Under some state and federal laws, HR professionals can be held individually liable.
July 1, 2012
Keeping the company out of court by ensuring that managers comply with the law remains an important part of any HR professional's job. But more and more, HR professionals may be defending themselves in suits brought against them in their individual capacities.
Why? A number of laws hold managers, including HR managers, personally liable for conduct "in the scope of employment" that violates employment laws. These include:
The federal Fair Labor Standards Act (FLSA).
The federal Family and Medical Leave Act (FMLA).
State tort laws penalizing negligent referral or hiring, defamation, and false imprisonment or false arrest.
Some state nondiscrimination laws.
Fortunately for HR decision-makers, they are not liable under every employment law. They generally have not been held liable for decisions under federal discrimination laws, including Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act (ADA) and the Age Discrimination in Employment Act (ADEA). Every federal appellate court that has addressed this issue has ruled that individual supervisors are not personally liable under those statutes, says attorney Christine Walters, SPHR, a consultant with FiveL Co. in Westminster, Md.
HR professionals sued individually under those three laws can generally get the claims against them dismissed. But for the other federal and state laws mentioned above, "It can cost as much as $150,000 just to get a case dismissed," according to attorney Denise Kay, SPHR, a senior consultant with Employment Practices Solutions in Lakewood, Colo. And there have been instances of HR professionals being found liable after trial and assessed large sums in damages payable to the employee or employees who brought the lawsuits.
Anyone who commits an act that gives rise to an employment complaint, or anyone even tangentially involved, can be at risk of losing personal assets, Kay says. And, the conduct doesn't have to be intentional. Here are some specific examples.
The FLSA specifically allows individuals to be sued, notes Eddie Isler, an attorney with Isler Dare Ray Radcliffe & Connolly in Virginia. "Usually, plaintiffs go after the business owner. But the person who is setting the pay and policies can also be individually sued," Isler says, and this is often an HR person.
The more control you have of the employment relationship, the more likely you can be deemed an "employer" under the FLSA and held liable, says Jason Storipan, an attorney in the New Jersey office of Fisher & Phillips LLP. If you control the terms of employment or have a big role in making personnel decisions and establishing pay policies, you could be held personally responsible for any damages or other remedies under the law, he notes.
Consider the common scenario of an HR director responsible for identifying exempt and nonexempt positions. Some groups of employees who should be classified as nonexempt are misclassified as exempt and not entitled to overtime. A group of these employees sue for unpaid overtime and name the HR director as a defendant. Although the director made an honest mistake, he or she may be found personally liable, according to Isler.
A recent case involved a mix-up with FMLA paperwork.
Maria was expecting a baby. In her seventh month of pregnancy, she began experiencing medical complications. Her doctor placed her on medical leave, and she presented this notice to her employer. While on leave, she stayed in touch with her employer. She was later released to "light, part-time duty" but continued to experience problems and was out intermittently. During this time, Maria consulted with her supervisor and the HR manager. She requested and submitted medical certification about her condition. Managers said the documentation provided by Maria's doctor was incomplete and insufficient, and they requested additional certification.
Maria was notified of the need to submit additional medical certification. She took the paperwork to her doctor's office and believed that the staff had completed it and that her employer had received it on that same day. Nevertheless, the company terminated her for job abandonment after she delivered her baby, claiming it did not receive proper medical certification to allow for the continued leave.
Maria sued her direct supervisor, the district manager, the HR manager and the company for violations of the FMLA. The court ruled that all individual defendants were properly included in the lawsuit, Kay says, noting that under the FMLA, the term "employer" includes "any person who acts, directly or indirectly, in the interest of an employer to any of the employees of such employer."
State Tort Actions
For HR professionals, individual liability is probably most likely in cases of negligent referral or negligent hiring. Both actions arise under state laws, Walters notes. HR professionals also may be held individually liable in defamation and false imprisonment or false arrest cases.
Walters describes an example of such a claim: Mary, an HR manager with company A, calls you, an HR manager with company B, for references about Betty Sue, who used to work for company B and has applied for a job with company A. Neither company has a reference policy. Betty Sue was fired for punching someone in the face, but you say that Betty Sue "was OK" and don't mention what happened because you don't want to make it harder for Betty Sue to get a job.
Betty Sue is hired by company A and, again, punches another employee. The punched employee sues you for negligent referral.
You may also be liable, Walters says, "when you say something rather than nothing but the something doesn't totally disclose what you have knowledge of."
Claims often allege that the employer failed to do a background check on an applicant who, once hired, committed an act of violence against another employee or a customer. If you are an HR professional responsible for hiring, "Make sure you are acting within the scope of your responsibilities," Walters says. "If you don't follow company procedures, that is when you can be held liable." In other words, if you have taken all the steps management requires when checking the background of an applicant, you should not be subject to liability. But if, for example, you omit a required background check because you are in a rush to fill a job, that omission may cost you in the future.
To raise a defamation claim, the employee must prove that the employer or individual defendant made a written or oral statement to one or more people concerning the plaintiff-employee, that the statement is false, and that it injured the reputation of the employee. Examples include e-mail circulation or comments made concerning a negative evaluation, Kay notes. Truth is a defense in a defamation claim, but individuals sharing information inappropriately or generating false or misleading information may face legal challenges, she adds.
There has been an "explosion of defamation cases arising out of the workplace over the last 10 to 15 years," Isler says.
