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  • Writer's pictureLeslie A. Farber

Are You Liable for Your Employee’s Acts?

Updated: Jul 3, 2019

Small business owner or global corporation, employers are often held liable for the conduct of their employees. Although generally, people are not held liable for the actions of others, the doctrine of “respondeat superior,” a Latin phrase meaning “let the superior answer” applies in employer/employee relationships. The purpose of this rule is to hold employers responsible for the cost of employee carelessness or misconduct.

But, this rule only applies if the employee is acting within the scope of employment. That is, if the employee was doing his or her job, carrying out company business or acting on the company’s behalf when the incident occurred. If the employee acted independently or for personal reasons, the employer might not be liable. Here are a few examples of the differences.

  • A securities firm provides cell phones for its agents. An agent, on the phone with a client while driving, is distracted and hits a pedestrian. The firm probably will be found liable and required to pay the pedestrian’s medical bills and maybe more.

  • A pizza chain promises delivery in 30 minutes "or your next pizza is on us." The delivery person hits a pedestrian while speeding to get there in under 30 minutes, the company will probably be legally responsible.

  • A custodian mops the floor in the customer aisle of a retail store, forgets to put a “Wet Floor” sign in the area, and a customer slips and falls on the wet floor and is injured. In that situation, the store owner would be liable for the custodian’s negligence.

  • A tech company provides company vehicles to technicians for on-site visits. One evening after the last appointment, a technician stops at a bar and after leaving the bar, hits a pedestrian. The employer probably will not be held responsible because, although the car is owned by the employer, the employee was using the car for personal, not business, reasons when the accident occurred.

In some cases, companies designate their workers as independent contractors, instead of employees, hoping to avoid liability. This is because respondeat superior only applies to employment relationships, not the relationship between a company and an independent contractor. However, most courts consider multiple factors when determining whether an employment relationship exists for purposes of applying liability.

Business owners can also be held responsible for an employee’s actions under the theory of “negligent hiring,” “negligent training,” or “negligent retention.” “Negligent hiring” is a type of legal claim that can be made by a customer or worker who is somehow hurt or “damaged” by an employee you hire. These case might happen when the employee in question commits some sort of crime on company time.

Negligent hiring means the employer knew or should have known about the employee's background which would have indicated that the worker could be dangerous. Background checks and drug tests can help reduce these types of claims.

Some examples of negligent hiring/retention are:

  • An Arkansas Federal Court recently awarded $7 million in damages to the family of a Arkansas truck driver killed in a 2008 accident in a wrongful death lawsuit brought against a timber company and its truck driver who caused the accident. The lawyers for the family argued that the timber company had negligently hired the truck driver who caused the accident without conducting a basic background search that would have quickly revealed a history of unsafe driving that included having his license revoked twice.

  • An employee rapes a coworker. On review, it is discovered that the employee is a registered sex offender who has served prison time for sexual assault. The employer might be liable because this information was discoverable with effective background checking.

  • Mary Foley ran a small temporary service agency. Last year she assigned a retired military man to a position as a night watchman at a warehouse. Mary did not know was that the man had never really been in the military. She also did not know that the man had a prior criminal record and current debt problems. He began stealing equipment from the warehouse. Since he technically worked for the temporary employment firm, Mary got sued and might lose the lawsuit.

There is a clear trend for allowing injured third parties to sue employers for hiring or keeping dangerous workers. You can minimize your exposure to lawsuits if you: perform background check on potential employees – verify resumes, check for criminal convictions, and check driving records. And if anything arises to indicate a worker on your payroll may be dangerous, deal with it immediately to avoid being sued for negligent retention.

If you have any questions about your or your companies’ responsibilities, you can contact me via email or phone 973-509-8500 x213.

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