7 Manager Mistakes with Costly Consequences

How HR can help prevent the missteps that could cost your company big in court.

By Jathan Janove, J.D. May 23, 2017
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Everyone makes mistakes. But few folks’ flubs matter more than those of managers, especially to your company’s bottom line. (On the plus side, managers’ mess-ups are often a boon to those of us in the business of employment law.) Even sensible managers can make seemingly minor errors—like failing to document a worker’s performance—that could result in seven-figure payouts in court.   

That’s why failing to train and educate managers may well be HR’s biggest mistake. I asked several experienced labor and employment attorneys to share their stories of costly management mistakes and the lessons HR professionals can learn from them. While these examples are all derived from real cases, details have been changed to protect confidentiality; any resemblance to real individuals should be considered coincidental. Without further ado, here are the unlucky seven.

1. Failure to Document

The story is a familiar one. Jason, the 45-year-old sales manager for a sporting goods manufacturer, had a three-year employment contract, which provided that he could be terminated only “for cause.” That included, of course, for failing to perform his duties—which is exactly what his supervisor Bill believed was happening. 

Bill became concerned about Jason’s performance during the first year of the employment contract when he noticed Jason was slacking off and not meeting his sales goals. But Bill kept quiet about it and hoped it was a fluke. He even gave Jason high marks in his first-year review. “Keep up the good work!” Bill wrote. 

In Jason’s second year, Bill didn’t notice any improvement. Yet during that time, he sent an e-mail to the company’s executives describing the great work his whole sales team was doing. He added a few lines of specific praise for Jason, pointing out his “can-do attitude” and the role Jason played in driving dramatic sales growth in a particular area. 

A month later, Bill fired Jason and told him it was because he had failed to perform to standards. That was news to Jason—who then sued for breach of contract and age discrimination, seeking six-figure damages for his salary and sales commissions for the remainder of his contract term. A costly legal battle ensued.

“Supervisors like Bill often try to be encouraging and ‘soften the blow’ of tough comments,” says Cecilia Romero, an attorney at Holland & Hart LLP in Salt Lake City. 

When Bill was asked during litigation why he had complimented Jason’s work in the e-mail to upper management, he admitted that his comments were not accurate but claimed that he didn’t want to “leave out” anyone on the team in his note.

While Bill’s intentions may have been good, inconsistent documentation can lead to the perception that the company terminated an employee for a more nefarious, and possibly discriminatory, reason, Romero says. “At a minimum, it means there are conflicting stories, which may prevent a court from dismissing a lawsuit early on,” she says. 

Moral of the story: “Be honest and direct with employees,” Romero says—and make sure your managers know why that’s so critical. “Also, properly document any performance problems in reviews, in e-mails and in other performance-related materials.”

2. Neglecting to Pay Overtime

Jill’s position was nonexempt under the Fair Labor Standards Act. Still, her boss described her as the “consummate professional” and never offered extra pay when Jill checked her e-mail at all hours, made and took business calls during her commute, and stayed late to make sure she didn’t just meet expectations but exceeded them. Jill never dreamed of asking for overtime pay for giving that “110 percent”—it was just who she was.

Unfortunately for the company, Jill’s co-worker Sam felt differently about his own similar situation. He filed a class-action suit alleging that the employer’s pay practices violated state and federal law and recruited a few co-workers to join him. His lawyer sought damages, back pay and attorney fees for a large group—which included Jill, even though she never wanted to be part of the case.

“Although employees like Jill are unlikely to sue their employers, this won’t stop disgruntled co-workers,” says Robin Shea, a partner at the law firm Constangy Brooks Smith & Prophete LLP in Winston-Salem, N.C. “If a co-worker like Sam files a class or collective action, then the employer could be looking at substantial liability for unpaid overtime and off-the-clock work, including for employees like Jill,” she says.

[SHRM members-only toolkit: Determining Overtime Eligibility in the United States]

Moral of the story: Although Jill’s dedication to her job is laudable, the Fair Labor Standards Act and most state wage and hour laws require that nonexempt employees be paid for all hours worked. Make sure these workers—and their managers—understand the rules. If supervisors allow nonexempt employees to take on extra duties, they must also ensure that the workers track all their time and are compensated accordingly. “If you don’t want to pay overtime, then you need to require them to quit at quitting time,” Shea says. In fact, employees who fail to comply should be subject to discipline. “It’s a shame to have to force good employees to be clock-watchers, but our wage and hour laws virtually require that.” 

