When must managers pay damages or attorneys fees?

Managers NOT personally liable for mis-handling harassment complaints

Managers and sexual harassment trainers take note — the dust has settled, and the law in California is now clear about when managers can be sued personally for discrimination, harassment, and failure to act on a complaint of harassment.

Earlier this year, the California Supreme Court held that managers can not be sued personally for firing employees for discriminatory reasons. The Court’s reasoning also applies to any other routine employment decision: hiring, promoting, demoting, paying, etc. When managers make these decisions, they can’t be sued personally.

Now, a California Court of Appeals has extended that ruling. The court interpreted the Supreme Court’s opinion to mean that a manager will be held personally liable if he or she harasses an employee. But, the Court of Appeals held, a manager “who neither personally participated in sexual harassment, nor substantially assisted or encouraged it, cannot be held personally liable for it” under California law.

What does “substantially assisted or encouraged” mean? Does that cover the situation where a manager is told of harassment and doesn’t do anything to stop it? No. The court said the managers may not have taken immediate appropriate corrective action, but deciding whether to take corrective action is a routine management decision that does not lead to personal liability.

If the managers had been “aiding and abetting” the harassers, the managers would be personally liable as harassers.

The Court of Appeals also held that non-management, individual contributors who harass co-workers are NOT personally liable for harassment. However, many of the allegations in this case (touching her breasts and buttocks, unwelcome hugging) are illegal under general civil and criminal laws. Thus the victim still has the right to sue her co-worker for these other violations.

Managers can breathe a sigh of relief that they are no longer on the hook for routine management decisions. And trainers should amend their programs to let managers know that although they can be sued for harassing someone, they can’t be sued for mis-managing a harassment claim.

HR people note: The Court said the jury could decide that giving two oral warnings was not appropriate corrective action, and sent the case back for trial.

Carrisales v. Department of Corrections, ___Cal.App.4th___, 98 C.D.O.S. 6379 (CA 4, 1998)


Court orders employer to pay attorneys fees for sued manager

A manager fires a poorly performing employee. The employee sues the employer and the manager personally. The same lawyer at first represents the manager and the employer, but later the manager is told to get his own lawyer. Ultimately, the case is settled and “dismissed with prejudice.”

Now the manager is suing the employer to pay his attorneys fees. Like most states, California law requires an employer to indemnify an employee 1) “for all that the employee necessarily expends or loses in direct consequence of the discharge of his duties,” or 2) for expenses incurred because of the employee’s “obedience to the directions of his employer, even though unlawful,” unless the employee believed, at the time he followed the directions, that the directions were unlawful. Cal. Labor Code ¤ 2802. Allowable expenses under the statute have been held to include attorney’s fees.

However, the courts have held that employers only have to indemnify management employees if the plaintiff’s claims against them were proven to be “unfounded,” or without merit. Here, the employer was arguing that because the case was settled, it must have had some merit, and therefore the manager was not entitled to indemnification.

The Ninth Circuit, in a case where the employer was the Teamster’s Union, applied California law which it said is based on a long history of common law. The Court held that where a plaintiff agrees to dismiss an action with prejudice, the dismissal “operates as a retraxit under federal law and under California law and … therefore [the case] was unfounded.”

The Court went on to say:

Nothing in California law suggests that once the relevant claims are deemed “unfounded” the employer gets a second bite at the apple to prove that the claims do in fact have merit — at least for purposes of escaping the obligation to indemnify the employee for costs incurred in defending the third party suit.

Leal v. Teamsters Union Local 856, ___ F3d ___,98 C.D.O.S. 5777 (9th Cir., 1998)


Managers can NOT be sued personally for discrimination, Cal. Supreme Court holds

In a broad-reaching opinion, the California Supreme Court has ruled that managers cannot be held personally liable for discrimination or for wrongful termination in violation of public policy. However, the Court left open the question, and in fact strongly implied, that managers can be held personally liable if they personally engage in harassment.

The Court also did not address, but strongly implied that managers cannot be held personally liable for failing to manage a harassment claim appropriately. The Court emphasized that managers are not liable for any decisions made in the course and scope of employment.

This decision is in line with the vast majority of federal court decisions that have ruled on the subject, and is good news for managers in California.

Reno v. Baird, ___ Cal.4th ___, 98 CDOS 5586 (1998)

Losing corrections officer ordered to pay employer’s attorneys fees

A male employee who claimed sexual harassment and sex discrimination against his female supervisor was found to have filed a frivolous lawsuit. He was ordered to pay the employer’s attorneys fees. The court’s decision, excerpted here, is fun reading for managers and a good warning to employee’s attorneys.

The court said, “Anyone who has ever worked in an office or, for that matter, been a school child on the playground knows that petty differences arise which cannot always be resolved without hurt feelings. Does that mean that these festering disputes in the workplace should find their way into the courts for resolution? Absolutely not. This case is a prime example of where such work related differences have no place in the courtroom.” …

“The mere fact Lucas is a female and plaintiff a male does not give rise to the inference that her alleged aggressive conduct was motivated by a desire to discriminate on the basis of gender. Without some evidence to make such an inference a reasonable one, it is mere speculation to suspect gender discrimination led to Lucas’ s allegedly hostile conduct. Speculation is insufficient.”

GUTHREY v. STATE OF CALIFORNIA, ___Cal.App.4th___,98 C.D.O.S. 3606 (5th CA, May 11, 1998)

Employee ordered to pay employer’s court costs

An employee who sued his employer and lost was ordered by the jury to pay over $5,000 in court costs to the employer. Although this amount does not begin to repay the employer for all its costs, it does serve as a message to employees (and their lawyers!) that frivolous lawsuits will not be tolerated.

The case was decided in Los Angeles, and follows similar cases around the country (e.g. see the newsletter archive for Spring 1996). It involved a man who claimed race discrimination as a result of disciplinary action, and harassment by co-workers who used racial epithets.

The court found that no name-calling had occurred, and that the discipline was justified. The employee was ordered to pay $5,406 to the employer.

Nwazota v. State of California,
No. BC 132211, Los Angeles Superior Court

Good news for managers

A wonderful case for managers was announced over the holidays by the Ninth Circuit Court of Appeals. The case involved a woman who was hired as an information services manager. After her first 90 days, her probationary period was extended due to poor performance. She continually received criticism, and about one year after she was hired, she was fired by the same person who originally had hired her.

The court held that where the same individual both hires and fires the employee, there is a legal presumption that the firing is not discriminatory. The court reasoned that a manager who is biased against someone of a particular group would not hire someone from that group. Obviously, if the hiring manager had been “forced” to hire someone (by management or by HR for affirmative action purposes) then the presumption is rebuttable.

This is good news for managers all over the country. Although the case applies only to the western states, other circuits have held the same.

Bradley v. Harcourt, Brace,
___ F.4th ___, 96 C.D.O.S. 9511 (9th CA, December 30, 1996)

Employee ordered to pay company’s lawyers

An employee who brought a frivolous claim of discrimination was ordered to pay the attorney’s fees the company spent in defending the action. His attorney was also sanctioned and ordered to pay a fine.

The case was decided in Alabama, but courts around the country have been coming to the same conclusion. Frivolous lawsuits will not be tolerated.

What’s a frivolous lawsuit? In this case, the attorney did no investigation besides talking with the employee. Once discovery began, the attorney learned that the position the employee claimed he was denied had never been filled. The employer moved for summary judgment, and the attorney did not file an answer, admitting there was no evidence. Based on these facts, the court held it was appropriate to fine both the attorney and the employee.


1996 WL 428072 (11th Cir.(Ala.)), Aug. 15, 1996.




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