is keeping organizations and managers from further educating and advising employees about investing funds. Respondents whose companies currently do not offer investment advice indicated that new laws exempting employers from liability for qualified independent investment advice or restructuring the fiduciary responsibility to rest entirely with the investment advice provider were the only ways an employer is more likely willing to offer investment advice.

Suffice it to say that employees feeling aggrieved have a plethora of potential claims against individual HR managers and company officials making employment decisions. So how can you protect yourself?

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