This Time, It's Personal

Executives are finding themselves personally liable for company decisions.

So, you think your waste company's actions on employment-related matters are all business? Think again. Employment lawsuits are getting personal.

More and more, supervisors, managers and company officials are finding themselves named as defendants in lawsuits brought by disgruntled current and former employees. Suing executives and other high-profile company leaders is gaining momentum thanks to a growing number of court rulings.

Earlier this year, a federal appeals court upheld a judgment that a hotel president was personally liable for the hotel's violations of the minimum wage, overtime and recordkeeping provisions of the federal Fair Labor Standards Act. The court found that the president had “ultimate control over the business's day-to-day operations … [i]n particular … directing employment practices, such as hiring and firing employees … and setting employees' wages and schedules.” [Chao v. Hotel Oasis, Inc., No. 06-1021, 1st Cir., June 28, 2007.]

Even the public sector is feeling the pinch. Last year, a federal appeals court broke new ground by ruling that a supervisor in a Texas administrative agency could be sued individually for wrongfully terminating an employee who had exercised her First Amendment rights and had been denied leave under the Family and Medical Leave Act. [Modica v. Taylor, No. 05-50075, 5th Cir., Sept. 13, 2006.]

More prominently, U.S. District Judge Deborah Batts ruled that former U.S. Environmental Protection Agency Administrator Christine Todd Whitman could be held personally responsible for alleged “deliberate and misleading statements” she made after the events of Sept. 11, 2001, particularly when she “reassured the public that the air was safe to breathe around lower Manhattan and Brooklyn, and that there would be no health risk … to those returning to those areas.”

Employment law specialists who represent management blame the rise in lawsuits against individuals primarily on unduly generous court interpretations of expanded and opportunistic state laws. They see the cases as just another form of pressure on a company to settle.

For their part, plaintiffs' lawyers see the trend as a chance simply to hold supervisors, managers and executives accountable for their wrongful conduct. They feel that potential exposure to personal liability will cause company officials to carefully weigh the alternatives before acting.

When a lawsuit is filed against a company and certain named corporate officials, the company attorney typically will take steps to remove the individual defendants from the case. Now and then, a named individual defendant will decide or be forced to retain his or her own legal counsel — sometimes at the company's expense.

Plaintiffs' attorneys, however, will acknowledge that even a climate tolerating suits against executives and managers has its drawbacks. Such suits are more time-consuming and more expensive. Instead of one or more lawyers on the other side for the corporate defendant, plaintiffs potentially face one or more lawyers for each defendant — for every motion, every deposition, every set of interrogatories, not to mention the overpopulated counsel tables in the courtroom during the trial itself.

The best way for a supervisor or manager to lower the risk of being named individually in a lawsuit is to act on the job within a well-defined scope of duties and responsibilities.
Barry Shanoff
Legal Editor
Rockville, Md.