Become Familiar with Personal Liability and What it Means for You

Steven Cesare, Ph.D.

A business owner from California asked a question of me the other day regarding the degree of personal liability he and his managers may be confronted with when dealing with various human resources topics. Though initially incredulous, the owner acknowledged that “while it may seem crazy, after all, this is California.”

To be perfectly clear: The dominant issue in his inquiry was that if an employee is targeted for personal liability, that employee’s company is not necessarily obligated to defend the individual employee in court. That means, the employee must secure his/her own individual legal defense, and risk damages that impact his/her personal assets, wealth, and earnings.

At the state level, the owner’s fears were justified. Per state law, an owner, director, officer, or managing agent (e.g., HR) of the employer; employees may now bring actions against the managing person or owner directly as an individual, as well as against the employing entity itself. Such action may be triggered by allegations related to sexual harassment, various wage and hour violations, as well as abusive conduct.

Beyond California, several other states including New Jersey, New York, Massachusetts, Connecticut, Ohio, Oregon, Pennsylvania, and Washington allow plaintiffs to bring claims against individuals under the theory that they “aided and abetted” discrimination or harassment.

At the federal level, there are currently 10 employment laws that permit individual civil liability:

  1. Consolidated Omnibus Budget Reconciliation Act (COBRA),
  2. Employee Retirement Income Security Act (ERISA),
  3. Fair Labor Standards Act (FLSA),
  4. Family and Medical Leave Act (FMLA),
  5. Foreign Corrupt Practices Act (FCPA),
  6. Immigration Reform and Control Act (IRCA)
  7. Occupational Safety and Health Act (OSHA),
  8. Section 1981 of the Civil Rights Act of 1866,
  9. Section 1983 of the Civil Rights Act of 1871, and
  10. The Uniformed Services Employment and Reemployment Rights Act (USERRA).

Among those 10 laws, the following five allow individual criminal liability:

  1. ERISA,
  2. FLSA,
  3. FCPA,
  4. IRCA, and
  5. OSHA.

To protect oneself against personal liability, individuals should:

  • Verify they are protected against personal liability claims to the degree to which they are explicitly covered as part of their employer’s Employment Practices Liability Insurance (EPLI) policy,
  • Develop an Asset Protection Trust (i.e., Living Trust) that shields “trust” assets from personal liability,
  • Become professionally fluent with the relevant employment laws that impact personal liability, and
  • Verify legal compliance with all procedures associated with the aforementioned topics at all times.

If you have any questions or comments about this topic or anything else related to human resources, simply call me at (760) 685-3800.

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Steve Cesare Ph.D.

has more than 25 years of Human Resources experience. Prior to joining The Harvest Group, Steve worked with Bemus Landscape, Jack in the Box, the County of San Diego, Citicorp, and NASA. Steve earned his Ph.D. in Industrial/Organizational Psychology from Old Dominion University, and has authored 68 human resources journal articles. As a member of The Harvest Group, Steve’s areas of expertise include: staffing, legal compliance, wage and hour issues, training, and employee safety.  Read Steve's full bio.