Actively Guarding against Suits

Discrimination and Whistleblower cases

Discrimination cases are brought frequently by whistleblowers against executives. Whistleblowers may claim that the executive discriminated against that whistleblower. Every executive needs a good understanding, but often executives do not have a good understanding, of key employment laws in the area of discrimination suits. Discrimination is never permitted against protected persons, which now includes new classes such as whistleblowers. The Sarbanes-Oxley Act makes whistleblowers a protected class. In cases of disparaging or changing the working conditions of a whistleblower, the risk exposure would be enormous to the officer individually.

Losing Indemnification

In such cases, exposure to unindemnifiable personal risks and liabilities can be unlimited. Indemnity cannot be paid if paying indemnification would violate so-called "Public Policy" which would mean that an individual would not receive indemnification if it's against public policy for the company to pay indemnification or reimbursement.  It is against public policy, obviously, to compensate any wrongdoer, aider, or abettor, for wrongdoing. The company could be powerless to pay any indemnification.

If there is Insurance, Coverage Excludes Fines

An insurer could agree to pay the unindemnifiable amounts. Nonetheless, insurance carriers would have a complete defense to paying any claims to the extent they constitute fines or penalties.  To be sure of this, you can look inside the exclusions section of most insurance policies.

Losses may include fines and penalties that are non-deductible.

To qualify as a deductible business expense, various requirements must be met, and one requirement is that the expense cannot be a fine or a penalty imposed upon wrongful conduct by a legal authority under applicable law. Paying unlimited expenses without any indemnification and without any tax deductibility would be a crushing burden. The actual amount of gross earnings before tax that one would need to earn to pay a non-deductible expense is estimated at about 200% of the nominal amount of the unindemnified cost in order to both pay the fines and pay the taxes on the earnings.

Review Numerous Protected Classes (Federal)

  • Race – Civil Rights Act of 1964
  • Color – Civil Rights Act of 1964
  • Religion – Civil Rights Act of 1964
  • National origin – Civil Rights Act of 1964
  • Age (40 and over) – Age Discrimination in Employment Act of 1967
  • Sex – Equal Pay Act of 1963 and Civil Rights Act of 1964
  • Pregnancy – Pregnancy Discrimination Act
  • Citizenship – Immigration Reform and Control Act
  • Familial status – Civil Rights Act of 1968 Title VIII:
  • Housing cannot discriminate for having children, with an exception for senior housing
  • Disability status – Rehabilitation Act of 1973 and Americans with Disabilities Act of 1990
  • Veteran status – Vietnam Era Veterans' Readjustment Assistance Act of 1974 and Uniformed Services Employment and Reemployment Rights Act
  • Genetic information – Genetic Information Nondiscrimination Act 

Review Numerous Protected Classes (California)

See all of the Federal Protected Classes, which are provided also separately in California law in ways that do vary from Federal law in some respects.

In California, all of the following are also additional state-only protected classes.

  • Marital status
  • Sexual orientation and identity
  • AIDS/HIV
  • Medical condition
  • Political activities or affiliations
  • Status as a victim of domestic violence, assault, or stalking