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.
In such cases, exposure to nonindemnifiable 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 nonindemnifiable 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.
Sexual orientation and identity
Political activities or affiliations
Status as a victim of domestic violence, assault, or stalking