March Legal Roundup: CEO, Chairman Personally Liable in Retaliation Case

Here’s the latest on some employment-related legal cases that have gone before the courts:


Personal Liability | National-Origin Discrimination | Disability Discrimination |

Religion & Associational Discrimination | Arbitration

Personal Liability

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CEO and Chairman Are Personally Liable for $11.3 Million In Sarbanes-Oxley Retaliation Case

A CFO of a video-game company reported concerns of financial fraud, first internally under the company’s Sarbanes-Oxleyrequired ethics code, then to the company’s outside law firm, and finally to the SEC when the internal complaints were ignored. She was then fired. The ensuing SOX retaliation case resulted in a verdict of $950,000 plus $384,000 in attorneys’ fees. The court ruled that emotional damages of $357,000 were also recoverable under SOX. Also, though the jury found the company liable for the damages, the court and the appeals court found that both the CEO and the Chairman of the Board could also be personally liable. This means the plaintiff has a choice of collecting from the company or from either or both individuals instead of the company. The problem for the CEO and Chairman is that collecting from the individual rather than the company may result in a tax advantage for the winning plaintiff. Also, both the company’s insurance policy and its corporate bylaws may prohibit reimbursement indemnification to executives and board members for acts of retaliation or other “misfeasance.” So the personal liability could hit very hard. Executives and board members should be careful and seek legal counsel before acting in frustration toward a whistleblower or other “thorns in the side.”

Jones v. SouthPeak Interactive Corporation (4th Cir., 2015)

‘Most of the Time They Deserve It’ and Other Hostile Comments Warrant Personal Suit of Mayor

A city clerk alleged she was subjected to ongoing hostile comments about herself and other women made by the mayor and city manager. These included frequent profane slur references to women; comments that “women were not smart enough to do city work”; and when female citizens complained of domestic abuse, that “most of the time they deserve it.” The clerk complained to human resources and legal counsel. The city manager then ordered her to not speak to anyone about her concerns or she would be fired. She did tell others; she was fired; and she then filed sexual harassment and retaliation charges against the city and the mayor personally. The mayor sought dismissal, but the court denied the motion holding “there was little doubt he was aware, and he should have expected to be named in a lawsuit.”

Huntsberger v. City of Yerington (D. Nev., 2015)

National-Origin Discrimination

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Arab Manager Fired and Told, ‘Go Work With Your Kind at 7-Eleven’

A 54-year-old Walgreens manager of Arab origin was assigned the most problematic store in one of the toughest areas of East Oakland. He turned it into one of the best in the district, with the lowest shoplifting losses and the greatest profit margin. A new district manager took over and began “nitpicking” in an apparent effort to find fault. This included giving discipline for the “serious and gross misconduct” of being five minutes late to a managers meeting (due to handling an emergency security issue at the store). The new DM made comments about the manager being too old and suggested he retire. The DM complained openly about the manager’s accent, and ridiculed the accent in public in front of other employees. The DM ultimately told the manager he should quit and “go work at 7-Eleven with your kind of people”a stereotype about Arabs and people from India. The manager was fired. He sued under Title VII and the Age Discrimination in Employment Act (ADEA). The court found ample evidence for a case of age and national-original discrimination.

Almaweri v. Walgreen Specialty Pharmacy (N.D. Cal, 2015).

Disability Discrimination

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Delay Dooms Defense; Employer Should Have Acted Sooner

A warehouse worker told other employees that he was having homicidal thoughts at work. They reported this to management. The company did nothing for almost a month. During that time the employee then came to managers and made several requests for leave for medical-insurance-paid care for his severe depression. The company then fired him for his earlier statements about homicidal thoughts, claiming it violated the company policy about threats and workplace violence. He filed an Americans With Disabilities Act case, and the court ruled in his favor. It found that the several-week delay was a problem. If the company had fired him quickly then there would have been no case at allhe did violate the anti-violence policy. However, management waited and waited until he raised the issue of disability and requested treatment under the “expense of the company’s health insurance.” Then he was fired. This created every appearance that the disability and health expenses were the real reason for the discharge.

Walton v. Spherion Staffing (E.D. Pa., 2015)

Probationary Employee Should Get Same Leave Accommodation as Everyone Else

A pipe-fitting manufacturer had a policy of granting up to 26 weeks paid medical leave to nonprobationary employees. A probationary Marine Corps veteran asked for six weeks unpaid leave for treatment of seizures caused by service-related injuries in Iraq. The company denied the accommodation based on the probationary status and fired the employee. The EEOC found that this violated the Americans With Disabilities Act’s reasonable-accommodation requirement. The company has settled, agreeing to pay $65,000 and other relief to the veteran. The company also agreed to modify its policy. Though it is not required to provide paid leave to probationary employees, it will provide unpaid accommodation leave to those with disabilities.

EEOC v. EZEFLOW USA, Inc. (D.C. W. Pa., 2015)

Religion & Associational Discrimination

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Jewish Wife Creates Valid “Associated With” Case

A Christian public-works equipment operator was harassed because he was married to a Jewish woman. He was often subjected to comments and name-calling such as “Jew lover,” “Hitler had the right idea with Jews to make lamp shades out of their skin” and much more. His complaints to management were mostly ignored. Supervisors also made anti-Semitic remarks, including that Jews will never be hired here. The employee filed a Title VII and a state discrimination claim. The court ruled that though he was not Jewish, his treatment due to association with a Jewish wife and alleged retaliation for complaining about this gave him a valid case for religious discrimination.

Chiara v. Town of New Castle (N.Y. App. Div., 2015).

Arbitration

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Toy Archery Set Not a Weapon of Mass Destruction

A bus driver bought a toy junior archery set for a friend’s son. It was rated as “safe for age 8.” The friend had bought a better model so the driver decided to return the set. He took the set, unopened, to work because his regular bus break was in the parking area of the store. Management heard that he had this weapon on the bus, and in spite of his showing it was a toy, never taken from its packaging, fired him for violating the workplace violence policy for bringing a weapon “designed in such a manner to inflict harm or injury or used in a manner to inflict harm or injury to another person.” The arbitrator ordered reinstatement and back pay. Of course the policy could be literally read to cover almost anything, from a toy archery set to a pencil to a paper clip, that could be used to inflict harm, but it was a great stretch to fit the toy into the logical scope of the policy. Also, the driver had an unblemished 23-year work history. The discharge was an unjustified overreaction.

In Re Amalgamated Transit Union and King County Metro Transit (2015)

Extensive Damage Was Not Enough to Fire Forklift Driver. Employer Was Contributorily Negligent

A forklift driver was fired after he drove over and ruptured pipes. This resulted in massive destruction of company products and property. The arbitrator revised this to a suspension, finding that there would have been less, or even no, product or property damage if the company itself had not created the problem. Products should never have been stored directly under the pipes, because of their inherent danger of leakage. The company had given NO training on the location of the shutoff valves, so it took 15 minutes of disorganized fumbling to find them. Had there been proper training, there would have been a quick shut off, and perhaps no damage at all.

In Re Brescone Bartan Co. and Teamsters Local 443 (2015)

Bob Gregg, a partner in Boardman & Clark LLP, shares his roundup of diversity-related legal issues. He can be reached at rgregg@boardmanclark.com.

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