Brother, Can You Spare a Dime?

Strategies Managers Can Implement To Avoid Personal Liability

When I was in college, I worked as a waitress at a local restaurant. I loved working as a waitress because the harder, faster, smarter I worked, the more tips I made. It was instant financial remuneration in direct relationship to the effort I put forth. As is often the case, my hard work and diligence was noted by the restaurant owner and I was offered a job as “manager.” At 19, I knew already, that despite the promotion and title, I would actually make less money as a manager than I did as a server. I also knew there would be more “responsibility” and “liability” with that title, though at 19, I doubt I understood the magnitude of those terms. “Did managers get paid ‘enough’ considering the risks?” I wondered.

Then again, that was only a “job” for me. It wasn’t my “career.” For most people in management, their management role is their career and they take it very seriously. Moving up and forward in a company is significant and compensation is not the only factor workers evaluate when considering a move into management. Certainly, there are many managers who feel that they do not get paid “enough,” especially considering the difficulties inherent in managing people. But, in my opinion, no manager gets paid “enough” for the risk of personal liability. Personal liability is the financial punishment that a court imposes on a manager, personally, for intentional acts which are deemed outside the scope of the employer-company’s policies and which cause harm to that manager’s subordinate.

Personal liability is intended to hit the manager in his or her own pocket. And it hits hard. In Roby v. McKesson, No. S149752 (Nov. 30, 2009), a California Supreme Court case, the jury during the trial court phase punished Roby’s manager personally with a liability of $500,000 in compensatory damages and $3,000.00 in punitive damages for her harassment of Roby. Roby’s manager ostracized her and called her disgusting for her body odor and arm scabs. The jury was ensuring that the person who caused the most harm to the victim paid for it personally. Presumably, $500,000 was much more than Roby’s manager made in a year.

That is why it is more important now than ever, especially in California, where personal liability exists for harassment, that managers know how to proactively prevent the circumstances that give rise to most lawsuits from their employees. Managers are not just responsible for helping the company avoid lawsuits; they now need to protect themselves too. The critical Proactive Lawsuit Prevention Strategies that managers must learn to avoid personal liability are:

1) A manager must learn how to document discipline and show progressive discipline when the employee he or she manages exhibits performance problems or behavioral misconduct. This critical strategy will insulate the manager from a claim that they acted to harass the employee showing that discipline or termination was well thought out, objectively justified and “not personal or harassing.” That is, when an employee is performing below standards, he or she is given a documented verbal counseling first, then a written counseling, then a last chance warning (or suspension with pay), etc. on a progressive scale, getting harsher as the disciplinary actions grow more frequent. The true purpose of progressive discipline is to give the employee many opportunities to improve performance. To protect against personal liability, managers should work in teams or with human resources/in-house counsel to ensure that their documented disciplinary actions are objective (not personal) and are based on measurable criteria. An objective review by the manager’s teammate or HR will ensure that the reasoning behind disciplinary action is not based on stereotype of discriminatory reasons. This team approach or peer review also protects the manager from personal liability because it guards against the perception that one manager singled out one employee with malice to harass.

2) A manager must learn how to use technology and not to get “used” by it. That is, in this day and age, many new cases are arising from the misuse of technology by managers. That is, new employment cases are citing inappropriate emails, the use of intranet and internet, social media, texting as the “smoking gun” evidence which proves a manager’s unprofessional, stereotypical or harassing intent. Managers must be trained, specifically, on the use of email. First, they must understand that email and other technological means of communication are discoverable and can be used as evidence in a lawsuit. They must learn, specifically, that all technological communication must have a professional, not conversational tone. There should be a clear understanding about when it is inappropriate to use email. For example, there are very few circumstances when it is justified to discipline or terminate an employee by email. This is a conversation, though difficult, that must be done in person. Responding to “flaming emails” or emails sent in anger from subordinates or coworkers should be well thought out and peer reviewed before sent. “Flaming emails” are bait for managers. Often a response when necessary to a “flaming email” should first be reviewed by counsel before sent. Managers should know not to have personal or sexual conversations on company owned devices. Finally, managers should understand that all technology leaves a blueprint. That, once it is written, even if it is deleted at a later time, it can be retrieved and used as plaintiff’s exhibit A, to show the manager had a malevolent intent against the plaintiff employee. Once this is proven, it is hard to avoid personal liability.

