Friday, January 11, 2013

Supervisors Can Be Held Individually Liable for Wrongful Termination in Virginia


 



In VanBuren v. Grubb, 733 S.E.2d 919 (Va. 2012), the Virginia Supreme Court held, in a 4-3 decision, that there can be individual liability in public policy wrongful termination cases.  In VanBuren, plaintiff filed suit for, among other things, wrongful discharge in the federal district court for the Western District of Virginia.  Plaintiff named both her former employer as well as her former supervisor, Dr. Grubb, in his individual capacity, as defendants.  Plaintiff alleged that she was sexually harassed by Dr. Grubb, and ultimately terminated when she refused to leave her husband for Dr. Grubb.  The district court dismissed the wrongful discharge claim as to Dr. Grubb.  On appeal, the Fourth Circuit certified the question as to whether a wrongful discharge claim was cognizable against an individual supervisor to the Virginia Supreme Court, and the Supreme Court accepted. 
 
The majority began by repeatedly recognizing that the wrongful discharge for violation of public policy is a “narrow” exception to the long-recognized doctrine of employment at-will.  However, finding that plaintiff was discharged for her refusal to “engage in the criminal acts of adultery and lewd and lascivious cohabitation[,]” the Court determined that this case fell into just such an exception.  See Mitchem v. Counts, 523 S.E.2d 246, 252 (2000) (discharge based on refusal to engage in fornication and lewd and lascivious cohabitation was against public policy).  

The majority went on to find that permitting suits against individual supervisors for wrongful termination was “consistent with the  Court’s established case law regarding agency relationships[,]” explaining that “[i]t has long been settled in Virginia that employers and employees are deemed to be jointly liable and jointly suable for the employee’s wrongful acts.”  (internal quotations omitted).  Noting that it is the wrongful motivation held by the supervisor – not the act of discharge itself – which creates liability under this theory, the majority reasoned that individual liability best serves the deterrent purpose of the wrongful discharge tort.  

The three-justice dissent endorsed the reasoning employed by the district court, and would have held that “when the employee-employer relationship has been wrongfully terminated, liability to the wronged employee can only rest with the other party in that relationship, the employer.”  The dissent noted that only the employer possesses the power to terminate an employee and that an individual manager or supervisor who carries out the discharge acts only in a representative capacity for the employer.  Accordingly, such an individual cannot be personally liable for the discharge.  Finally, the dissent reasoned that “[b]ecause the legal duty at issue in a claim for wrongful discharge does not flow from one employee to another employee, it is irrelevant if a manager or supervisor also engaged in the conduct that violated public policy.”

The state courts are deeply divided on this issue.  Some Courts have reached conclusions consistent with those of the Virginia Supreme Court.  See, e.g., Myers v. Alutiiq Int'l Solutions, LLC, 811 F. Supp. 2d 261, 269 (D.D.C. 2011) (predicting that the “D.C. Court of Appeals would allow claims against individual supervisors for wrongful discharge” where it was shown that their conduct was sufficiently wrongful because “individuals are liable for their own torts, even as agents acting on behalf of their employers”); Higgins v. Assmann Elecs., Inc., 217 Ariz. 289, 173 P.3d 453, 458 (Ariz. Ct. App. 2007) (holding that, under the Arizona Employment Protection Act “[c]orporate officers are liable to those harmed by such officer[s]” when their “acts constitut[e] the wrongful termination” of an employee); Jasper v. H. Nizam, Inc., 764 N.W.2d 751, 776 (Iowa 2009) (holding that an individual corporate officer can be held liable for wrongful discharge because the tort “does not impose liability for the discharge from employment, but the wrongful reasons motivating the discharge”); Ballinger v. Delaware River Port Auth., 172 N.J. 586, 800 A.2d 97, 110 (N.J. 2002) (holding that “an individual who personally participates in the tort of wrongful discharge may be held individually liable” because “[a]n agent who does an act otherwise a tort is not relieved from liability by the fact that he acted at the command of the principal or on account of the principal”) (alteration in original) (internal quotation marks and citation omitted); Kamensky v. Roemer Inc., 1 Pa. D. & C. 4th 497, 499 (Pa. 1988) (holding that “an officer of the corporation who takes part in the commission of the tort by the corporation is personally liable therefor[]”) (internal quotation marks and citation omitted); Harless v. First Nat'l Bank in Fairmont, 169 W. Va. 673, 289 S.E.2d 692, 698, 699 (W. Va. 1982) (holding that liability on the part of the employer “does not mean that another employee who has been the principal protagonist in obtaining the employee's discharge would not also be liable,” because “an agent or employee can be held personally liable for his own torts against third parties”).  