These cases are dangerous because plaintiffs' attorneys think they can probably get to the jury rather than being dismissed at an early stage in the proceedings, he explains. Whether something is true or false—the question at the heart of a defamation claim—is for a jury to decide. So, plaintiffs' attorneys in these cases know they will "get their day in court."
How do HR professionals get involved in these messes? "They have loose lips and broadcast to other people in other organizations the grounds for someone's resignation—or they misstate the reasons" why the employee no longer works at the company, Isler says.
An example would be telling someone that a former employee was fired for using drugs, when the HR professional actually was confusing that employee with someone with a similar name.
Although qualified privilege attaches to most HR communications, "You can lose the privilege by talking to someone who doesn't need to know," Isler says. "Don't talk about people after they leave" the company.
State claims may be brought for several causes of action not specifically related to employment, such as assault and battery.
False imprisonment and false arrest. False imprisonment is broadly defined as the restraint of one's liberty without sufficient cause. In essence, it is the illegal detention of a person without lawful process.
Imagine this scenario: An HR manager meets with an employee for investigation of alleged workplace misconduct. The employee gets agitated, stands up and starts to leave the office. The manager says, "Sit back down. You are not leaving the office before I say it's OK." The employee claims false imprisonment.
During investigations, do not "tell people not to leave the office," Walters says.
A related claim would be false arrest, Isler notes. For example, an HR professional, based on scant information, calls the police, thinking that someone is stealing from the company. That person is arrested and later sues the company for false arrest, naming the HR professional as an individual defendant.
What You Can Do to Avoid Lawsuits
There are steps HR professionals can take to avoid personal liability:
Know the law. Ignorance is no defense, says attorney Denise Kay, SPHR, a senior consultant with Employment Practices Solutions. Keep up with federal and state laws to minimize legal exposure.
Follow the law and not necessarily your supervisor's orders. Question the orders or suggestions of a superior that do not seem quite right, Kay suggests. Ask questions and seek clarification before engaging in possibly questionable behavior involving employees.
Keep your policies up-to-date, and follow them. Conduct regular HR audits to ensure that your policies comply with the law, Kay says. Further, it is not good enough to simply have a policy; the policy must be communicated, supported and used appropriately.
"Make sure you are acting within the scope of your responsibilities. If you don't follow company procedure, that is when you can be held liable," says attorney Christine Walters, SPHR, a FiveL Co. consultant.
Engage in due diligence. When conducting investigations or considering corrective actions, don't send a message to managers that you don't trust them, Walters notes, but make sure you have the same facts they do.
Document all actions. Make sure managers are documenting their employment decisions and document what you are doing as well, Walters says.
Communicate with employees. Speak truthfully and in a dignified manner. Act professionally, honestly and confidentially in every interaction with employees, Kay says. Do not act in anger or in a retaliatory manner.
Respond properly to authorities. Do not obstruct justice or otherwise interfere with or provide false information to an authority, Kay says.
Consider employment practices liability insurance. Do you have coverage? If not, consider obtaining it. Although it is not inexpensive, it will cost less than litigation—the costs of which can be astronomical, Walters says. Carriers provide coverage for individuals, she explains, as long as the individual is acting within the scope of professional responsibility.
State Equality Laws
Although federal nondiscrimination laws, including Title VII, the ADEA and the ADA, do not permit suits against individual supervisors, a vast number of state equal employment opportunity statutes "don't specify that individuals can't be sued, and courts have allowed them to be sued," Isler explains.
According to Kay, the Colorado Anti-Discrimination Act expressly states that individuals may be sued for certain discriminatory or unfair employment practices, and judges in Colorado courts have not hesitated to permit plaintiffs to proceed on claims against individual employees under the law.
Other states, such as Virginia, expressly limit personal liability by defining the employer as "any employer employing more than five but less than 15 employees." Since a supervisor does not "employ" anyone, he or she may not be held personally liable under this definition.
Claims Under Other Laws
This article contains an incomplete list of the federal and state employment-related claims that may be brought against HR professionals. It may be possible for an employee or former employee to maintain a suit against an HR manager for violation of other federal laws, including the Employee Retirement Income Security Act, the Equal Pay Act, COBRA and federal immigration laws.
State claims may be brought for several causes of action not specifically related to employment, such as assault and battery, negligent or intentional infliction of emotional distress, invasion of privacy, and interference with contract. Claims may also be brought for violation of state wage and hour or leave laws.
Why Sue HR?
HR professionals may be sued in their individual capacities for several reasons, Kay says, based on the employment actions and the litigation strategy.
The first and most obvious reason is when the HR professional is accused of intentionally engaging in unlawful conduct. For example, consider the behavior of the HR manager who denied FMLA leave to an eligible employee who requested it in an effort to force her to resign. In this case, it is easier to point a finger at the HR professional as the one responsible for the employment decision. Because of the clearly illegal nature of the action, the employee may be more motivated to try to hold the responsible party liable.
Other violations may occur unintentionally but are illegal nonetheless, such as misclassifying nonexempt employees as exempt, thereby making them ineligible for overtime.
Beyond the actual events that transpire in the work environment, plaintiffs' lawyers may have strategic and tactical reasons for including HR employees in lawsuits, Kay says.
Plaintiffs' attorneys may want to:
Create conflict between the employer and HR professional to complicate the defense, possibly making it necessary for separate attorneys to represent these parties.
Obtain as much information as possible during the discovery process.
Maximize negative publicity.
While the clear trend indicates that individual HR managers are being sued along with their employers for participation in employment decisions, awareness, preparedness and education can minimize individual exposure, Kay concludes.
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