3) A manager should learn the critical importance of giving accurate performance appraisals. Performance appraisals are accurate reflections of an employee’s performance. The content of an annual performance appraisal should not be a surprise to the employee because the manager has addressed the performance issues on an ongoing basis with the employee as the performance events occur. Many employee lawsuits come out of an employee’s anger or a sense that he or she was terminated or disciplined unfairly. That is, they didn’t see it coming or they had no chance to improve. Sometimes, the employee has been told that he or she was performing satisfactorily or was even given raises. Accurate performance appraisals prevent employees from reaching the level of “disgruntled” or angry enough to hire a plaintiff’s attorney or assign blame to their manager.

4) A manager needs to know when to stop talking about a former employee. Many managers think that once an employee has left a company that the truth can come out. That is, once the employee is terminated, the manager begins to tell the story as to why that employee “had to go.” Managers must understand that it is usually after the employee has left a company that the employee contemplates a lawsuit. A manager’s unkind words, post-termination references that injure the employees ability to get work, and allegations of misconduct can give rise to claims against the manager for defamation, tortuous interference with future contract and intentional infliction of emotional distress claims, all of which can be made against the company but also against the manager, personally, with unlimited punitive damages.

5) A manager must find alternative and healthy ways to handle stress or anger. As in the case of Roby v. McKesson, courts award personal liability against managers who are purposefully hurtful and unkind to the employees they supervise. The best way to avoid personal liability as a manager is to treat employees consistently, avoiding any inference of favoritism and to find a constructive way to deal with stress in the workplace. Any display of anger or targeting frustration on employees is “asking for it.” Last, any name calling or personal attacks, especially in front of coworkers will be seen as intentional and harassing. As a manager, whether you act out anger in public against your own employees or you witness another manager doing the same, it is your responsibility to help solve this problematic behavior before it manifests into litigation.

Many managers, when faced with accusations of harassment or intentional tortuous acts are shocked and surprised that an employee targeted them in a lawsuit. Implementing the aforementioned proactive lawsuit prevention strategies will help protect managers from these allegations and the stress inherent in defending their workplace conduct.

Fault lined “No-Faults” May Create Liability for Attendance Conscious Employers

If you have the pleasure of working in manufacturing, construction and other industries where unplanned absences have an immediate and direct impact on production and the bottom line, you are probably familiar with a “no-fault” attendance point policy. This is a policy where there are no excused or unexcused absences. All absences (except those that are specifically excluded by company policy, state or federal laws) count against an employee. That is, “No one wants to hear about whose fault it is that you can’t be at work today.” Employee absences are tracked based on the number of occurrences of absence or tardy, often via a point system. For example, an absence that is called in ahead of time will cause the employee to get 1 point. A tardy will cause an employee a 1/2 point. An absence without a call in is a “no-show” and that may cause an employee to get 2 points. Progressive discipline is provided when employees reach or exceed specific points. For example, disciplinary actions could be taken if an employee earned the relevant points within a 12-month period. If an employee has 7 points within a 12 month period, he or she receives a verbal warning. After 9 points, he or she receives a written warning and so on until the employee reaches the maximum allowable points, causing termination.

Although rigid, these attendance policies are favored by production centered industries because they allow companies to maintain staffing needs and quickly warn employees who have excessive attendance or lateness that directly undermines productivity. Because the attendance is usually administered by a computerized system or software, it also helps insulate production supervisors from being accused of “targeting” these employees for discriminatory reasons. Once an employee reaches the maximum allowable points, he or she has been sufficiently disciplined for his or her absences and warned of imminent termination. Thereby, undermining any post termination claim of discrimination or wrongful termination.

Since they are not exactly pro-employee, these no fault attendance policies are often criticized for their rigidity, for discouraging employees from staying home when they are “fluey” but not wanting or needing to go to the doctor (as was the case when the H1N1 virus began its outbreak), for being unfair to women who are often the parent to stay home to care for the unpredictable needs of small children or the elderly (the criticism Wal-Mart came under recently for instituting a point attendance policy) and for not allowing leeway for unplanned emergencies, such as car accidents, among other reasons.

