Did you know that as an employer you can be held responsible for the harmful acts of your employees? This article will discuss how and why. Another article in this series will discuss how you can minimize your risks.
The law governing when an employer will be liable for a subordinate’s harmful acts goes by many names. The most common are: “vicarious liability” (holding any party liable for the acts of another), “respondeat superior” (a Latin term meaning, let the master answer, which designates holding a party liable for the acts of their subordinate), “master-servant liability” (another term for respondeat superior), and “principal-agent liability” (a type of relationship giving rise to vicarious liability). People or organizations that are harmed by employees will often seek compensation from the employer rather than from the employee. This occurs because the employer is perceived as having more money and/or insurance than the employee to pay for the loss.
Determining whether an employer is liable for the acts of a subordinate is a three step process:
- Determine whether or not the subordinate is an independent contractor or an employee.
- Determine whether the harmful act was performed within the scope of the employer-employee relationship.
- Determine whether the employer has ratified the harmful action taken by the employee outside the scope of the employer-employee relationship.
Independent Contractor or Employee: It makes a difference.
The key to determining whether a party is an independent contractor or an employee is the employer has the right to control both the manner and method by which the person performs the job in question. [Community for Creative Non-Violence v. Reid] The stronger the right to exercise control, the more likely the party is an employee. The weaker the right to control, the more likely the party is an independent contractor. This determination is made by courts based on a variety of factors.
Factors Considered
The factors most commonly used to determine whether a person is an employee or an independent contractor are the following:
- How the parties define their relationship.
- Whether the party hired has his own truly independent business.
- The custom in the industry for the type of work performed.
- Whether the hired party supplied the tools used to perform the work.
- The length of time the worker is engaged and the method of compensation for the engagement. A short-time engagement and/or a flat fee are indications that a party is an independent contractor.
A court will look at the totality of the arrangement to determine whether or not the engaged party is an employee or an independent contractor.
Consequences of Independent Contractor versus Employee Distinction
Independent Contractor
If the party who committed the harmful act is an independent contractor, the employer is not liable for damages; unless the harmful act falls within one of a few narrow exceptions. Employers are liable for the acts of independent contractors in three situations:
- Dangerous Activities: If the independent contractor is performing acts that are dangerous by their very nature (such as demolishing a building), the employer is liable for any injury results.
- Negligent Hiring: If the employer is negligent in selecting the independent contractor (for example the employer hires a security firm known to employ dangerous felons), the employer is liable for the independent contractor’s harmful acts.
- Non-delegable Responsibilities: The law creates certain responsibilities which cannot be delegated. If an employer tries to delegate these responsibilities to an independent contractor, the employer remains liable. For example, a restaurant owner’s responsibility to keep the restaurant safe for its guests is non-delegable. If the restaurant owner delegates maintenance to an independent contractor, the restaurant owner remains liable to a customer injured because of a dangerous condition.
Employee
If the party committing the harmful act is an employee, then a court will look further to determine whether the employer will be held liable.
Was the Act Within the Employer-Employee Relationship?
Once it is determined that an employee committed the harmful act, the next issue is to determine if the harmful act occurred within the scope of the employee’s employment. An employer is only liable for the harmful acts of its employees if the harmful act occurred within the scope of the employee’s employment. To determine whether a harmful act was within the scope of employment, courts consider three factors:
- Whether the employee performed the harmful act during the hours of his employment and at the place his employment. If the harmful act is not closely related to both the time and place of employment, the employer is not liable. For example, Howdy Enterprises (the manufacturer of bathroom fixtures) is likely not liable for the harm caused by one of its employees when the employee is in a bar fight with a stranger while on vacation.
- Whether the conduct was done to benefit the employer. Even if the conduct is only partially to benefit the employer, the harmful act will likely be considered within the scope of employment.
- Whether the conduct was the type of conduct the employee is employed to engage in. The closer the conduct is to the employee’s job, the more likely the conduct will be considered within the scope of employment.
If the harmful act is found to be within the scope of employment, the employer is liable for the employee’s harmful act. If the harmful act is found to be outside the scope of employment, the employer is not liable; unless the employer has ratified the harmful act.
Employer Ratification of an Employee’s Harmful Act
An employer will be considered to have ratified an employee’s harmful act if the employer, with knowledge of all the facts, accepts the employee’s act as its own act. If an employer does not know all of the facts of the employee’s behavior, he will not be deemed to have ratified the act. An employer can expressly accept the act. For example, by saying “good work.” The employer can implicitly accept the act. For example, by not punishing, correcting, or reprimanding an employee after the employer is fully informed of the facts of the act.
If an employer ratifies the harmful act of an employee, the employer is liable for the employee’s harmful act, even if it was performed outside the scope of the employee’s employment.
Legal Disclaimer
This website provides information addressing legal topics of interest to the general reader. You should not consider this information designed or adequate to meet any of your particular legal needs, concerns or inquiries. You should consult with a lawyer licensed to practice law in the jurisdiction appropriate to your legal situation to assess your situation and provide you with appropriate legal advice.