Supervisor Liability in Employment Litigation

By Michelle MacDonald

With great power comes great responsibility. No, we're not talking about Spider Man (but see Kimble v. Marvel Entertainment, Inc. (2015) 135 U.S. 2401, 2415). Actually, we're talking about the liability of a supervisor who harasses an employee. When that happens, legal responsibility rests not only with the employer, but with the individual supervisor as well. This can be heavy liability, but when the circumstances warrant, the courts have not hesitated to impose it.

Background

Under agency law, it is generally understood that managers and supervisors must be clothed with actual or apparent authority to represent the company to the outside world. In order for a supervisor to be considered an agent of the company, the company itself must either hold the manager out as an agent or negligently fail to correct the reasonable apprehension made by others that the person speaks for the company. Associated Creditor's Agency v Davis (1975) 13 Cal 3d 374.

This distinction does not carry over to the employment law sphere in California. When it comes to interactions with the company's own employees-which form the basis of claims under the Fair Employment and Housing Act (Cal. Gov't Code §§ 12940, et seq.)-supervisors may be considered "employers," thereby subjecting the company, and possibly even themselves individually, to statutory liability regardless if the company itself ratified their acts in any way. The rationale as to when and why this occurs is discussed below.

FEHA

The Fair Employment and Housing Act (FEHA) prohibits (among other things) discrimination, harassment and retaliation by "employers" in the workplace (see Cal. Gov't Code § 12940). FEHA addresses these three categories of liability in separate sections and, therefore, they have been handled by the courts as distinct bases of liability although there is some overlap between the categories. See Cal. Gov't Code §§ 12940(a)[discrimination], 12940(h) [retaliation] and 12940(j)(1) [harassment]; see also Roby v McKesson Corp (2009) 47 Cal 4th 686, 705); Miller v Department of Corrections (2005) 36 Cal 4th 446.

Government Code section 12940 only uses the word "supervisor" and "supervisors" a single time while identifying their participation in the wrong as an exception from the general rule that employers must have actual knowledge of harassment before liability attaches (Cal. Gov't Code §12940 (j)(1)). This language is in keeping with both federal and state case law, which treats supervisors differently than other employees in matters of civil rights and discrimination in the workplace. The United States Supreme Court has defined a supervisor as an employee empowered by the employer "to take tangible employment actions ...[and] a significant change in employment status [against fellow employees] such as hiring, firing, failing to promote, reassignment with significantly different responsibilities or a decision causing a significant change in benefits." Vance v Ball State (2012) 133 S. Ct 2434, 2443.

A supervisor is an agent of the employer (Janken v GM Hughes Electronics (1996) 46 Cal App 4th 55), and the actions of a high-level manager may be more injurious to fellow employees because of the prestige and authority that a manager enjoys within an organization. See Roby v McKesson (2009) 47 Cal 4th 686.

In short, the bad acts of a supervisor are treated very differently under FEHA than boorish or discriminatory behavior of non-managerial employees pursuant to the real-world premise that supervisors are more capable of causing psychological and economic harm to the persons under their control in the same organization. Moreover, the organization itself is responsible for the elevation of the harassing individuals to their positions of power and, therefore, shares responsibility for their actions even if other persons in the organization have no actual knowledge of their actions.

Depending on the theory of recovery triggered by their actions, the supervisors may even be directly and individually responsible to the plaintiff under FEHA.

Discrimination, Harassment and Retaliation

Government Code Section 12940 (a) bars discrimination in the workplace on the basis of gender, race, religion, sexual orientation, gender expression, medical condition, military and veteran status, disability and age. Courts have interpreted this mandate to potentially involve the performance of commonly necessary personnel actions and other management duties such as hiring, firing, promotion and compensation, which may be found to be discriminatory if based on improper motives. See Janken v GM Hughes Electronics (1996) 46 Cal App 4th 55, 64. The California Supreme Court has specifically found that exercise of personnel management properly delegated by an employer to a supervisory employee might result in discrimination. As a matter of public policy, however, individual supervisors are not liable to plaintiffs for discrimination under FEHA in carrying out the policies of the employer. Reno v Baird (1998) 18 Cal 4th 640, 655.

