When Might Your Employees Be Sued – and When Might YOU Be Sued?
When you hire employees, they typically act as representatives of the company in a legal sense. This means that when they commit misconduct or negligence, plaintiffs can sue the company itself rather than trying to hold the individual employee liable. While this makes sense, there are a few exceptions to the rule. As we have seen in the past, plaintiffs sometimes choose to sue employees or independent contractors directly instead of the company. This often makes sense from a financial perspective. But when might your employees be sued, and when might you be sued?
When Companies Face Lawsuits: Ex-Employees Sue Twitter After Mass Layoffs
One of the biggest stories in the big tech world this year was Elon Musk’s acquisition of Twitter. The billionaire threatened to buy Twitter in an apparent move against what he believed to be censorship. The idea was that after he had purchased the social media app, he could change its policies to allow more free speech. The potential deal went back and forth over the months, and at one point, the acquisition seemed very unlikely. But today, Musk is, in fact, the new owner of Twitter – and one of his first moves was to cut half the company’s employees.
Some of these fired employees were some of the most influential figures within the organization. Others were just regular office workers trying to provide for their families. The layoffs were conducted in a highly publicized manner, accompanied by security personnel who escorted many of the employees off the premises.
While this made for great press for Elon in his apparent fight against censorship, it might not come without consequences. On November 20, 2022, it was reported that Twitter was being sued for violating federal and state employment laws. According to the lawsuits, Musk violated various statutes during these layoffs, including California’s WARN Act and the federal Worker Adjustment and Retraining Notification Act.
Does this lawsuit actually have any merits? Let’s examine the federal laws first: Under the Worker Adjustment and Retraining Notification Act, employers with more than 100 workers must provide 60 days’ notice to their workers before layoffs at the bare minimum. California’s statute is similar and offers further protection to workers. On the surface, it would seem that Elon Musk did, in fact, break the law with these sudden layoffs.
But he has faced similar lawsuits after conducting mass layoffs within Tesla, and this lawsuit has seen very little success in the courts (at least in Texas, where workers were forced to arbitrate their claims). In addition, some insiders have reported that Twitter’s laid-off workers were asked to sign a waiver in exchange for “a week or two of severance pay.” This waiver apparently robs them of their rights and protections under the WARN Act. Musk claims that the severance pay was actually much higher with a duration of three months – not one or two weeks.
This system is also known as “pay in place of notice,” and it is a common tactic employed by companies around the world. The basic concept is simple: Instead of giving their employers 60 days of notice, the company simply agrees to continue paying them for 60 more days. This results in two situations that are roughly equivalent in the eyes of the law. However, critics argue that the WARN Act is not just about money, claiming that it also gives employees enough time to think about their next move.
In any case, this situation is definitely something to consider if you are running a company with more than 100 employees in California. Many major organizations are planning mass layoffs in the future due to economic uncertainty and the looming threat of a recession. Another major company that is reportedly planning mass layoffs in the near future is Amazon. It is important to conduct these layoffs properly and legally to avoid potential consequences in the future.
When “Employees” Face Lawsuits: Celebrities Who Endorsed FTX Sued by Investors
In other situations, “employees” of companies can be sued instead of the organizations themselves. A solid example is the onslaught of lawsuits filed against celebrities who endorsed FTX. These celebrities were not “employees” in the traditional sense, but they were obviously paid to promote FTX. So why would these investors choose to sue a celebrity spokesperson instead of the company itself? Well, the answer is simple: FTX has nothing left to offer. The company is bankrupt, and its demise is causing a chain reaction throughout the entire crypto industry. In other words, investors are searching for other people to hold accountable – people who actually have enough money to pay their damages.
That is not to say that Bankman-Fried is not being sued – because he is. But it might be easier to hold celebrities accountable for violating SEC laws by promoting crypto assets like FTX without making certain disclosures. When you are publicly endorsing a financial product like crypto, there are far more restrictions and regulations compared to endorsing a pair of sneakers or a new moisturizer brand. The number-one rule for these celebrities is publicly disclosing that they are being paid to endorse financial products. But all of these lawsuits face one major challenge: Nobody can really decide whether cryptocurrencies should be classified as “securities” under SEC law. If crypto is not a security, then none of the above rules apply.
In any case, celebrities, business leaders, and public figures of all types should be very careful about what they endorse publicly. A quick payday might sound like a great deal, but you should always speak with a business law attorney before blindly associating your name with a questionable product. Even if you escape legal action, the damage to your reputation could ruin your entire career.
Where Can I Find a Qualified Business Law Attorney in California?
If you have been searching for a qualified, experienced business law attorney in California, look no further than Milligan, Beswick, Levine & Knox, LLP. With years of experience in business law, we have been assisting companies in the San Bernardino area as they fight for their rights and pursue justice. Whether you are facing lawsuits filed by your employees or you are being sued by another company for breach of contract, we can help you with virtually any business-related legal issue imaginable. Book your consultation today to get started with an effective action plan.
Stephen Levine, is a Board Certified Specialist in Criminal Defense — an honor achieved by only the top criminal law attorneys in California. Mr. Levine has over 40 years of experience in criminal defense and family law serving Southern California, and is a highly regarded Super Lawyer as well as AV Rated attorney.