As the company owner, you bear the ultimate responsibility for its success or failure. It’s up to you to make sure that your products or services work the way they should. It is your responsibility to ensure that there are enough paying customers to make payroll and cover the expenses of your business – and make a profit besides.
But do you and your company also bear responsibility for incidents that occur during company time as the result of actions taken – or not taken – by your employees? In many cases, the answer to that question is “yes.” Furthermore, there is often no way for employers to avoid being stuck with the tab for the conduct of their workers.
“There is only so much an employer can do. Third parties look to the deep pockets,” said Dianne Moretzsohn, counsel and employment law attorney for McCausland Keen and Buckman located in Radnor, Pennsylvania.
The following examples represent some of the possible circumstances involving employer liability for employee conduct, and are not intended to provide legal advice. Instead, the suggestions included below are general measures that business owners can take to deal with such challenges. Consult with an attorney in your jurisdiction for specific advice about your company’s particular circumstances.
Detours versus Frolics
Respondeat Superior is a Latin phrase that means “Let the master answer.” Under the principle of respondeat superior, employers are generally held legally and financially responsible for the conduct of employees who are acting within the scope of their employment. But there are exceptions and limitations to employer liability.
In many cases, the question of liability turns on just where “scope” begins and ends. One key to defining the limits of “scope,” and therefore employer liability, lies in determining whether an employee’s conduct constitutes a “detour” or a “frolic.”A “detour” generally means that the employer is liable, while a “frolic” often releases employers from legal liability, Moretzsohn said.
One example of a “detour” is an employee driving a company vehicle but who has an accident while driving out of the parking lot where he stopped for lunch. Under such circumstances, the employer would probably be liable for damages caused by the employee, Moretzsohn said. By contrast, an employee installing an air conditioning system in a customer’s home or business who stole money or property from the customer would clearly be engaged in a “frolic.” But even employee conduct that falls under the category of “frolic” can leave employers legally and financially liable.
No sane employer would hire a worker with the intent of having that worker steal from customers and clients. But failing to perform due diligence in hiring could be viewed by the courts as negligent hiring. Failing to conduct background checks or verify a worker’s employment record or training are classic examples of potentially negligent hiring. If a plaintiff were to learn that the light-fingered worker from the example above had been convicted of theft in the past, the employer could face extensive legal exposure.
Sexual harassment is another area where claims of negligent hiring can arise. If a plaintiff discovers that his or her harasser had been disciplined for a similar offense in the past, the employer could be held liable for negligent hiring practices. Courts would potentially view any past corrective measures taken by the company as insufficient or ineffective because the offensive conduct occurred again, Moretzsohn said.
Minimizing Legal Exposure
The principle of respondeat superior is often very broad. But that doesn’t mean that there is nothing that employers can do to limit their liability. The key is to take swift and decisive action to correct misconduct when it occurs – and to have written policies in place to limit the possibility of misdeeds occurring in the first place, Moretzsohn said. Specifically, company policy should include the following aspects:
- Thorough background checks and verification of qualifications for all employees
- Clear guidelines on allowed and prohibited conduct, e.g. no talking on cell phones while driving, forbidding sexually or racially charged language or prohibiting discussion of confidential company projects on social media
- Immediate and decisive corrective action, including dismissal of employees who violate company policies
- Established policy and procedure on handling sexual harassment, racial bias or similar complaints, including a mechanism that allows the complaining party to avoid his or her alleged abuser
- Racial, age, disability and gender sensitivity training for workers at all levels of the company
Taking measures like those listed above will not guarantee that employees will not engage in detours or frolics while on company time. Nor will your company be totally spared from lawsuits. But practicing due diligence can mitigate, or lessen the potential liability your company may face. In many instances, plaintiffs can be persuaded to settle out of court or lawsuits may be dismissed altogether.
“Plaintiffs have their own lawyers. Plaintiffs’ attorneys evaluate cases (and advise their clients accordingly),” said Moretzsohn.