Harassment, on the other hand, is a much different story. It is defined to potentially include "slurs or derogatory drawings, [physical interference] with freedom of movement,... [or] unwanted sexual advances." See Cal. Gov't Code §12940 (j)); Reno v Baird, supra, 18 Cal 4th at 646. None of these types of actions are necessary to the management of personnel for the benefit of an employer. As such, any employee, including a supervisor, is personally liable for acts of harassment under section 12940 (j)(3); however, employers are only strictly liable for supervisors who harass their fellow employees. Gov't Code §12940(j)(1).

The supervisor must be acting in the course and scope of his or her employment when the harassment occurred. Myers v Trendwest Resorts Inc (2007) 148 Cal App 4th 1403. However, if the harassing employee is a non-supervisor, the only way to hold the employer responsible is to show that the employer knew or should have known of the harassment and failed to take immediate and appropriate corrective action. See Cal. Gov't Code §12940 (j)(1). Moreover, a second tier supervisor who knows of the harassment but fails to do anything is not subject to personal liability although failing to respond appropriately to the complaints of harassment may well trigger liability against the company itself. Fiol v Doellstedt (1996) 50 Cal App 4th 1318.

Retaliation under FEHA is governed by section 12940 (h), which makes it an unlawful employment practice to discharge, expel or otherwise discriminate against any person because the person has opposed practices forbidden under the FEHA, or because that person has filed a complaint, testified or assisted in any proceeding instituted under the protections of FEHA. The California Supreme Court has ruled that supervisors are not individually liable for retaliation on the ground that retaliation of the type identified by the Government Code is generally a corporate decision, potentially made collectively by a number of persons which would potentially make individual responsibility unfair and unwarranted. See Jones v Lodge at Torrey Pines Partnership (2008) 42 Cal 4th 1158. In this sense, discrimination and retaliation-as defined and governed by the code-are treated similarly by the courts as an expression of corporate policy as opposed to individual bad acts.

The Roby Case

Many of the foregoing concepts came together in Roby v McKesson (2010) 47 Cal 4th 686. The plaintiff was a 25-year employee of the defendant serving as a customer service liaison at a local distribution center. She was responsible for processing forms and handling customer service issues related to product delivery and, up until the last three years of her tenure, had received uniformly favorable performance reviews. However, the plaintiff began to experience periodic panic attacks involving heart palpitations, shortness of breath, dizziness, trembling and excessive sweating. The attacks would come on suddenly and without notice.

At approximately the same time, the defendant employer instituted a companywide attendance policy which required a 24-hour advance notice for absences. The policy included a complex calculation of tardiness and absences, and imposed progressive levels of discipline based on those calculations and the number of warnings an employee received in any 90-day interval. The court noted that the policy operated to the disadvantage of employees such as the plaintiff, who because of medical conditions, might require several unexpected absences in close succession.

In the midst of the plaintiff's struggles with the new attendance policy, she was reassigned to another immediate supervisor who objected to her frequent absences. The plaintiff also was prescribed medication that caused her body to produce an unpleasant odor. Her panic attacks worsened, even to the point where the plaintiff dug her nails into the skin of her arms producing open sores.

The new supervisor made negative comments publicly to coworkers about the plaintiff's body odor, attendance and habits related to the panic attacks. She called the plaintiff "disgusting," refused to acknowledge the plaintiff's greetings, belittled her contribution to the company, excluded her from office parties, made faces at the plaintiff and frequently reprimanded her. The supervisor regularly ignored the plaintiff at staff meetings and overlooked her when distributing and handing out holiday gifts and travel trinkets to other employees. She also announced the plaintiff's absences in a demeaning fashion.

Eventually, the plaintiff accumulated too many unexpected absences due primarily to her panic attacks. She was terminated pursuant to the company's attendance policy, and proceed to file suit.

The plaintiff's claims against her employer included wrongful termination; disability discrimination in violation of section 12940 (a) against the employer only; and harassment in violation of section 12940 (j) against both the employer and the supervisor individually.

After a successful trial in which the plaintiff was awarded significant economic, non-economic and punitive damages against both the company and the supervisor individually, the court of appeal was tasked with the assignment of reviewing the verdicts and analyzing their validity in light of current law. Of importance to this discussion, the appellate court reviewed the record and found that it did not support the plaintiff's claims of harassment partly on the grounds that the plaintiff was relying on the same evidence of company policy for different and distinct claims.