3. Misguided Paternalism (or Maternalism)

Denise was the chief operating officer for a company with 300 employees. She prided herself on supporting women in the workplace, including facilitating leave and flexibility options for the members of her largely female senior management team. Yet she also complained about the impact of maternity leave on the business when her executives took advantage of it. “It makes it really hard to get things done properly and on time,” Denise opined. 

In fact, in a report to the company’s board of directors, Denise wrote that an important project could not be completed by its target date because a key employee was on maternity leave. 

Denise’s outlook trickled down to Selma, the manager of a team that needed a project leader. After announcing the opportunity to her employees, Selma gestured to a couple of young women and said, “I know that you two aren’t interested because you have small children and probably don’t want to work the extra hours.” 

The next day, one of these workers, Amanda, complained to the HR director, Louise, about Selma’s comments: “This isn’t fair. Selma is holding it against employees who have young children. And she gets this attitude from Denise.”

Louise told Amanda she was misinterpreting Selma’s remarks. “Everyone knows that Denise is a big champion for women in the workplace,” Louise said. “Look at how many women we have in senior positions!”

“That may be,” Amanda replied, “but Denise’s and Selma’s comments hurt women.” 

Louise again disagreed and took no action on Amanda’s complaint.

Four months later, Amanda applied for a higher-level position—and didn’t get it. A discrimination and retaliation claim soon followed.

Selma made a mistake when she made assumptions about what her workers would and wouldn’t want to take on—and an even bigger one in voicing her concerns to those employees. “Whether the personal situation is a disability, the health of a family member, the age of children, etc., the employee, not the employer, makes the determination on whether she can take on additional hours or responsibilities,” says Charlotte Miller, a former state bar president who is currently chief human resource officer for the U.S. Ski and Snowboard Association. 

Moral of the story: “Empowering employees who have children or other family needs means making available flexible work or other benefits,” Miller says. “It does not mean determining what ambitions an employee should have or what opportunities an employee should pursue.” 

While Denise’s company offered good leave benefits, she undermined them with her complaints about employees taking the time off. “That’s not empowerment—it’s compliance, with a knife,” Miller says. 

Bonus moral: And let’s not let the HR director off the hook. “Louise should have taken Amanda’s complaint seriously, investigated and followed up,” says Monica Whalen, attorney and president emeritus of the Mountain States Employers Council in Salt Lake City. “Instead, she let her own perception of Denise as a ‘champion of women’ get in the way. By prejudging Amanda’s complaint, Louise unwittingly set up her employer for both a discrimination and a retaliation claim.”  

4. Playing Favorites

Department manager Frank promoted his favorite worker, Henry, to the role of supervisor. Frank was delighted to have a good, trusted friend in that role to whom he could talk freely regarding his misgivings about other employees. One of these involved a Hispanic employee, Joseph, whom Frank viewed as passive-aggressive. Speaking freely with Henry about Joseph’s lack of timeliness in executing projects, Frank said, “There’s probably some reason that stereotypes are stereotypes.” 

Henry took the hint and began to push hard on Joseph and the other employees Frank didn’t like and was quick to write them up for whatever displeased him. Frank backed Henry on the new, harsher mode of supervision. 

Joseph felt he was being unfairly disciplined for offenses that non-Hispanic employees committed without consequence, so he filed a claim of national origin discrimination with the U.S. Equal Employment Opportunity Commission (EEOC). When the agency’s investigator interviewed Henry, Henry admitted that his disciplinary practices weren’t always consistent and that he took his lead from his manager. He then shared Frank’s complaints about Joseph and his comment about truth in stereotypes. This caused the EEOC to take great interest in Joseph’s claim. As you can well imagine, things didn’t end well for the employer.

Moral of the story: “As this company learned, cronyism among managers—where the emphasis is on likes and dislikes, rather than on performance—can lead to off-the-cuff remarks and conclusory statements that are not helpful in focusing an employee on the pertinent timelines, rules and tasks required,” says Corbett Gordon, an attorney at Tonkon Torp LLP in Portland, Ore. “Indulging in gossip and stereotypes created a dynamic where Henry viewed his role as that of Frank’s henchman, rather than as a helpful and transparent supervisor to all his subordinates.” 

5. Compliance Miscalculations

Although she’d just received a demand letter from a former employee’s lawyer, business owner Sarah sounded fairly happy on the phone to her employment lawyer. She said, “This person is making a claim that we fired her because of her health, but we knew she wasn’t eligible for Family and Medical Leave Act leave when we let her go. We should be fine, right?”

‘Be honest and direct with employees. Also, properly document any performance problems in reviews, in e-mails and in other performance-related materials.’