Notwithstanding these criticisms, when applied consistently, fairly and objectively, the “no-fault” attendance point system is generally upheld by courts when challenged. The problems or “fault-lines” emerge when individual managers, human resource personnel or sometimes even company counsel mistakenly do not properly identify the tardiness or absence as within statutorily protected leaves. That is, an employee receives points when their absence should not have counted as an “occurrence” and they are disciplined or terminated while protected under the Family and Medical Leave Act (FMLA), the California Family Rights Act (CFRA), the Americans with Disabilities Act (ADA) or California’s Fair Employment in Housing Act (FEHA).

For example, in Roby v. McKesson Corp., No. S149752 (Nov. 30, 2009) the California Supreme Court reviewed a case that involved the McKesson Corporation’s wrong decision to deny one of its employees FMLA and terminated her when she reached the maximum points under the Company’s no fault attendance policy. In this case, Charlene J. Roby was a 25 year employee of McKesson Corporation, a distributor of pharmaceuticals and health care products. At the end of her employment, Ms. Roby was a customer service liaison at McKesson Corp. In 1997, Ms. Roby began experiencing panic attacks. This restricted her ability to perform her job as she would have heart palpitations, shortness of breath, dizziness, trembling and excessive sweating. She began a medication for the panic attacks, but one side effect of the medication was unusual body odor. Her panic disorder also caused her to nervously dig her fingernails into her skin and this caused scabs and sores. Her supervisor, knew about her panic disorder, her body odor and skin condition. Her supervisor called Ms. Roby “disgusting” because of the scabs and odor, she refused to acknowledge her greetings, turned away when Ms. Roby asked her questions, ignored her in meetings and called Ms. Roby’s job a “no-brainer.” Ms. Roby’s condition caused excessive absences. Although she requested FMLA, she was denied it by the company. In 2000, she was terminated based on these excessive absences pursuant to the recently instituted no fault attendance policy.

After her termination, Ms. Roby was “devastated,” depleted her savings and became suicidal. Ms. Roby sued McKesson Corp. and her supervisor personally for harassment and discrimination based on her disability. The jury sympathized with Ms. Roby and gave her a very generous verdict: $1.3 million in lost earnings, between $500,000 and $2 million for emotional distress, including $500,000 against the supervisor as an individual and $15 million in punitive damages. The Supreme Court reduced this amount to $1,900,000.

Although McKesson Corp.’s no fault attendance policy was designed to protect the company and its supervisors from claims such as Ms. Roby’s, when implemented with complete disregard for Ms. Roby’s ongoing medical issue, compounded with her supervisor’s personal attacks, it in fact created the opposite effect: both company and personal liability.

Proactive Lawsuit Prevention Strategies for No-Fault Attendance Policies
1) Train Your Managers.
All managers and human resources must be trained that employees with known or suspected disabilities and medical conditions may be protected by state and federal laws. They must be trained on the nuances between FMLA and CFRA, between ADA and FEHA. This may mean that the employee needs a special accommodation, time off, allowance for tardiness or is an exception from the attendance policy point system all together. This training should cover what a supervisor can ask for in terms of medical documentation and personal information. Moreover, all supervisors and managers must never make personal attacks, comments or criticism with respect to an employee’s disability or condition, verbally or in writing.

2) Institute Pro-Employee Benefits
A company with a no fault attendance policy can compensate for the rigidity of this policy by rewarding employees for perfect attendance, recognizing exemplary employees in company newsletters or intranet, by providing paid time off, paid sick leave, paid vacation benefits or rolling holidays. All of these would kick in before the points began to be counted against the employee.

3) Apply the Policy Fairly
Managers and human resource personnel must understand that the policy cannot be used to terminate disfavored or “problem” employees and ignored when the employee is someone they would like to keep. In Carmona v. Southwest Airlines, 5th Cir., No. 08-51175 (April 22, 2010), the 5th Circuit recognized that Southwest Airlines allowed some of its flight attendants to maintain employment even after reaching the maximum points under Southwest’s no fault attendance policy. Therefore, the Company’s decision to terminate one flight attendant, Carmona, for reaching maximum points was a “pretext” for his manager’s true discriminatory intent against Carmona’s for being disabled, which violated the ADA.

Proactive Lawsuit Prevention LEADERSHIP Strategies

The focus of my business is about teaching other businesses how to prevent lawsuits. Much of my time is spent teaching awareness raising seminars, law based topics and CYA skills (that stands for Cover Your …you can figure it out on your own.) That is, I often train employees, management, human resources and even in-house counsel how to implement policies and procedures so that when an employee has an internal complaint, the company is primed to diffuse the lawsuit-bomb in order to avert a disgruntled employee from suing. These are what I have termed Proactive Lawsuit Prevention Strategies.

