HR and other organizational leaders beware: your risk of personal liability for employment decisions – or indecisions – continues to grow. In the recent case of Smith v. Bray (May 24, 2012), the Seventh Circuit Court of appeals joined a growing number of federal courts that have declared that HR leaders and other company managers at all levels of the organization can be held personally liable for race discrimination and retaliation claims filed under § 1981 of the Civil Rights Act of 1866. While managers and supervisors cannot be held personally liable under Title VII of the Civil Rights Act of 1964, they can under § 1981. Making matters worse, § 1981 does not place any monetary caps on damages and has a much longer statute of limitations. Employers who fail to train managers and supervisors to avoid bias and retaliation claims are not only exposing themselves to liability, but are also exposing their leaders to costly personal liability.

Summary of § 1981

Shortly after the Civil War, Congress enacted the Civil Rights Act of 1866. Section 1981(a) of that Act protects the right of all people “to make and enforce contracts” regardless of race. With adoption of the Civil Rights Act of 1991, Congress broadened § 1981 by clarifying that it protects “the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.” 42 U.S.C. § 1981(b). Contracts include employment relationships that are at-will. The Supreme Court has held that § 1981 permits claims for retaliation if one person takes action against another for asserting the right to substantive contractual equality granted under § 1981. CBOCS West, Inc. v. Humphries, 553 U.S. 442, 445 (2008). The standards and methods of proof that apply to claims of racial discrimination and retaliation under Ti tle VII also apply to claims under § 1981. Humphries v. CBOCS West, Inc., 474 F.3d 387, 403-04 (7th Cir. 2007), aff’d, 553 U.S. 442 (2008).

Summary of Smith v. Bray

Darrel Smith worked as a process technician for three years at a chemical plant in Illinois. Smith, who was black, began suffering verbal harassment from his white supervisor and co-workers. Smith also found trash and feces in his work locker. Smith alleged that he complained to HR about the harassment. The HR manager, Denise Bray, denied receiving any complaints. When Smith told his manager he planned to retain a lawyer, the manager threatened Smith, warning him that he would regret doing so. Smith was eventually fired for excessive absences. When the chemical company went bankrupt, Smith’s only hope to recover damages was to sue the individuals responsible for the alleged wrongs and seek to hold them personally liable. Smith settled his claims against the primary wrongdoer, his former supervisor, but Bray refused to settle. Smith alleged that Bray conspired with the immediate supervisor to retaliate against him in violation of & sect; 1981. Smith contended that Bray engaged in retaliation by ignoring his complaints about the harassment and by persuading Bray’s superiors to terminate Smith in retaliation for lodging harassment complaints. Though the trial court granted Bray’s motion for summary judgment and though the Seventh Circuit Court of Appeals affirmed the ruling for Bray on the ground that Smith adduced insufficient evidence of retaliatory motive, the victory still leaves HR and other managers and supervisors exposed to costly risk of personal liability for race bias and retaliation claims.

Lessons for Leaders

First, Employers must take immediate steps to adequately train leaders at all levels of the organization to understand best practices for avoiding claims of harassment, discrimination, and retaliation. Employers must be aggressive in proactively protecting their leaders and the organization by equipping leaders with the knowledge and skills necessary to adeptly avert costly claims and maintain effective employee relations strategies that build successful cultures. Second, leaders must respond promptly and appropriately to complaints of harassment or discrimination. Third, responsive steps must be well documented to prove the employer’s genuine concern to maintain a workplace free from unlawful harassment, discrimination, or retaliation and to rebut any notion of alleged bias or retaliatory motive. Fourth, frequently follow up with t he complaining party and related individuals and document the follow up and its results to ensure the issues have been satisfactorily resolved.

Equip your leaders with best practices by registering them for the Best Employer Defense Training Series 2012, which covers how to avoid harassment, discrimination, and retaliation claims, along with several other critical topics that will your organization and leaders avoid costly claims and personal liability. Call Jessica at 918-591-5203 for more information and to register.

By Christopher S. Thrutchley, cthrutchley@dsda.com