     –Cecilia Romero,  
Holland & Hart LLP

Her lawyer had bad news for Sarah: “You’re right about the Family and Medical Leave Act,” she said. “Unfortunately, however, the former employee is probably covered by the Americans with Disabilities Act (ADA), and there’s no indication that her manager or HR tried to accommodate her under the ADA before you fired her for attendance problems.” 

Moral of the story: This common scenario “illustrates what many businesses do well and what they don’t do well,” says Mike O’Brien, an attorney at Jones Waldo in Salt Lake City. “They wisely know that HR laws apply, that it is a risky legal landscape and that any termination can result in some kind of a claim,” he says. Nevertheless, they often fail to consider that a number of HR laws—not just the one or two they know best—may apply to any given situation and thus fail to train their managers accordingly, O’Brien continues. Businesses “should carefully analyze and, with the help of legal counsel as needed, identify all potential legal risks in a termination before pulling the trigger.” 

6. Failure to Accommodate

Debra worked as one of two hairdressers at a nursing home. On Mondays and Tuesdays, she pushed residents in wheelchairs from their rooms to the nursing home’s beauty shop to do their hair and then wheeled them back afterward. On other workdays, Debra mainly did the hair of residents who didn’t require wheelchair assistance. 

After undergoing surgery, Debra returned to work with a permanent pushing restriction of 50 pounds. Her doctor said pushing wheelchair-bound residents could cause additional physical damage that would likely require her to have another surgery. 

Debra suggested that others push the wheelchairs for her on Mondays and Tuesdays. However, the nursing home’s administrator rejected the idea and refused to restructure Debra’s duties because the pushing restriction was “permanent.” 

Debra quit and sued under the ADA. Until Debra’s position was filled, the remaining hairdresser received assistance from other staff in wheeling residents to and from the beauty parlor, without any “undue hardship” to the facility or its residents. 

Although a lower court initially dismissed the case on the grounds that pushing wheelchairs was an “essential function” of the position, an appellate court disagreed and sent the case back for jury trial. 

Moral of the story: Maria Greco Danaher, a shareholder with the law firm Ogletree Deakins in Pittsburgh, offers three lessons: “First, just because a restriction is permanent doesn’t excuse an employer from attempting to accommodate it. 

Second, if you’re going to say that a suggested accommodation is impossible—in this case, having others assist in the wheelchair pushing—don’t use that very accommodation when the employee leaves the position. 

And, most importantly, at least consider restructuring the job when reviewing reasonable accommodation choices. Don’t simply assume an accommodation can’t or shouldn’t be made.”

7. Turning a Blind Eye to Bullying

For many years, a company conducted annual training on its anti-harassment policy. However, neither company policy nor the training included bullying, based on reasoning that “generic” abuse is not a legal issue since it’s not based on race, sex or other legally protected classes.

The organization’s leaders came to regret this omission after an employee filed a lawsuit alleging abuse and harassment by his manager. They learned the hard way that defending a claim by arguing that a manager is an “equal opportunity offender” is an uphill battle.

“When judges and juries feel an employer tolerated or allowed an abusive work environment to exist, they’ll often strain to find a legal hook to hold the employer accountable,” says attorney Mary Wright of Wright & Supple LLP in Albany, Calif. “And given the plethora of legally protected classes and activities under state and federal law, it’s often not hard to find a hook.” 

[SHRM members-only presentation: Confronting Workplace Bullying

Moral of the story: Offer anti-bullying training. When Wright counsels employers, she reminds them of four important reasons to do so: 

• In some states, such as California, anti-bullying training is required by law. 

• Bullying can be the basis for an employee’s lawsuit for other claims, such as intentional or negligent infliction of emotional distress. 

• Bullying is on the rise. 

• Workplace bullying is likely to contribute to subsequent medical disorders and even “secondhand abuse,” in which those who have been bullied go on to bully others.

Cases Closed

Sometimes HR professionals assume managers with common sense won’t make these mistakes. But unfortunately, as the French philosopher Voltaire said, “Common sense is not so common.” Moreover, employment laws aren’t always so logical themselves.

So don’t let managers navigate these tricky legal waters on their own. Train them, encourage them to come to you with questions and problems, and turn to employment attorneys if you get stuck. 

That’s how HR can accomplish its goal of getting the right employees in the right positions doing the right things—without ever having to visit the inside of a courtroom. 

Jathan Janove, J.D., is principal of Janove Organization Solutions in Portland, Ore. He is the author of Hard-Won Wisdom: True Stories from the Management Trenches (Amacom, 2016).

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Illustrations by Alex Nabaum for HR Magazine.

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