Taking The Fall

A Case In Point

Consider a recent decision made by the California Supreme Court. The case concerned a hospice care nurse who was discharged from her position several weeks after she revealed she had been diagnosed with cancer. The nurse sued both the hospice care agency and her supervisor, claiming she was a victim of discrimination based on her medical condition, an act that is contrary to the California Fair Employment and Housing Act.

Before the courts could consider whether anyone at the hospice care agency had indeed discriminated against the nurse, they had to determine whether the supervisor could be held individually liable. This was a matter of law and precedent. The superior court initially ruled that the supervisor should be dismissed from the lawsuit, but the Court of Appeal reversed the decision, contending that the supervisor could be held liable after all. The supervisor then appealed to the California Supreme Court.

Like many courts interpreting state employment laws, the California Supreme Court justices examined the language of similar federal laws. In a lengthy opinion, they noted the "clear and growing consensus" of courts that supervisors can't be held personally liable for employment discrimination under Title VII, the ADA or the Age Discrimination in Employment Act.

One reason is that Congress specifically exempted businesses with fewer than 15 employees from liability under these laws because of the cost of litigating discrimination claims, so it would make no sense to hold an individual liable. Another reason is that imposing liability on individual supervisors is likely to make it harder for supervisors to make level-headed decisions. As the judges noted in the Court of Appeals case on this subject, "It is manifest that if every personnel manager risked losing his or her home, retirement savings, hope of children's college education, etc., whenever he or she made a personal management decision, management of industrial enterprises and other economic organizations would be seriously affected."

Because the language of the California law is so similar to the language of the federal law, the California Supreme Court agreed with the original ruling that the supervisor couldn't be held liable. Even if the subsequent trial shows that the supervisor in question was guilty of outrageous discrimination, the company, not the individual, has to pay. That doesn't mean supervisors are free to harass or discriminate against members of their staff. The company is very much on the hook because of the supervisor's conduct, and anyone whose poor judgment led to a big lawsuit can expect to be disciplined. "[For example,] a supervisor who sexually harasses someone may not get sued," Karpeles says, "but he can be fired."

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This article was originally published in the June 1999 print edition of Entrepreneur with the headline: Taking The Fall.

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