June Happenings – Supreme Court Ruling and Audit Work Scrutinized

Supreme Court Issues Key Ruling on Definition of “Supervisor”

In a key case for employment practices this month, the Supreme Court issued a ruling that changed the definition of “supervisor” for the purpose of determining liability for workplace hostility.  The case originated when a female employee of Ball State University’s dining services department experienced hostility, discrimination and harassment from a catering specialist who worked there as well.  The woman filed a lawsuit against the university alleging that it created an environment that was hostile.  The University defended itself by explaining that the catering specialist was neither a manger nor a supervisor of the plaintiff, so they had no strict or vicarious liability in the hostilities between two coworkers.

In June, the Supreme Court ruled that the catering specialist was not a “supervisor” and therefore the University was not liable for her actions.  The Court continued explaining that “an employee is a ‘supervisor’ for purposes of vicarious liability under Title VII if he or she is empowered by the employer to take tangible employment actions against the victim.”  This definition departs from the standard definition the EEOC uses which is allows for the term “supervisor” to be used much more broadly.

This decision by the court is far from a panacea from employment liability, however.  An organization that hears of harassment in the workplace and fails to act can still be held liable.  Also, the Court explained that when an organization concentrates the decision making power into a small group, an individual in that group may not have direct management responsibility over an employee, but still be help liable for actions by the group.

It is important for firms to continue to drive a company culture that discourages any form of discrimination or harassment.  A firm should have a hotline to report such activities and each report should be investigated thoroughly.  Employment related lawsuits continue to be an expensive but very preventable situation.  Contact ProtectLawyers.com to discuss ways to protect your firm.

Accounting Firm Sued for Basketball Coach’s Errors

EisnerAmper, LLP has been served with a lawsuit in conjunction with litigation against a Greensboro, Arkansas basketball coach and financial planner.  Stan Kowalewski coached high school basketball and also ran SJK Investment Management – an investment fund that at its height had $70M in assets under management.  Mr. Kowalewski used his influence as a coach and his past record as an investor to secure institutional clients and investors.  SJK also used their audits as evidence that their work was above-board.  After discovering the mismanagement of funds, the SEC investigated SJK.  EisnerAmper is being attached to the suit for failure to uncover gross mishandling of money during their audits.  The prosecution even points to the fact that a Google search of Stan Kowalewski would have revealed a case of using booster funds from sporting events for his personal purposes – which should have raised red flags and led to further scrutiny of the investment firm.

Audits and work on  financial institutions continue to be the most severe accounting professional liability claims in the industry.  It is important to use checklists and second partner reviews of all engagements to prevent oversight – or alleged oversight – from bringing a claim against the firm.