Tuesday, August 21, 2012
It’s pretty well established that, for the antidiscrimination statutes at least, there’s no personal liability, (a position which has always seemed questionable to me but as to which I’m in the distinct minority). The effects of this rule, however, can be blunted if an employer can obtain indemnification from the supervisor responsible for the violation. Such efforts are rare, but they are not unknown, and a recent example illustrates the point. Howard University v. Watkins, 2012 U.S. Dist. LEXIS 58863 (D.D.C. April 27, 2012), denied a former assistant dean’s motion to dismiss the university’s claims of indemnification and fraud.
The case arose out of a disabilities discrimination claim brought against Howard by one Goodwin, which settled for $253,000 in damages and attorneys’ fees. The university had terminated Goodwin, on Watkins’s recommendation for what she claimed were his “behavior problems”; Howard claimed it would not have done so had Watkins revealed her knowledge of Goodwin’s HIV status and that she had denied him a requested accommodation.
Looking to common law indemnification arising from express or implied contracts, the court found that Watkins would be liable if Howard proved its allegations. The court also upheld Counts for fraudulent concealment, fraud, and misrepresentation. The distinction between the various Counts suggests that the defendant might have been liable even if she had not been guilty of fraud, perhaps the discrimination itself.
Under this case, then, the true perpetrator would be responsible for all harm caused by an act of discrimination, presumably not only any settlement or judgment paid by the employer but also the employer’s own costs of the defense of an action. To the extent that employers can utilize indemnification, problems of agents’ pursuing their own interests rather than those of their principal would be reduced.
So why don’t employers frequently resort to indemnification? The obvious reason is that they have the usual remedy of firing the supervisor rather than pursuing an expensive claim that may well lead to an uncollected judgment. Few former “acting assistant deans of students” will be able to pay quarter million dollar judgment, and pursuit of the claim itself is costly (the case was filed in Maryland in 2006 and still had not been tried in the District of Columbia when the opinion was handed down).
Then there’s the question of employee morale. Few universities would want their deans to fear that they may be on the hook for far more than their annual salaries. In Watkins itself, the employer may well have thought that the defendant’s conduct was so outrageous that few other supervisors would feel threatened by the lawsuit. There might also have been a felt need to back compliance and human resources divisions by taking action against a supervisor who Howard thought had pulled the wool over the University’s eyes.
But beyond these concerns, the cause of action has its own problems. Northwest Airlines v. Transportation Workers Union, 451 U.S. 77 (1981), rejected indemnity or contribution under Title VII or the Equal Pay Act because it would disrupt the “comprehensive character” of statutory remedies. Watkins distinguished that precedent because it had recognized that indemnification might be permissible where state law provided the rule of decision and allowed for indemnification. Thus, it was critical to the case that (1) the DC Human Rights Act barred the underlying conduct; (2) the plaintiff in the original suit had sued under the DCHRA; and, apparently, (3) the Human Rights Act itself permitted individual liability, presumably because that statute’s comprehensive scheme would not be disrupted. This combination of circumstances will not always obtain.
Finally, there’s the question of whether the Howard gave Watkins the opportunity to approve the settlement. Even where a judgment is concerned, an indemnitor must prove that it mounted a reasonable defense before an indemnitee s liable. When a settlement is concerned, the indemnitor is also supposed to tender the defense to the indemnitee or at least give her the opportunity to respond to the proposed settlement.
Thanks to Joanna Solloway for her help with this.