Other courts, however, have held, contrary to the Virginia Supreme Court and the decisions cited above, that there is no individual liability for the tort of wrongful discharge.  See, e.g., Miklosy v. Regents of Univ. of California, 44 Cal. 4th 876, 80 Cal. Rptr. 3d 690, 188 P.3d 629, 645 (Cal. 2008) (holding that the agency relationship shields employees from tort liability for wrongful discharge); Buckner v. Atlantic Plant Maintenance Co., 182 Ill. 2d 12, 694 N.E.2d 565, 569, 230 Ill. Dec. 596 (Ill. 1998) (Supreme Court of Illinois stated that, “[l]ogically speaking, only ‘the employer’ has the power to hire or fire an employee.”); Rebarchek v. Farmers Coop. Elevator & Mercantile Assoc., 272 Kan. 546, 35 P.3d 892, 903-04 (Kan. 2001) (quoting extensively from Buckner and adopting its holding); Schram v. Albertson's Inc., 146 Ore. App. 415, 934 P.2d 483 (Or. Ct. App. 1997). (“[T]orts…are based on the violations of duties owed by one party to another other than those created by contract” and “the tort of wrongful discharge arises when an employer violates a duty imposed by an established public policy. The employment relationship is a necessary element of the tort and establishes the duty of the employer on behalf of the employee not to violate an established public policy. That relationship does not exist among fellow employees.”); Physio GP, Inc. v. Naifeh, 306 S.W.3d 886 (Tex. App. 2010) (rejecting the application of agency principles and recognizing that “[t]he employment relationship is the source of the duty in wrongful discharge torts” and that relationship “exists only between the employer and employee, not between two employees, even when one of those employees is a supervisor or even the owner.”)

Comments on the implications of this decision after the jump.

COMMENTS

The Recent Virginia Supreme Court decision raises a host of follow-on concerns for management and supervisors.  First, individual supervisors who do not qualify as officers or directors under the employer’s D&O policy may have no insurance coverage provided by their employer.  I have heard, second hand, stories that some employees have obtained coverage under their homeowners policy for some claims arising out of the workplace.  Certainly, in those jurisdictions, like Virginia, that now recognize individual liability in wrongful termination cases, employers will need to discuss with their insurance brokers additional coverages to protect supervisors who are now vulnerable to suit.  

Second, typically, a supervisor would not be covered by the Company’s indemnification commitments or the statutorily-imposed indemnification requirements.  For example, the most frequently used indemnification requirements are those based on the Delaware Business & Commercial Code, and those provisions would not appear to cover a supervisor in these circumstances.  See Del. Code Ann. tit. 8, § § 102(b)(7), 145 (2010). Accordingly, in those jurisdictions, like Virginia, that now recognize individual liability, employers may want to expand their indemnification commitments to cover vulnerable supervisors.  If employers do so expand indemnification commitments, we can anticipate an argument that to do so violates public policy.  Cf. Limbaugh v. Coffee Med. Ctr., 59 S.W.3d 73 (Tenn. 2001) (implying that a negligent tortfeasor can seek contribution from an intentional tortfeasor, but that an intentional tortfeasor may not be able to seek contribution from an intentional tortfeasor).  

Third, assuming a supervisor is even aware of his/her exposure in light of cases like VanBuren, they might explore with an insurance broker whether coverages are available.

Fourth, a number of jurisdictions have expanded the concept of wrongful termination to include, for example, wrongful demotion claims.  See, e.g. Moore v. Wynnewood, 57 F.3d 924 (10th Cir. 1995) (under Oklahoma law, court assumed that claim for wrongful demotion was cognizable); Montgomery v. Mississippi, 498 F. Supp. 2d 892 (S.D. Miss. 2007) (under Mississippi law, plaintiff in a civil service position could state a claim for wrongful demotion); Colores v. Bd. of Trustees of the Cal. State Univ., 105 Cal. App. 4th 1293 (Cal. App. 2003) (under California law wrongful demotion claim sounding in contract).  Employers and supervisors involved in decision-making regarding demotions will need to be aware of the potential exposure to individual liability.  

Fifth, the state courts have debated whether the concept of wrongful termination includes an alleged constructive discharge.  Compare Starzynski v. Capital Pub. Radio, 88 Cal. App. 4th 33, 36 (Cal. Ct. App. 2001) (stating claim for wrongful constructive discharge under California law) with Fisher v. Lexington Health Care, Inc., 722 N.E.2d 1115, 1118 (Ill. 1999) (expressing reluctance to provide common law cause of action for retaliatory constructive discharge or demotion).  In those jurisdictions that do recognize a constructive discharge as the potential basis for a wrongful termination claim, supervisors may have further exposure to individual liability.  

Sixth, the VanBuren decision and others rely heavily on the truism that the principal and its agent are responsible for torts committed by the agent on behalf of the principal.  See, e.g. Ballinger v. Delaware River Port Auth., 172 N.J. 586 (N.J. 2002); Harless v. First Nat’l Bank in Fairmont, 289 S.E.2d 692 (W. Va. 1982).  Some jurisdictions have held that the wrongful termination claim derives from principles of contract law, not tort law.  Sterling Drug, Inc. v. Oxford, 743 S.W.2d 380, 385 (Ark. 1988); Brockmeyer v. Dun & Bradstreet, 335 N.W.2d 834 (Wis. 1983).  In those jurisdictions, presumably the rationale of cases like VanBuren would not apply and individual liability would not be recognized.

Seventh, many have advocated, for a variety of reasons, that employers have a process in place that is totally divorced from the supervisor advocating an adverse action to independently review proposed adverse actions.  Assuming that one can create a taint-free independent review process, that might diminish or eliminate the individual supervisor’s exposure to liability.  And, as we all know, may be of some benefit in “cat’s paw” cases post-Staub. 
 


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