Although banks are always allowed to be included in employment-related claims as employers, there is an increasing tactic to include C-suite individuals to create pressure for a quick settlement. Employers can take some preventive measures to minimize the potential liabilities or distractions that can accompany being a named party in a lawsuit.

Within the alphabet soup that is employment law, C-suite individuals may be liable in their individual capacity instead of solely the employer, depending on the claims being brought, and can be found personally liable for actions outside the scope of employment.

Fair Labor Standards Act
Corporate officers and supervisors may be personally liable for violations under the FLSA if they exercise day-to-day control of operations and are involved in the supervision and payment of employees.

Tips to Minimize Risks:

  • Use a committee to make payment decisions.
  • Have multiple avenues to allow employees to report concerns.
  • Make sure non-discretionary bonuses are included in overtime for non-exempt employees.
  • Retain outside counsel to update job descriptions/policies and verify employees are properly classified as exempt or non-exempt.

Family and Medical Leave Act
C-suite individuals may be liable for violations of FMLA if they were involved in the decision to grant or deny leave, or if they were involved in any adverse decision affecting the employee’s rights upon returning from such leave.

Tips to Minimize Risks:

  • Rely on a third party to act as administrators.
  • Exercise care when denying FMLA leave or refusing to allow an employee on leave to return to work.
  • Get as much information as possible regarding the reason for an employee’s absence and document it.
  • Promptly notify human resources if you learn that an employee’s need for leave could possibly be FMLA-related.
  • Make sure to get the proper FMLA paperwork in a timely manner.
  • Apply internal processes consistently and fairly.
  • Take advantage of training opportunities and seminars for your supervisory team.

ERISA and COBRA apply individual liability on employees who act as plan administrators. Further, a person who exercises discretion under an ERISA plan is deemed a fiduciary and can be held personally liable for breach of fiduciary duties when an ERISA benefit is improperly denied or interfered with. Plan administrators who fail or refuse to comply with information requests or who fail to file an annual report or other required information may be held individually liable.

Tips to Minimize Risks:

  • Rely on a TPA.
  • Get an indemnification agreement from the bank that protects you when acting within the scope of your employment in good faith.

Common OSHA violations include failure to review safety protocols (including Covid safety protocols), failure to maintain equipment, failure to provide proper training (including mandatory training required under certain state laws) and failure follow up on reports of safety issues. These violations can lead to personal liability for the individual who is in charge of ensuring the company meets safety standards. Furthermore, any employee who retaliates against an employee for filing a complaint with OSHA, participating in an OSHA inspection, or testifying against an employer can be held personally liable for damages to the employee.

Tips to Minimize Risks:

  • Review your facilities, machinery, and equipment and update them when necessary.
  • Implement a comprehensive safety program and update it periodically.
  • Ensure proper training for employees and management as to general safety practices as well as mandatory OSHA requirements.
  • Have procedures in place for safety complaints and accident investigations.
  • Develop a program that prohibits retaliation against any employee who makes safety-related or other complaints.
  • Before terminating or otherwise disciplining an employee, determine whether the employee has engaged in any protected act, and if so, make sure the imposed discipline is not based upon a protected activity.

Immigration Reform and Control Act
The IRCA requires all U.S. employers, regardless of size, to complete and maintain Form I-9 upon hiring a new employee. IRCA imposes individual liability for incorrectly filling out the form. The IRCA also creates protections for foreign workers against discrimination based on national origin.

Tips to Minimize Risks:

  • Use E-Verify to confirm eligibility of employees.
  • Train employees on how to complete and maintain Form I-9.

Common Solutions That May Minimize Risk
Many banks require alternative dispute-resolution procedures. Arbitration is a method of alternative dispute resolutions where neutral arbitrators preside of the dispute and is usually only used if there is an agreement in place.

Other protective measures can include waiver of jury trial, reduced statute-of-limitation periods to bring a claim to the extent permitted by law and class action waivers that require employees to bring claims in their individual capacity.

Many banks are offering separated employees a severance agreement. such as payment of unused paid time off in states that do not require payout, in exchange for a release of claims, even if the banks are unaware of any claims, in an effort to minimize risks.

Most banks are starting to use a committee or outside counsel, instead of an individual who may be accused of having unconscious bias, to make decisions/recommendations.

Lastly, always be sure to document legitimate reasons for taking adverse actions against employees (such as separation).


James Reid