Guard Against Legal Pitfalls: HR’s Personal Liability Explained

Companies often stand by HR professionals and managers who are sued as individual defendants in employment litigation, so long as HR and managers have handled things properly. But if they haven’t, they may have to retain and pay for their own attorneys and be responsible for paying a share of any settlement, judgment, or verdict won by plaintiffs.

If managers have handled things by the book and still are unfortunate enough to be named as individual defendants — which happens — their company will normally stand by them and agree to a “united defense,” said Robin Shea, an attorney with Constangy, Brooks, Smith & Prophete in Winston-Salem, N.C.

“As a practical matter, this means that the company will retain and pay the lawyers, and the company will pay 100% of any settlement, judgment, or verdict,” Shea said.

On the other hand, if managers fail to comply with the law and corporate procedures, the company’s attorneys will probably not be able to represent them because the employee’s position could create a conflict of interest with that of the company, she added. “The practical effect of this is that the individual defendant would be paying for their own attorney and possibly paying at least a portion of the plaintiff’s recovery — in addition to the stress and job insecurity that could result from the noncompliance.” 

Individual Liability Claims

Plaintiffs sometimes name any member of management, including HR, as an agent of the employer liable under Title VII of the Civil Rights Act of 1964 or the Americans with Disabilities Act (ADA). But courts generally do not find individual liability under these laws, Shea said.

Instead, the courts find employers legally responsible if any of their agents knew or should have known of illegal acts or were acting unlawfully.

Under the ADA, an individual member of management is sometimes named as a defendant, especially when they played an active role in denying a reasonable accommodation or terminating an employee for the inability to perform essential job functions, Shea said. 

In addition, if the plaintiff alleges retaliation, it is not uncommon to see the alleged retaliator named as a co-defendant with the employer. 

“Even if the individual is not liable for the alleged ADA violations, there could be state law tort claims asserted against the individual, such as negligent infliction of emotional distress or claims under disability rights laws,” Shea said. 

Members of management, and occasionally HR, are named as individual defendants in harassment lawsuits, especially when an individual defendant is the alleged harasser. “Again, the claims against the alleged harasser would normally be state law tort claims, such as negligent or intentional infliction of emotional distress or — depending on the circumstances — assault and battery,” Shea said.

Under the Fair Labor Standards Act (FLSA), an individual can be an employer if they are “acting directly or indirectly in the interest of an employer in relation to an employee,” Shea noted. This has usually been applied to individuals who are owners or primary operators of the employer company, but it could also apply to an HR professional who was responsible for setting wages for employees or determining which employees are entitled to overtime pay. 

If the plaintiff sues a company and an individual defendant and wins, the company and the individual would be jointly and severally liable. This means that the successful plaintiff could recover their monetary award and attorney fees from either the company or the individual defendant, or portions from each defendant. 

“I have not had an FLSA lawsuit where an HR professional was named as an individual defendant,” Shea said. “In my experience, the individual defendant — if any — is the owner of the company.”

The Family and Medical Leave Act (FMLA) standard is the same as the FLSA standard — an individual is an employer if they act in the interest of an employer with respect to the employee. “An individual can be sued based on the employer’s FMLA violation, and HR is probably most at risk here,” Shea said.

Preventive Steps 

Employers should provide regular guidance and training on applicable employment laws and company protocols, Shea said. Any management training should include a component covering the legal, financial, and reputational risks to members of management if they commit a violation of an employment law, she added.

“Any complaints of harassment, discrimination, or retaliation should immediately be referred to HR,” Shea said. “This won’t prevent a manager or supervisor from being sued for allegedly violating the law, but it will make it much easier for them to prevail.”

A plaintiff typically names individuals that wronged them or that the plaintiff does not like, said Stephen Scott, an attorney with Fisher Phillips in Portland, Ore. He said that HR professionals can minimize legal exposure by living according to the golden rule: Treat others as they would like to be treated.

“I have seen multiple lawsuits where the alleged bad actor is not named as an individual defendant — but someone else is — because it turns out the plaintiff liked and felt respected by the alleged bad actor,” Scott said. 

HR should text, email, and otherwise interact like it will all be read back to them in a deposition, he said.