On Thursday, Nvidia’s board announced that Jensen Huang had resigned as president, CEO and director, effective immediately. CFO Colette Kress was named interim CEO, and the board named its first-ever chair. Huang co-founded the company in 1993 and led it for 33 years.
Much of the coverage has focused on a separate controversy that has nothing to do with employment law. But according to news reports, the turning point came on Wednesday, when the New York Times and others reported that Huang also had a relationship with a senior Nvidia executive who reported to him. Huang resigned the next day, and Reuters has since reported a relationship with a second employee. Nvidia’s announcement did not address either relationship, and no finding that a company policy was violated has been reported.
The facts are still developing, and this column is not about what happened at Nvidia. It is about the workplace issue at the center of the story, because it is one that California employers of every size face: a supervisor in a romantic relationship with someone who reports to them. In restaurants and hotels, that is often a general manager and a server, or an owner and a manager. Here are five lessons.
1. “Consensual” does not mean “low risk.”
A relationship that is welcome today can become the basis for a harassment claim when it ends. The subordinate may later say the relationship was never truly voluntary because the other person controlled their schedule, pay, or job. California juries will often hear that claim even when contemporaneous texts or messages appear consensual. A breakup followed by a schedule cut, a bad review, or a termination looks like quid pro quo harassment or retaliation, even if the employer’s reasons were legitimate.
California law makes this exposure expensive. Under the Fair Employment and Housing Act, an employer is strictly liable for harassment by a supervisor (Gov. Code § 12940(j)(1)). In State Department of Health Services v. Superior Court (2003), the California Supreme Court held that the federal Faragher/Ellerth defense does not apply to FEHA claims. An employer with a good policy can at most reduce damages under the avoidable consequences doctrine; it cannot avoid liability. The supervisor can also be personally liable for harassment (Gov. Code § 12940(j)(3)).
The more senior the person, the bigger the problem. A relationship between peers in the kitchen is mostly a personal matter. A relationship where one person controls the other’s livelihood is a business risk.
2. The employees who aren’t in the relationship can sue too.
Employers often think only of the two people involved. California law does not stop there.
In Miller v. Department of Corrections (2005), a prison warden had affairs with several subordinates and gave them preferential treatment. The California Supreme Court held that when sexual favoritism is sufficiently widespread, it can create an actionable hostile work environment for other employees, even though no one propositioned them. Isolated favoritism toward a single partner is generally not enough, but the line between “isolated” and “widespread” is a fact question that gets decided late in litigation. Even one clear instance of preferential treatment—best shifts, a promotion, or a pass on discipline—can be used as evidence of a hostile environment or retaliation if other employees complain or the relationship ends badly.
In hospitality, favoritism is easy to see and easy to prove: who gets the best sections, the Friday night shifts, the promotion to lead, or a pass on the attendance policy. When a manager is in a relationship with a team member, everyone else on the schedule is a potential witness.
3. You can lawfully regulate supervisor–subordinate relationships if you set the rule in advance.
California protects employee privacy, and Labor Code § 96(k) addresses lawful off-duty conduct. That does not mean employers are powerless.
In Barbee v. Household Automotive Finance Corp. (2003), a national sales manager began dating a member of his sales team. The company had a conflict of interest policy, and the CEO told him that dating within the sales force was a bad idea. He was given the choice to end the relationship or have one of them leave, and he was terminated when the relationship continued. The Court of Appeal affirmed summary judgment for the employer, holding that a supervisor had no reasonable expectation of privacy in an intimate relationship with a subordinate under those circumstances, and rejecting his privacy and wrongful termination claims.
The key facts were advance notice and a written policy. A workable policy usually includes:
- A disclosure requirement. Supervisors must tell HR (or, for owners and officers, the board or outside counsel) about any romantic relationship with someone in their chain of command—ideally before or immediately when the relationship begins or becomes known—and the company should document the report.
- A change in reporting lines. The supervisor has no role in the other person’s scheduling, pay, tips, evaluations, discipline, or promotion, and that change should be documented in writing.
- Clear consequences for nondisclosure, separate from the relationship itself.
- A narrow scope. Rules aimed at supervisor–subordinate relationships rest on solid ground under Barbee. Blanket bans on dating among peers are harder to justify and harder to enforce.
Advance written notice matters. California’s privacy protections and Labor Code § 96(k) make a clear, pre-existing policy the difference between a defensible business decision and a privacy or wrongful-termination claim.
4. The policy has to reach the top, including the owner.
Most relationship policies are written for managers and enforced on managers. The highest-risk relationships often involve the person who signs the paychecks, and no one in the company feels able to raise them.
Nvidia had an independent board, and it reportedly retained an outside law firm to run its investigation. Many restaurant groups have neither. Build the escalation path now:
- Decide who receives a complaint about the owner or CEO. It might be an outside HR consultant, outside counsel, or a designated partner.
- Use an outside investigator when the person accused controls the company. An investigation run by someone who reports to the accused will not hold up well in litigation. Independence and clear documentation of the process improve the credibility of any later defense.
- Train the top of the organization. California requires two hours of harassment prevention training for supervisors every two years at employers with five or more employees (Gov. Code § 12950.1). Owners and executives who supervise anyone should be in the room, and the training should cover workplace relationships, not just overt harassment.
- Protect the people who report. A complaint about a supervisor’s relationship, or about favoritism, is protected activity, and retaliation is a separate violation (Gov. Code § 12940(h)).
For more on managing harassment and retaliation risk, see our earlier article on the topic.
5. Plan for a sudden leadership exit before you need it.
Nvidia named an interim CEO and a new board chair on the same day it announced Huang’s resignation, and the two emailed employees that day, with a company-wide meeting scheduled for the following week. Analysts had noted that succession was a weak spot. Most closely held hospitality companies have no plan at all for losing the founder, a key partner, or a top operator overnight.
From an employment law perspective, the preparation is mostly paperwork that should already exist:
- Executive and operating agreements should define “cause” to include violations of the company’s harassment, conflict of interest, and relationship policies.
- Separation agreements must comply with Gov. Code § 12964.5, which limits nondisparagement and confidentiality terms that would prevent an employee from disclosing information about unlawful acts in the workplace, including harassment, and requires specific carve-out language.
- An interim leadership plan should name who signs payroll, who approves terminations, who communicates with employees, and who will handle any pending investigation or employee complaints, so operations and compliance do not stall while the business sorts out what happened.
When the leader leaves under a cloud, employees will be watching how the company responds. A prompt investigation, a clear statement that the policy applies to everyone, and no retaliation against anyone who came forward are the best protection against the next lawsuit. For more on handling high-stakes terminations, see our article on key termination issues.
Policies, training, and an independent escalation path only work if they actually reach the top of the organization before a crisis. The cost of getting this right is far lower than the cost of defending the claim that follows.
Recent Comments