Business Owners and HR Managers Beware Individual Liability for Wrongful Termination

November 19, 2012, 5:09 PM

A November 1, 2012 Virginia Supreme Court decision may expand radically the potential personal liability of managers, human resources personnel, and other individuals involved in the termination of employment. The sharply-split, 4-3 decision in VanBuren v. Grubb holds for the first time under Virginia law that an individual co-worker and not only a corporate employer can be held liable for the common-law tort of wrongful termination of employment. [W]e conclude that Virginia recognizes a common law tort claim of wrongful discharge in violation of established public policy against an individual who was notthe plaintiffs actual employer but who was the actor in violation of public policy and who participated in the wrongful firing of the plaintiff, such as a supervisor or manager. (Emphasis added.)

The Courts opinion may be proof of the old axiom that hard facts make bad law. The allegations of misconduct are extreme (and, since the case was pending on a motion to dismiss, the allegations made by the plaintiff were all assumed to be true). The former employee, a nurse, alleged that her physician/supervisor (an owner of the medical practice) grabbed her, rubbed her back, waist, breast and other inappropriate areas, told the nurse that he loved her, encouraged her to leave her husband, attempted to kiss and grope her, asked her to accept his love for what it was and what it could be, and asked her whether she planned to stay with her husband. When the nurse told the doctor she did not intend to leave her husband, the doctor fired her, giving no other explanation for terminating [the nurses] employment. The nurse sued both the medical practice and the doctor for wrongful termination. A federal judge threw out the wrongful termination claim against the physician, reasoning that the termination of employment was an act of the medical practice, not the individual. The federal court of appeals asked the Virginia Supreme Court for its opinion, and the Court said the doctor could be held liable personally, as well as the practice, for wrongful termination.

This decision may initiate a sea change in Virginia employment law. Most employment discrimination law in Virginia derives from federal statutes: for example, Title VII of the Civil Rights Act of 1964 governs discrimination on the basis of sex, race, color, religion and national origin; the Age Discrimination in Employment Act prohibits age discrimination, and the Americans with Disabilities Act covers discrimination against individuals with disabilities. The majority of courts have held that these federal statutes do not impose liability on individuals; the corporate employer is the entity at risk to be held liable. (The Fair Labor Standards Act requirements of overtime and minimum wage payment are exceptions to this general rule.) Moreover, most of the federal anti-discrimination laws provide for limited damage awards to successful former employees. For violation of the ADA or Title VII, a small company is subject to no more than $50,000 in potential general and punitive damages combined (plus attorneys fees and lost wages). Exposure under the ADEA generally is limited to double the lost wages. However, there is no damage cap for general damages that may be awarded to a prevailing former employee under the common law wrongful termination action. In other words, a former employee who sued his boss and his former company, and convinced a jury that he was fired in violation of Title VII, might persuade a jury to award him two million dollars. But that Title VII award against the individual boss would be thrown out by the court, and the award against the company (assuming it was a small business) would be cut down to $50,000. In contrast, a former employee bringing a common law wrongful termination claim against his boss and his former company, who is awarded two million dollars by the jury, gets the two million dollar judgment. Whats more: the boss is, in most cases, likely to be jointly and severally liable with the company for the entire judgment. The only limit on damage awards for wrongful termination cases is the general Virginia prohibition on punitive damage awards in excess of $350,000.

There was a spate of wrongful termination cases filed in Virginia in the mid- to late-1990s, but few have been filed in recent years. The fact that a wrongful termination claim now exposes individual co-workers and supervisors to personal liability may well revitalize that cause of action. And the standard for liability seems very broad: an individual co-worker or manager may be held personally liable where she or he was the actor in violation of public policy and who participated in the wrongful firing of the plaintiff. What does this mean? Hundreds if not thousands of federal court decisions have struggled for decades with the standard of causation necessary to impose liability for a discriminatory termination. Must the unlawful act be the but for cause of the termination? What happens in the case of mixed motives, where the employee is fired for a legitimate reason but some bad actor participated in the termination? Just this last Term the U.S. Supreme Court first weighed in on the cats-paw theory of liability, where the person who makes the termination decision is innocent of wrongdoing but is influenced by a bad actor. Under Virginia law, would both be liable if the innocent manager knew of the bad acts, even if the manager condemned them? Maybe so! We anticipate many more wrongful termination claims to be filed as a result of this decision.

How can Human Resources and managerial personnel protect themselves from the far-reaching effect of this new decision? Should companies rush to get insurance coverage that would protect their line managers from individual discrimination judgments? Even if available, that likely would cost a fortune. The best advice we have right now is for HR and managers to do what they should always have been doing: train managers, supervisors, and employees; investigate all complaints and take prompt and effective remedial action; document any legitimate disciplinary issues as well as any instances of discrimination or harassment, and make sure termination decisions are made on a fully-informed record, with fairness and consideration.

There are a number of other noteworthy albeit more legalistic issues raised by this decision. For example, the Supreme Court says that the claims asserted by the nurse against the corporate employer were viable: [t]here is no question that [the nurse] has stated a cognizable wrongful discharge claim against her employer. The Court noted that the discharge was wrongful because, in part, it violated the public policy underlying Virginias criminal prohibition of adultery but not mentioning that this same Court held the adultery statute unconstitutional years ago! Even garden-variety wrongful termination claims, made against corporate employers, will be given new life by this decision. --John M. Bredehoft