Personal Liability in Employment Law: You're Suing Me?

Did you know that managers, business owners, and human resources professionals can be personally and individually sued for their involvement in employment decisions? It's true. Employment litigation is a risk for individuals, as well as organizations. You are betting your personal financial future—and sometimes your personal freedom—each time you make, or help to make, an employment decision. Do not become frozen with fear because of this prospect of personal liability. Do not adopt a devil-may-care attitude, either. If you do, one day you may be handed papers and hear those famous words, "You've been served!"—or worse yet, be arrested. Instead, educate yourself about these risks and how you can minimize them.

What Federal Employment Laws Include the Risk of Individual Liability?

Many employment laws explicitly allow applicants and/or employees to sue individuals as well as the organization. Some even include the risk of criminal prosecution. Whether individual liability is possible generally depends on how the law in question defines who is an "employer." Not all federal employment statutes allow lawsuits or criminal penalties against individuals. Some of the key federal laws and their provisions for personal liability are discussed below:

1. Fair Labor Standards Act

The Fair Labor Standards Act (FLSA) allows for individual liability because its definition of "‘employer' includes any person acting directly or indirectly in the interest of an employer in relation to an employee." 29 U.S.C. § 203(d). Managers, business owners, and HR professionals act in the employer's interests whenever they make employment decisions, so they are included within the reach of who is an "employer" under the FLSA.

The FLSA sets the federal minimum wage, regulates child labor, and determines when overtime must be paid and to whom. 29 U.S.C. § 201, et seq. The FLSA is one of the most complex of all the federal employment laws, and it can be very difficult to properly administer. Business owners and HR professionals may be at a higher risk for individual liability under the FLSA, as compared with line managers, because they are more likely to make decisions regarding the classification of jobs, payment of wages, and recruitment of minors.

Violation of the FLSA's mandates, which also includes anti-retaliation provisions protecting employees who assert rights under the law, can result in civil legal proceedings before the Department of Labor or before a court. Civil remedies assessed against violators include the amount of unpaid/underpaid wages, liquidated damages equivalent to the wages owed, the employee's attorneys' fees and legal costs, equitable remedies (e.g., reinstatement or promotion), and civil fines. 29 U.S.C. § 216(b)-(e). Civil remedies are only part of the legal risk under the FLSA. Criminal penalties are also available under the FLSA including criminal fines of up to $10,000 per violation and imprisonment of up to six months, or both. 29 U.S.C. § 216(a). Avoiding criminal prosecution is a good reason to get to know your obligations under employment laws such as the FLSA.

2. Family and Medical Leave Act

The Family and Medical Leave Act (FMLA) also explicitly allows for individual liability. Within its definition of "employer," the FMLA includes "any person who acts, directly or indirectly, in the interest of an employer to any of the employees of such employer." 29 U.S.C. § 2611(4)(A)(ii)(I). Thus, similar to the FLSA, individuals can be held personally liable for violating the FMLA.

The FMLA requires that covered employers provide leave and job protection for eligible employees who take qualifying medical, family, or family military leave. 29 U.S.C. § 2610, et seq. Failing to follow the FMLA's mandates, interfering with FMLA proceedings or inquiries, and discriminating against those who exercise FMLA rights are prohibited under the law. 29 U.S.C. § 2615. The FMLA is another complex federal employment law that is very difficult to properly administer. Line managers, business owners, and HR professionals are involved in attendance and return-to-work matters, putting them at risk for FMLA individual liability. Business owners and HR professionals are at further risk due to their role in making policies surrounding FMLA and administering FMLA leaves.

Violations of the FMLA can result in civil legal proceedings before the Department of Labor or before a court. Civil remedies assessed against violators can include compensatory damages (i.e., lost wages, lost benefits, and other costs proven by the employee), liquidated damages equal to the compensatory damages, the employee's attorneys' fees and legal costs, and equitable remedies (e.g., reinstatement or promotion). 29 U.S.C. § 2617. The FMLA does not allow for criminal penalties.

Back to Newsletter | Download PDF | Top of Article

3. Uniformed Service Employment and Reemployment Rights Act

The Uniformed Service Employment and Reemployment Rights Act (USERRA) allows for individual liability. Within its definition of "employer," USERRA includes "any person, institution, organization or other entity that pays salary or wages for work performed or that has control over employment opportunities, including a person . . . to whom the employer has delegated the performance of employment-related responsibilities." 38 U.S.C. § 4303(4)(A)(i) (emphasis added). Managers and HR professionals, as well as business owners, fall within USERRA's definition of employer and carry risk of personal liability.