The California Supreme Court disagreed with that approach, noting that while discrimination under section 12940 (a) requires "official action [taken by the employer] with respect to the employee such as hiring, firing, failure to promote, adverse job assignment, significant change in compensation or benefits, or official disciplinary actions," Roby, supra, 47 Cal 4th at 706, there is no requirement preventing the same acts from being the basis of a harassment action under section 12940 (j)-even though discrimination and harassment are separate wrongs under the FEHA. The Roby court found that the plaintiff's discrimination claim was founded both in the termination and the attendance policy which precipitated it, but also in the "official employment actions" such as the failure to include the plaintiff at office parties. Roby, supra, 47 Cal 4th at 708.

In addition, the acts of the supervisor, including the demeaning comments about body odor, failure to respond to greetings, disparate treatment with regards to handing out small trinkets and facial expressions, were found to support claims of harassment under section 12940 (j). Roby, supra, 47 Cal 4th at 709. Even though these actions may only have been expressions of personal animus between the supervisor and the plaintiff and arguably unrelated to the supervisor's managerial role, the very fact that they were being performed by a supervisor clothed the acts with an official pattern of bias. Id.

The Roby court noted explicitly, "[Acts] of discrimination can provide evidentiary support for a harassment claim by establishing discriminatory animus on the part of the manager responsible for the discrimination, thereby permitting the inference that rude comments or behavior by that same manager was similarly motivated by discriminatory animus." Id. In that way, the same acts when performed by a supervisor may communicate a "hostile message" which not only encompasses official employment actions but also contributes to harassing social interactions. Specifically, the California Supreme Court cited in this category the shunning of the plaintiff during staff meetings, the belittling of plaintiff's job and the reprimands in front of coworkers. Roby, supra, 47 Cal 4th at 709.

Finally, the Roby court found that the critical inquiry is whether the overlapping evidence can provide support individually for both harassment and discrimination. At that point, the trier of fact can determine the damages based upon whichever theory under FEHA is successful. Roby, supra, 47 Cal 4th at 710.

Punitive Damages

The Roby court analyzed the punitive damages awards against both the company and the individual supervisor. Under Civil Code section 3294 (a), punitive damages may be awarded when proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud or malice. The California Supreme Court further relied on the analysis expressed by the United States Supreme Court in State Farm v, Campbell when determining the degree of reprehensibility of the employer's conduct and, therefore, the justification as to the amount of the award. See State Farm Mut. Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408; Roby, supra, 47 Cal. 4th at 712-718. The court was found that the plaintiff incurred physical harm to her health, that she was objectively affected as to her emotional well-being and that as a low-level employee she was financially vulnerable to her employer's actions.

However, the Roby court drew a distinction between the wrongful, malicious and frequently repeated conduct of the supervisor towards the plaintiff and the single act of the employer in adopting a strict attendance policy. The court noted that with respect to punitive damages, the supervisor in question was not a managing agent, but 1 of 20,000 employees without the broad authority implied by the award which intended to punish the company as a whole. The court cited the lack of evidence that the supervisor's actions were a "product of corporate culture." Rather the wrong of the corporate employer was a failure to foresee the consequences of its attendance policy on its disabled employees, while the animus displayed by the supervisor was described as "isolated." Roby, supra, 47 Cal 4th at 716.

Ultimately, although the California Supreme Court agreed in Roby that punitive damages were warranted against the employer, it concluded that the acts were "at the low end of the range" of reprehensibility (47 Cal.4th at 717) and it adjusted the damages awarded accordingly.

Conclusion

California law takes into account the real-world experiences of employees and supervisors and the actions they take matter greatly when it comes to promoting fairness and equality in the workplace. Even low-level supervisors are considered clothed with authority, and they can set the tone for life within a company. A discriminatory act by a coworker may foster an unpleasant but transitory experience, whereas that same act by a supervisor can elevate the wrong to an expression of corporate bias. As such, employers are strictly liable for harassment by supervisors under FEHA, while harassment by co-workers requires a showing of actual knowledge of the employer before liability attaches.

However, when it comes to punitive damages, supervisors are not necessarily managing agents, and their acts must be more than isolated wrongs but an actual expression of a corporate philosophy in order to make the company liable for exemplary damages.

The easiest way to avoid all of these issues is to have a workplace where everyone is treated with dignity, respect and fairness.

Michelle MacDonald is an associate with Gray Duffy. She works in the firm's Encino office where she handles a wide variety of civil litigation matters, including employment disputes.

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