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Why Employers Should Expand Management Training

June 1, 2010

Most employers train their managers and supervisors on applicable federal, state and local anti-discrimination laws. But not as many employers conduct training on general contract and tort law, although these are areas of law that also may serve as the basis for employment-related lawsuits. Because these so-called “common-law” claims can prove every bit as problematic—and costly—as statutory discrimination claims, employers should incorporate training in these general areas of the law into their overall management training program. Here’s a discussion of why this training is so important:

Contracts and their complications
Simply speaking, a contract is an agreement between two or more people or entities to do or not do something. Many people think of a contract as a written document, but, subject to the laws of the various states, an oral promise related to the terms of employment can sometimes be enforced as well.

Furthermore, many people think that a written contract cannot be changed by a subsequent oral promise. But again, subject to the limitations of the laws of the various states, a written contract sometimes can be changed by an oral promise—even if the written contract says that it can be changed only in writing. Therefore, managers and supervisors need to be trained to be clear and careful in communicating with employees about company policies and other work-related documents.

For example, a breach-of-contract claim based on an oral promise may arise when an employee is seeking compensation outside of the applicable plan or is seeking otherwise to avoid limitations set out in company policies or documents. A sales commission plan typically contains language stating that only certain persons (or persons holding certain positions) can change the terms of the plan. (Such language is preferable to vague limitations indicating that such changes can be made only if approved by “management.”)

Still, if a manager or supervisor represents to an employee that the employer is willing to deviate from the written terms of the plan under certain circumstances, and if the employer has occasionally deviated from those terms under such circumstances in the past, an employee’s reliance upon the manager or supervisor’s representations may be deemed sufficiently reasonable to permit the employee to recover commissions in an amount in excess of the specific written limitations of the plan.

Why would a manager or supervisor suggest that the specific terms of the written document might not apply? Perhaps the manager or supervisor is unaware of recent changes to a plan or policy. Or perhaps the manager or supervisor is attempting to motivate the employee to continue his or her efforts in pursuit of a difficult sale by holding out the hope of additional compensation—even though the manager or supervisor believes it extremely unlikely. Perhaps the manager or supervisor is simply worn down by the relentless lobbying of the employee to escape the limitations of the commissions plan.

In any event, a poorly trained manager or supervisor certainly can make more difficult an employer’s legal defense based on the terms of the plan or policy. On the other hand, the combination of a carefully crafted plan or policy, the consistent application of its terms, and a well-trained manager or supervisor significantly increases the likelihood of successfully defending against such “outside-the-plan” claims.

Torts for beginners
A manager or supervisor’s actions also may subject his or her employer to liability in tort. Lawyers struggle to define precisely what a “tort” is, but it generally means an unlawful act that is not based on a contract. Non-lawyers are more familiar with the concept of a tort as one often involving a claim for a personal injury.

Federal and/or state law typically protects specific characteristics (e.g., race or sex) and activity (e.g., certain forms of whistle blowing). A manager or supervisor’s workplace misconduct, however, may expose an employer to liability for various torts under state law as well.

For example, a manager or supervisor who engages in sexual harassment subjects a covered employer to potential liability under Title VII of the Civil Rights Act of 1964, and a manager or supervisor who makes improper hiring inquiries may subject a covered employer to liability under the Americans with Disabilities Act.

Such conduct, however, also may subject the manager or supervisor’s employer to liability for state-law torts. These can include assault and battery or intentional infliction of emotional distress based on allegations of unlawful harassment. The conduct also could create a state-law cause of action for invasion of privacy based upon the manager or supervisor’s inquiries. A negative employment reference may subject an employer to a claim of retaliation under one or more of the federal anti-discrimination statutes, but improper communications regarding current or former employees also may subject the employer to liability for defamation under state tort law. Subject to the limitations of the various state laws, an employer may be held directly liable for the conduct of the manager or supervisor, or an employer may be held liable for negligently hiring, failing to train or continuing to employ the offending manager or supervisor.

Why contract and tort claims complicate employment law disputes
In addition to the general question of liability, state-law contract and tort claims also can hinder the successful defense of a lawsuit as a procedural matter. State-law contract and tort claims may provide a basis for the plaintiff to sue and remain in state court, where judges are more inclined than their federal counterparts to conduct trials and less inclined to grant motions to dismiss or for summary judgment.

The addition of the manager or supervisor as a co-defendant also may require securing separate legal representation for that manager or supervisor, thereby increasing the cost of litigation and making strategic decisions more complicated. (By contrast, several federal anti-discrimination laws have been interpreted as not permitting the assertion of claims against individual managers and supervisors.)

Furthermore, state-law contract and tort claims often have longer statutes of limitations than federal claims. State-law claims typically place fewer (if any) limitations on the amount of damages a plaintiff may recover, thereby creating at least the potential for a greater monetary recovery against the employer. To the extent the employer wishes to avoid trial, the addition of such claims, as well as the presence of individual managers or supervisors as defendants in the case, may make a reasonable settlement more difficult.

Federal anti-discrimination laws often focus on the manager or supervisor’s intent and, so, employers can often escape liability for undisputed acts as long as the manager or supervisor did not act based on any improper reason.

The question of liability under state common-law claims, on the other hand, often focuses on the conduct itself. Although there are several defenses that may be available to employers in defending against such state-law claims that are not available in defending against related federal-law claims, the best defense is still for manager and supervisors to avoid engaging in conduct that might subject their employers to potential liability under state law.

For these reasons, employers should consider incorporating training on state-law contract and tort claims into their overall management training programs.

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