USERRA prohibits discrimination against service persons due to their military service, requires military leave to allow employees to serve in the uniformed services, requires reemployment of returning service persons (under most conditions) without loss of seniority or pay or benefits, and prohibits retaliation against persons who assert or assist others in asserting USERRA rights. 38 U.S.C. §§ 4311-4319. USERRA retaliation claims may be the biggest risk of personal liability for line managers, as line managers are most involved in daily interactions with returning service persons. HR professionals and business owners are at risk for the entire panoply of USERRA claims.

Violations of USERRA can result in civil legal proceedings before the Department of Labor or before a court. Civil remedies assessed against violators can include compensatory damages for lost wages and benefits, liquidated damages equal to the compensatory damages, the employee's attorneys' fees and legal costs, and equitable remedies (e.g., reinstatement or promotion). 38 U.S.C. § 4323. USERRA does not allow for criminal penalties.

4. Immigration Reform and Control Act

There is also personal liability under the Immigration Reform and Control Act (IRCA) of 1986. The prohibitions of IRCA apply to "a person or other entity." 8 U.S.C. § 1324a(a) (emphasis added). Therefore, IRCA applies to individuals.

IRCA makes it unlawful to recruit or harbor or employ illegal aliens, requires employers to verify every employee's identity and eligibility to work in the U.S. within three days of employment (I-9 procedures), prohibits discrimination against persons due to their national origin, and prohibits retaliation against persons who assert non-discrimination rights under IRCA. 8 U.S.C. §§ 1324-1324b. IRCA harboring and discrimination claims may be the biggest risk of personal liability for line managers given their close daily contact with employees and more intimate knowledge of the employees' personal circumstances. Managers who handle I-9s for new hires have increased risk under IRCA, that is otherwise confined to HR professionals.

Violations of IRCA can result in civil legal proceedings by the Department of Homeland Security or before a court. Injunctions and per-violation civil fines for improper I-9s can be assessed and these fines gradually increase if noncompliance occurs on multiple occasions. 8 U.S.C. § 1324a(e). After three violations, a pattern or practice of I-9 violations may be established, such that criminal prosecution may occur and result in criminal fines and imprisonment for those found guilty. 8 U.S.C. § 1324a(f). Civil remedies for violation of IRCA's non-discrimination and non-retaliation provisions include compensatory damages for back pay, civil penalties, equitable relief (e.g., hiring, reinstatement, post notices, provide education, etc.), and paying the employee's attorneys' fees and legal costs. 8 U.S.C. §§ 1324a(h)-1324(i). Individuals can also face criminal prosecution for "harboring" known illegal aliens—which is a term that is broadly defined. 8 U.S.C. § 1324(a).

Efforts to enforce IRCA including criminal prosecutions, are in the spotlight and on the rise due to frustration over Congress' lack of progress on immigration reform legislation. Therefore, it makes sense to review your obligations under IRCA.

5. National Labor Relations Act

The National Labor Relations Act (NLRA) sets forth the rights of employees to organize and bargain collectively and defines what constitutes unfair labor practices on the part of employers and labor organizations. 29 U.S.C. § 151, et seq. The NLRA provides for individual liability by defining "employer" as "any person acting as an agent of an employer, directly or indirectly." 29 U.S.C. § 152(2). Complaints may be filed with the National Labor Relations Board (NLRB) and any interference with the NLRB's performance of its duties is punishable by a fine of up to $5,000, imprisonment of up to one year, or both. 29 U.S.C. §§ 161-162.

6. COBRA and ERISA

The Employee Retirement Income Security Act of 1974 (ERISA) sets minimum standards for retirement and health benefit plans offered by employers. ERISA requires that individuals who manage these plans (and other fiduciaries of the plan) meet certain standards of conduct. The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to continue group health benefits for a limited time following a qualifying event, such as job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. COBRA is a subsection contained within ERISA, thus, the laws share some common definitions and enforcement provisions. The Department of Labor and the Internal Revenue Service coordinate efforts for enforcing ERISA.

ERISA defines "employer" to include "any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan." 29 U.S.C. § 1002(5) (emphasis added). Thus, federal law governing employee benefits allows for individual liability.

Civil remedies available under ERISA include personal liability for individuals to pay plan participants $100 per day for failing to make timely reports or provide information when requested to do so by the government, civil fines between $100-$10,000 per day (depending on the violation), payment of the plaintiffs' attorneys' fees and legal costs, payment of lost contributions to benefit plans, and any other equitable remedies deemed appropriate under the circumstances. 29 U.S.C. §§ 1132(c), (g), (l), and (m). Criminal action can be taken against individuals who violate ERISA. Individual criminal penalties include a criminal fine of up to $100,000 and imprisonment of up to ten years, or both. 29 U.S.C. § 1131. ERISA contains some of the harshest criminal penalties in any employment law.