For example, sexual harassment lawsuits are prevented when an employer has a strong policy which prohibits harassment, when employees are trained to take complaints to receptive managers, when human resources is prepared to investigate it, and when the company responsibly acts to remedy the harm done. These are examples of Proactive Lawsuit Prevention Strategies and spreading this dogma is the mission of my business.

Yet, in reading a recent Harvard Business Review article, “The Big Idea: Leadership in the Age of Transparency” (April 2010) by Christopher Meyer and Julia Kirby, it occurred to me that I needed to be invoking an even more proactive “leadership” characteristic into my own curriculum. In their article, Meyer and Kirby make the case that “the true measure of corporate responsibility – and the key to a business’s playing a proper role in society – is the willing, constant internalization of externalities.” In my area of expertise, the “externality” is the extremely, remote, potential litigation. More than CYA tactics which prevent actual lawsuits, companies need to be looking at internalizing all the externalities inherent in employee relations, even the conflicts which may not necessarily give rise to litigation under the current laws or the externalities that a business is not forced to “pay for” by order of a court.

For example, although federal and state laws (Title VII and the Fair Employment & Housing Act (FEHA) in California) protect certain categories from unlawful harassment, i.e. sex, race, religion, etc., companies seeking to stand out as having leadership strategies would also respond to harassment based on “unprotected" categories. That is, when human resources receives a complaint from an employee that she is being “harassed” based on her weight or she complains about a singular “blond joke,” whether she can actually meet the legal criteria for a valid claim with the EEOC or Department of Fair Employment & Housing (in California) should be irrelevant. A leading company takes ownership of all complaints made by employees and seeks to provide a workplace free of any conduct that interferes with an employee’s ability to work optimally.

Why? According to Meyer and Kirby, the rationale goes beyond, “it’s the right thing to do.” Their article puts forth that our corporate society has become literally transparent. So that hiding a wrong is no longer an option. For example, the campaign by Phillip Morris in the 1980s to conceal evidence which linked smoking to lung cancer could not occur in today’s society of social media, whistle blower protections and instant messaging. According to the authors, “the worst of all worlds is to be made responsible, and still not be considered responsible.”

I agree with this premise that transparency demands higher accountability and recent case law supports it as well. In the case of Pietrylo v. Hillside Restaurant Group, disgruntled employees began a Myspace page which maligned their managers’ inappropriate behaviors. Although the company sought to force the employees to remove the page, the damage to the company’s reputation had been done. In a recent investigation I was asked to conduct, after interviewing the company’s employees, I learned that some employees, in reaction to the corporate officers’ secretive conduct, reactively began an anonymous blog which purposely leaked confidential company information to all employees. The availability of social media, the access to technology and the flattening of companies corporate structures encourages transparency. The company’s leadership role is to accept this and to act accountable to transparency’s offspring - heightened corporate responsibility to all externalities.

In the legal realm, that means protecting employees from conduct which has yet to be protected fully under the law, but which is still detrimental. For example, many companies employ an equal-opportunity bully. That is a person, who does not discriminate, but bullies all underlings similarly. Often under these circumstances, an employee may not be able to maintain a claim of unlawful harassment absent a showing of discriminatory behavior. (Although recent EEOC actions suggest that the agency and courts are beginning to recognize this behavior as actionable. See E.E.O.C. v. National Education Association (male supervisor’s temper tantrum had a disparate impact on female employees even when he treated male employees similarly.) A company that protects its employees from “bullying” by disciplining the bully is demonstrating its leadership by refusing to allow its employees to be mistreated, whether it can be “forced” to or not by a court of law or agency.

Similarly, employees who “haze” new employees must also be disciplined whether the law prohibits the specific hazing behavior or not. This is another example where a company can maintain a leadership policy which prohibits any hazing activities whether or not an employee can maintain a cause of action or not. (Some courts recognize hazing employees as actionable when the elements of sexual harassment or assault exist. The U.S. Supreme Court set this precedent in Oncale v. Sundowner Offshore Services.

What are other Proactive Lawsuit Prevention Leadership Strategies or other examples that you can think of? What legal externalities should your company internalize and act to remedy?