Recently, there has been an increasing awareness of the impact of employment decisions, not only for employees and the companies that they work for, but also for the managers and supervisors that make these decisions. The emerging trend indicates that these decisions-makers are more likely to be held personally liable for the decisions that they make in the workplace. This type of liability can arise in a variety of employment-related legal scenarios, including: wrongful discharge, harassment and discrimination, and decisions made under the purview of federal employment statutes. This article will examine each of these potential pitfalls in detail and provide suggestions for how to avoid or mitigate your personal liability when making employment decisions.
Wrongful discharge claims occur when an employee alleges that the employer broke an employment contract or unjustly fired the employee for performing a legal duty or exercising a legal right. Companies have a tendency to rely too heavily on the contractually-based at-will employment doctrine as a defense for these claims. Certain states, including New Jersey, Pennsylvania, and West Virginia, have bypassed the at-will employment defense and assigned individual liability to supervisors who personally participated in the decision-making for the tort of wrongful retaliatory discharge, even if that supervisor was acting within the scope of his or her employment. These states consider wrongful discharge to be a tort offense rather than a breach of contract, and assign liability to the supervisor under the theory that an agent who commits a tort is not relieved from liability simply because s/he was acting on the employer’s behalf. To avoid incurring liability employers can counsel their supervisory personnel to avoid making misleading statements about job security, giving misleading performance reviews, inconsistently applying discipline, and mishandling termination meetings.
Harassment and discrimination in the workplace can take many forms, and an increasing amount of these cases are now exposing supervisors to personal liability. In a harassment lawsuit, an employee alleges that a co-worker or supervisor created a hostile work environment or conditioned certain components of the employee’s job upon sexual advances or favors. Title VII of the Civil Rights Act, the federal law that provides for protection from harassment and discrimination, does not impose personal liability on supervisors; however, harassment lawsuits often add tort claims such as battery or intentional infliction of emotional distress, which do impose personal liability. In some jurisdictions, states are beginning to draft legislation that explicitly provide for supervisor personal liability in harassment cases, though this has not yet extended to Maryland, Virginia, or the District of Columbia. Nevertheless, two critical steps that employers can take in light of these decisions are to (1) develop, distribute, and actively enforce an effective non-harassment policy that provides clear guidance to employees on how to report complaints; and (2) exercise reasonable care in addressing all complaints through investigations and corrective actions. It is important to emphasize that having a non-harassment policy but failing to train your supervisors and employees will make it difficult to later assert the policy as a defense against a harassment claim.
Finally, federal statutes that govern the workplace are also being expanded to include personal liability for management personnel, including the Fair Labor Standards Act (FLSA) and the Family Medical Leave Act (FMLA). Under the FLSA, “employer” is defined to include “any person acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. 203(d). This definition has been broadly interpreted by the courts, including the Fourth Circuit Court of Appeals, to include supervisors as “employers” under the statute. Individual managers have been held liable under the FLSA if they were capable of exercising supervisory authority over the complaining employee and were responsible, to some degree, for the alleged violation. As for the FMLA, its definition of an “employer” tracks that of the FLSA, and it has additional regulations providing for individual liability under the Act. 29 C.F.R. 825.104(d). The courts have generally interpreted the FLSA and FMLA to allow employees alleging causes of action under these Acts to include claims against their supervisors. Thus, managers need to understand their responsibilities under these Acts and have access to the resources needed for full compliance in order to avoid personal liability.
The scope of individuals potentially susceptible to liability for employment-related decisions is increasing and has effectively put supervisors and management personnel at a higher risk. There are no absolute solutions for avoiding individual liability; however, this article has outlined some steps that can be taken to minimize the risks. Training programs offered by employers are critically important to help managers and employees gain a better understanding of company policies, procedures and guidelines. Informed hiring decisions and on-going performance reviews can provide back-up documentation and records of an employee’s history with the company that can assist in repudiating future claims. And finally, it is advisable to include experts, such as human resource professionals or employment law attorneys, throughout the decision-making process to ensure that all possible precautions are taken.