Back to Newsletter | Download PDF | Top of Article

7. Federal Anti-Discrimination Statutes

Various federal laws prohibit discrimination, harassment and retaliation in employment, including Title VII (protected classes include sex, pregnancy, race, color, national origin and religion), the Age Discrimination in Employment Act (ADEA), and the Americans with Disabilities Act (ADA). Each of these statutes uses a similar definition for covered "employers" that requires a minimum number of employees. Most federal circuit courts of appeal that have addressed the issue have held that these statutes do not allow personal liability against individuals. See, e.g., Jensen-Welch, J., Suing the Bastard Boss: Personal Liability of Supervisors for Workplace Sexual Harassment, Defense Counsel Journal, pp. 466-470 (Vol. 69, Oct. 2002) (analyzing Title VII for individual liability and finding that all but one circuit court of appeal has addressed the issue and denied the existence of individual liability); Nelson v. Long Lines Ltd., 335 F. Supp. 2d 944, 964 n.5 (N.D. Iowa 2004) (listing cases where a majority of federal circuit courts of appeal determined there was no individual liability under the ADEA); Walsh v. Nev. Dep't of Human Res., 471 F.3d 1033, 1037 (9th Cir. 2006) (listing cases where a majority of federal circuit courts of appeal determined there was no individual liability under the ADA). Although personal liability is not present under these federal laws, your actions can create liability for your employer. In addition, many state anti-discrimination laws allow for individual liability. So don't become complacent when it comes to discrimination, harassment, or retaliation.

What State Employment Laws Include the Risk of Individual Liability?

State statutes governing the workplace vary widely, but many allow for personal liability of individuals. See, e.g., Jensen-Welch, J., Suing the Bastard Boss: Personal Liability of Supervisors for Workplace Sexual Harassment, Defense Counsel Journal, pp. 470-481 (Vol. 69, Oct. 2002) (analyzing state law regarding individual liability for sexual harassment). An exhaustive listing and analysis of state statutes is beyond the scope of this article. However, managers, HR professionals, and business owners are advised to consult with local legal counsel to evaluate their personal exposure under state employment laws. Sometimes state laws can be confusing, so be sure you have a knowledgeable and up-to-date source of information. For example, the California Supreme Court recently determined that its anti-discrimination statute (the Fair Employment and Housing Act) allows individual liability against persons for claims of workplace sexual harassment only, but not for any other type of prohibited employment harassment, discrimination, or retaliation. Jones v. The Lodge at Torrey Pines Partnership, 2008 Cal. LEXIS 2504 (Cal. Mar. 3, 2008).

Beyond state statutes, all states have common law causes of action for wrongs that can occur in the workplace (and elsewhere). Common law claims are created by the courts from case law involving wrongs that are not otherwise prohibited by statutes. After all, legislative bodies cannot pass statutes and ordinances to cover every bad thing that can occur. Still, every person is expected to conduct themselves with the general bounds of societal decency, and courts have created a body of common law to provide remedies against persons who do not follow this generic norm.

Most common law claims carry a very real threat of individual liability. Such common law claims include wrongful discharge, defamation, assault, battery, false imprisonment, intentional infliction of emotional distress, intentional interference with business relationships, intentional interference with prospective business relationships, malpractice, invasion of privacy, and various negligent management practices (e.g., negligent hiring, negligent retention, negligent supervision, negligent training, and negligent investigation). It is important to note that, here, individual liability extends beyond managers, HR professionals, and business owners to even non-supervisory coworkers.

Are Legal Actions Commonly Taken Against Individuals for Workplace Harms?

It is becoming more and more common for employees and/or applicants to take legal action against individuals, as well as organizations, due to harms suffered in the workplace. According to a 1997 survey conducted by the Society for Human Resource Management, 23% of the responding companies had an individual named in an employment-related lawsuit and 16% had an HR professional named individually in such a lawsuit. See Bliss, W., The Wheel of Misfortune, HR Magazine (Vol. 45, May 2000). Based on anecdotal evidence, it's a good bet those numbers would be higher today. The good news is that individual defendants are often dismissed from employment litigation before the case gets to trial. Such dismissals may occur by court-imposed summary judgment in favor of the individual defendant or when the plaintiff agrees to dismiss the individual defendant for strategic reasons. The bad news is that while an individual defendant is in the case, s/he has to bear the mental and financial strain of defending himself/herself.

Back to Newsletter | Download PDF | Top of Article

Why Are Individuals Sued for Workplace Harms?

The most likely individuals to be named in employment-related litigation include business owners, supervisors/managers, and HR professionals. Individuals are added as parties to an employment-based legal proceeding for many reasons. Some motives are financial. At times, the individual sued has personal wealth or personal insurance coverage that is attractive to the plaintiff's potential recovery. The more deep pockets in a lawsuit, the better, as far as the plaintiff is concerned. Sometimes the organization has few resources, has closed, or has declared bankruptcy. If the employer's pocket is empty, individual defendants appear all the more attractive as parties to the legal proceeding.

