Representing Both Defendant-Employer and Defendant-Employee

There are several reasons that a plaintiff might name a supervisor or manager as a co-defendant. The first is factual: The plaintiff may very well view her manager as the source of the discrimination. After all, an individual supervisor or manager is often the person making employment decisions, or, at the very least, is the person communicating that decision to a given plaintiff.

The second reason is procedural: For plaintiffs working for incorporated companies that have a principal place of business in another state, naming an individual defendant will likely destroy diversity jurisdiction and ensure that the case remains in state court. State courts are generally seen as more plaintiff-friendly than federal courts. Thus, to the plaintiff and her counsel, naming an individual co-defendant is simply sound litigation strategy.

There are also strategic reasons for naming an individual co-defendant. The plaintiff may hope to create tension and hostility between the employer and individual defendant. It would certainly make the plaintiff’s success more likely if the defendants began pointing fingers at one another. In addition, the individual co-defendant may have his or her own insurance coverage, through a director or executive’s plan or through his or her own homeowner’s plan.

Whenever an employer and individual employee are jointly sued, the question that will be foremost in the employer’s concerns is whether it is obligated under state law to defend, or at least indemnify, the individual co-defendant. Several jurisdictions, most notably California, require private employers to indemnify employees for losses incurred in the course and scope of their employment.

California interprets its indemnification provision to require an “employer to indemnify an employee for attorneys’ fees and costs incurred in defending a third-party lawsuit, where such expenses are necessary and the lawsuit is based on the employee’s conduct within the course and scope of his or her job duties.” In order to garner the protection of this provision, an employee seeking indemnity must show that the conduct defended against was within the course and scope of employment. “Course and scope” are defined using respondeat superior principles; that is, an employer is vicariously liable for risks incidental to the employer’s business. Consequently, a California employer is required to indemnify its employees against the costs of any lawsuit so long as the employee’s conduct was “not so unusual or startling that it would seem unfair to include the loss resulting from it among other costs of the employer’s business.” See Cassady v. Lewis, 145 Cal.App.4th 220 (Cal. Ct. App.2006); Jacobus v. Krambo, 78 Cal. App. 4th 1096 (Cal. Ct. App. 2000).

In a jurisdiction like California, where an employer is required to defend or indemnify a sued employee, there is an obvious practical advantage to a joint representation: One defense is less costly than two. In addition, by engaging in a joint representation, the employer would have more control over defense costs and strategy, as well as more assurance that the employee’s defense is being effectively and efficiently handled. Finally, the employer would likely have more familiarity with its corporate policies and procedures and greater access to other employees who may act as witnesses. It would be more efficient to translate such information to one counsel.

A joint representation may also suggest to the jury that the employer supports the individual defendant and that the employer does not believe the individual defendant engaged in any misconduct. Finally, a joint representation ‘ paid for by the employer ‘ is more likely to ensure the cooperation and loyalty of the individual defendant. Whenever an individual defendant is named, it is almost certain that that individual will be a key witness to the lawsuit. Providing a joint representation will go a long way toward guaranteeing an atmosphere of cooperation and support.

There are several situations in which a joint representation is not advisable or is even prohibited by the Rules of Professional Conduct. Clearly, if an employer is asserting a defense that implicates the individual defendant (e.g., that the employee acted outside the scope of his employment), a conflict of interest exists and a joint defense would be inadvisable. Indeed, Model Rule of Professional Conduct 1.7 prohibits a lawyer from representing a client where that client’s interests would be directly adverse to another client’s interest or where the representation would materially limit the lawyer’s representation of another client.

In addition to conflict of interest issues, joint representations may also implicate a lawyer’s duty to maintain client confidences. For instance, what if an individual defendant reveals facts suggesting that he did engage in harassing conduct? A lawyer may not be able to divulge such information to the employer without violating his or duties to the individual defendant. In such a situation, the lawyer may be forced to withdraw from his or her representation of the employer.

These pitfalls are especially evident in a sexual harassment suit. In many harassment cases, an employer can avoid liability by demonstrating that it took reasonable action to prevent and promptly correct any harassing conduct and that the plaintiff unreasonably failed to take advantage of the employer’s corrective measures. This defense, titled the Faragher/Ellerth defense, generally allows an employer to escape liability if the employer can demonstrate that: