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Scare tactics for compliance: teaching managers that they could be personally liable for employment law violations could encourage compliance

February 3rd, 2012  |  Lorene Park

Ideally all of an employer’s managers and supervisors would do everything in their power to encourage company-wide compliance with applicable employment laws. However, given the recent rise in employment litigation, it is apparent that compliance continues to be problematic, and employers would be well advised to provide additional incentives for compliance. Personal financial concern can be a powerful motivator. With that in mind, one incentive is simply educating supervisors, managers, and other decision-makers that they can be held personally liable for certain violations of employment laws within the company. Thus, in the minds of these managers, compliance is not just important for the company, but also for their own well-being. Some cases that could be used to illustrate this principle include the following:

FLSA violations:  Liability for wage and hour violations under the FLSA can extend “any person acting directly or indirectly in the interest of the employer in relation to an employee.” This has been interpreted to include individuals who have significant control over the employment relationship and particularly those who made decisions leading to the FLSA violation. For example, a federal district court in Florida allowed a hotel employees’ wage claims to proceed against a hotel manager while the action against the hotel itself was stayed in bankruptcy (Bullock v LVN Prop Mgmt, LLC (D. Fla. 2012)). Despite the manager’s protestations that employees were hired and managed by a third party who contracted with the hotel, the court found questions of fact on the extent to which the manager, who was also part owner of the hotel, controlled the employment relationship. Employees testified that she directed some of their daily activities; signed payroll checks; was at the hotel daily to observe work that was being done; and commented and criticized such work.

FMLA violations:  Under the FMLA and its implementing regulations, any person “acting in the interest of the employer” (e.g., a supervisor) may be individually liable for violations of the FMLA. Some courts have ruled that liability turns on whether the individual exercised sufficient control over the conditions of the employment. In 2012 for example, the Third Circuit ruled that an employee, who had Type II diabetes, could sue her supervisor individually under the FMLA.  The appellate court reasoned that he acted in the employer’s interest while carrying out his role as supervisor; he exercised control over her employment situation; and exercised substantial authority over the termination decision, even if he lacked final authority to fire her (Haybarger v Lawrence County (3rd Cir. 2012)).

OSHA safety violations:  In a St. Louis case against Andre Stone & Mason Work, Inc., the Eighth Circuit ordered the arrest of the original owner of a company and the owner of the successor company for repeatedly failing to comply with court sanctions regarding OSHA violations. The owners failed to pay fines and correct worker safety violations related to fall hazards, scaffolding deficiencies, power tool guarding, and other hazards associated with multiple construction projects (Case Nos. 06-2609 and 07-2304).

Payroll taxes:  I.R.C. Sec. 6672(a) makes “any person” having the responsibility to collect and pay over the employment taxes liable for a trust fund recovery penalty. In one case, an officer of a corporation, who was also a shareholder, was held liable in connection with the corporation’s unpaid withholding taxes. He was a responsible person with respect to the payroll taxes because he owned company stock, served as its director, signed loan documents on its behalf, approved business sites, reviewed sales data, directed payments to certain creditors to reduce debt the he had personally guaranteed, and had the authority to hire and fire senior employees and accountants involved in payroll operations (Erwin v United States, (4th Cir. 2010)).

State discrimination laws:  Although individuals are generally not held personally liable under federal anti-discrimination laws such as the ADA, Title VII, and ADEA, they may be personally liable under a state’s laws. For example, the Supreme Court of Arkansas ruled that a nurse who was fired after complaining of sexual harassment by a doctor could proceed, under Arkansas Civil Rights Act, on an individual sexual harassment and retaliation claim against the doctor who supervised (Calaway v Practice Mgmt Servs, Inc  (Ark. 2010)). Similarly, an employee who worked in a county jail was allowed to proceed on her individual claims, under California’s Fair Employment and Housing Act, against two officers who allegedly aided and abetted her employer’s racial harassment against her by making offensive and threatening comments to her (Davis v Prison Health Servs (N.D. Cal. 2011)).

Training for compliance:  As these cases indicate, managers and supervisors have more than their jobs to lose by failing to comply with employment laws. Educating such high-level employees on the potential for them to be held personally liable could serve as a powerful incentive not only for their own compliance, but also the compliance of workers over whom they have supervision. By way of illustration, employers should include real cases, like the above, when training supervisors and managers on the importance of complying with employment laws.