Other motives for naming individuals as parties in employment-related legal matters are emotional. Some plaintiffs have a vendetta against the individual defendant(s). At times, the plaintiff suffered a very personal wrong at the hands of the individual defendant and wants to strike back. It is common to see individual defendants named in harassment lawsuits, given the often highly personalized nature of incidents of harassment.

At yet other times, the motive for pointing the finger at an individual in a workplace legal proceeding is legal strategy. When the individual has acted against the organization's policies (i.e., "outside the scope of employment"), the organization can escape liability. At other times, the plaintiff wants to draw extra attention to a matter, either to punish the employer or to garner public support—and adding individuals (especially high-profile individuals) to a legal proceeding can bring that added "oomph" to the case. If an individual is spouting the party line on behalf of the employer, but the plaintiff believes there is more to be known, then suing that individual may cause him/her to come forward with other information that may help the plaintiff's case.

What Can I Do to Avoid or Minimize My Risk?

It is devastating whenever legal action is taken against you personally, whether in a civil proceeding or a criminal prosecution. Both types of actions take a toll on your emotions, professional reputation, finances, and time; but a criminal action is particularly disconcerting as it also puts your personal freedom and criminal record in jeopardy. The following tips will help you minimize, or avoid altogether, the risk of personal and individual liability for your workplace actions:

• Educate, Educate, Educate. You must know what you are required to do, and what you are prohibited from doing, under the laws that govern your actions in the workplace. The path to this knowledge is repetitious education. Repetition provides constant reminders and allows you to stay current on the ever-changing sea of employment law. You don't have to become a lawyer. You only have to know the basics of the laws so you can spot issues and know when and where to get help when you need it.
• Compliance and Consistency. Knowing the law is not enough. You have to comply with both the letter and the spirit of the law. Consistency in the treatment of others is key to avoiding employment liability; but consistency does not necessarily mean treating everyone exactly the same.
• Act on What You Know. If you do it, see it, hear it, or hear about it, it has become your problem—and a problem for your organization—so you must act on it. You cannot bury your head in the sand and pretend a wrong didn't occur or hope it will go away.
• Document, Document, Document. This famous mantra from employment law can be included in almost any list of employment tips for managers and HR professionals. Contemporaneous documentation provides necessary proof for employment legal proceedings—and it can be very helpful when memories fade. Documentation should explain the facts of what happened, who was there, when it occurred, where it occurred, how it occurred, and why the action was taken in response.
• Thoroughly Research/Investigate. Before taking any employment action, thoroughly research and/or investigate the matter. Document your findings and the action taken based on those findings. Do not act on the spur of the moment or in anger. Instead, slow down, calm down, get the facts, and think before you act.
• Be Respectful. How people are treated is just as important as the reasons for the action taken. You've probably known people who could fire employees but the employees still feel good about it! Show respect for others by being confidential and empathetic to their needs and feelings. Preserve others' dignity and treat them as you would like to be treated yourself.
• Need Help? Get It! There's no shame in recognizing when an issue has exceeded your abilities, knowledge, or objectivity. Know when to get help and from whom. Whether help is from upper management, human resources, an attorney, or any combination of these, be sure to reach out for that helping hand and share the burden.
• Insurance. If you're still having trouble sleeping at night, check on your insurance coverage for individual liability in employment lawsuits. Your employer may have general liability, directors & officers, malpractice, or employer's practices liability insurance that may provide coverage for your defense if you are sued for workplace acts. If not, or if you believe the coverage is inadequate, you can obtain your own personal liability policy.

Jill R. Jensen-Welch is an attorney with Dickinson, Mackaman, Tyler & Hagen, P.C., in their Des Moines, Iowa, office. She practices primarily in Employment Law and Civil Litigation. Jill has 16 years of experience as a human resources professional.

The information appearing in this publication is intended to provide current information relating to employment and labor law. It is not intended as legal advice or opinion, which is provided by the Firm to clients with respect to factual situations and only upon engagement.

Back to Newsletter | Download PDF | Top of Article

The Straight to the Point e-newsletter is a periodic e-newsletter published by VisionPoint^®. If you have a suggestion, comment or an idea for an article on an ethics and compliance issue, please email us at info@visionpoint.com.

If you liked this e-newsletter, be sure to add this address to your address book (or "safe sender list") and Forward this to a Friend to encourage your friends and colleagues to subscribe.

© Copyright 2008. VisionPoint^® Productions, Inc. All Rights Reserved.