When a Supervisor Is Sued Individually

The complaint arrives and your name is on it, next to the company's, as a defendant. Perhaps you made the decision. Perhaps you only carried it out. Either way you are now a party to a lawsuit, and the first thing to understand is that the lawyer the company retained does not necessarily represent you, and if that lawyer does represent you, it is only for as long as your interests and the company's stay aligned.

The Law Offices of Albert Goodwin defends managers and supervisors in New York City who have been named individually in employment claims.

Why You Can Be Named at All

Federal employment discrimination statutes generally do not permit individual liability. Title VII, the Age Discrimination in Employment Act, and the Americans with Disabilities Act reach employers, not co-workers or supervisors personally. If federal law were the whole picture, most managers would not be defendants.

New York is different, in two directions at once.

The New York State Human Rights Law

The State statute reaches individuals on two theories. An individual with sufficient ownership interest or power to do more than carry out personnel decisions made by others may be liable as an employer. Separately, and much more commonly, the statute makes it unlawful for any person to aid, abet, incite, compel, or coerce the doing of any prohibited act. That aiding and abetting provision is how ordinary supervisors without ownership become defendants: the theory is that the supervisor participated in the employer's discriminatory conduct.

Recent amendments broadened the statute considerably. It now applies to employers of any size, the requirement that harassment be severe or pervasive has been removed in favor of a standard asking whether the employee was subjected to inferior terms, conditions, or privileges of employment, and the time to file a complaint with the State Division of Human Rights was extended to three years for claims arising after the amendment took effect.

The New York City Human Rights Law

The City law is broader still. It applies to employers with four or more employees, with no minimum for certain harassment claims, and it must be construed liberally and independently of federal and state analogues. Individual employees can be liable directly, and the City law contains its own aiding and abetting provision. Its standard for what constitutes unlawful discrimination is lower than the federal standard: the question is whether the employee was treated less well because of a protected characteristic, with petty slights and trivial inconveniences excluded.

The City law also imposes liability on the employer for the conduct of an employee who exercised managerial or supervisory responsibility, which is why the company's exposure and yours are frequently examined together, and why a company may be more willing to defend you than you expect, at least initially.

Wage and Hour Claims

Under the Fair Labor Standards Act and the New York Labor Law, employer is defined functionally. Courts apply an economic reality analysis asking whether the individual had power to hire and fire, supervised and controlled work schedules or conditions of employment, determined the rate and method of payment, and maintained employment records. A manager with genuine operational control over pay practices can be individually liable, jointly with the company, for unpaid wages, liquidated damages, and the plaintiff's attorney fees. A manager who merely implemented a payroll system designed elsewhere usually is not, and establishing that distinction early is the core of the defense.

Retaliation and Defamation Exposure

Supervisors are also named in retaliation claims, which are often the strongest part of a plaintiff's case because the timeline is objective. Where a manager who received a complaint takes adverse action shortly afterward, the inference is available regardless of whether the underlying complaint had merit.

Defamation claims against supervisors also appear, based on statements made about the former employee. In New York, statements made in the course of an internal investigation or to those with a corresponding interest are generally protected by a qualified privilege, which is defeated by proof of malice. That privilege is a strong defense, and it is stronger when the statements were limited in audience and factual in nature, which is a reason to be careful about how a departure is discussed internally.

The Representation Problem

This is the issue we most want managers to understand. When a lawsuit names both the company and you, the company's counsel will often propose to represent both. Joint representation is efficient and frequently appropriate, and it is paid for by the company, which matters.

It stops being appropriate when your interests diverge, and they diverge more often than people expect. The company may want to establish that you acted outside the scope of your authority, on your own initiative, contrary to policy, because that is the company's best defense. Your best defense may be precisely the opposite: that you did what you were instructed to do, consistent with policy, with approval from above. Both positions cannot be advanced by one lawyer.

Watch for these signals: you are asked to sign a statement drafted by someone else; the company's answer to the complaint distances the company from your conduct; you are asked about the matter in an internal investigation before or during the litigation; the company is negotiating a settlement that resolves the claims against it while leaving you in the case; or the company declines to confirm in writing that it will indemnify you.

Indemnification and Insurance

Whether the company must pay your defense and any judgment depends on the same sources that govern officers: the bylaws or operating agreement, any indemnification agreement, employment practices liability insurance, and, if you hold an officer title, the directors and officers policy. Many employment practices policies cover employees acting within the scope of their duties, which is why the scope question is central to both the merits and the coverage.

Ask for the indemnification commitment in writing, early, and read the conditions attached to it. Indemnification is commonly unavailable for intentional misconduct or conduct outside the scope of employment, which means an insurer or employer may reserve rights on precisely the allegations that matter most. See indemnification and advancement.

What to Do When You Are Named

1. Do not contact the plaintiff, at all, for any reason. Anything that could be characterized as pressure becomes a retaliation claim against you personally.
2. Preserve everything. Emails, messages, notes, and calendars. Deleting anything, including material you consider personal, is far worse than whatever it contained.
3. Ask, in writing, whether the company is indemnifying you and whether its counsel represents you individually. Get the answer in writing.
4. Do not sign a statement or declaration prepared by company counsel without independent review.
5. Note the deadline. A response to a complaint is due on a fixed date, and a default judgment against you personally is a serious matter.
6. Consider your own counsel where any divergence signal is present. A consultation is inexpensive relative to the exposure.

If You Are Also Being Managed Out

A supervisor named in a lawsuit is frequently a supervisor whose own employment is about to end, either because the company blames them or because the association has become inconvenient. Those two tracks, the litigation and your employment, need to be handled together, since a severance discussion during a pending case implicates indemnification, cooperation obligations, and the release language. See responding to a PIP, severance review, and being investigated at work.

You can contact us by phone at 212-233-1233 or by email at [email protected].