It is generally understood that an employer can be held responsible for the acts of an employee. The legal concept is known as vicarious liability, and this article offers an introduction to the concept, defenses to employer liability, and a few steps business owners could take to protect themselves.
Vicarious liability makes an employer liable for the negligence of an employee, even when the employer may have had little or no involvement in the event that caused injury to a third party. In Latin, this is known as respondeat superior, or “let the master answer.” The injured party may sue the employer and the employee, who are both jointly and severally liable for the employee’s negligence.
An employer, however, is not liable for all acts of an employee. Some common defenses to vicarious liability include (a) when the person was not truly an employee, but an independent contractor; (b) when the person was acting outside the scope of employment; and (c) when the employee’s conduct was intentional as opposed to negligent.
An employer is not generally vicariously liable for the acts of independent contractors. A person is an independent contractor when, as a matter of economic reality, the worker is not economically dependent upon the alleged employer and is instead in business for himself.
An example is when a business hires a contractor to do work (e.g. a plumber) and that contractor’s negligence harms a third person (e.g. an auto accident). If an independent contractor, the employer cannot be held vicariously liable for the harm to the third party.
Scope of employment
A common issue is whether the employee was acting within the scope of employment when the employee negligently caused harm to a third party. The threshold question is whether the employee was “on duty” at the time.
If on duty, the employer could be liable. For example, where an employee drank alcohol at an employer-sponsored party, the drinking and resulting harm caused by employee negligence (e.g. an auto accident) could be within the scope of his employment.
In contrast, an employee involved in a car accident going to or coming home from work, at the end of a work shift, most often is not considered acting within the scope of employment and generally no vicarious liability exists.
An employer is generally not liable for the intentional torts of employees. Intentional acts (e.g. an assault) are not normally considered within the scope of employment or in furtherance of the employer’s business.
If an employee assaults another person at the employer’s job site, the employer is likely not vicariously liable, even though the employment could have created the opportunity for the assault. However, there could be other legal theories that make the employer liable.
An example is if the employer knew or should have known the employee was prone to violence or failed to properly respond to evidence that an assault could occur.
In terms of discrimination claims, employer liability for the acts of employees can be complicated. An employer may be vicariously liable for sexual harassment committed by supervisory personnel, depending upon the type of harassment that is proven.
Hostile work environment claims may require proof that the employer knew or should have known about the harassment. On the other hand, claims for quid pro quo sexual harassment can create strict liability for the employer. Strict liability exists because the law finds the employer granted the employee-supervisor the authority to make the employment decisions that created the quid pro quo sexual harassment.
In addition to hiring quality and consciences employees, and adequately training and supervising their work, there are other steps an employer can take to protect itself from vicarious liability. The employer’s business structure can provide protection for the business owner’s personal assets. The owner can form a corporation or limited liability company to create a separate legal identity. Vicarious liability passes to the corporation or LLC and not to the business owner.
Insurance is another important means of protection. According to Brent Schmitten, president and chief operating officer of Mitchell, Reed & Schmitten Insurance, Inc., “A business can buy general liability insurance to protect from the costs of lawsuits caused by employee negligence, as well as incidents at their place of business.
Business auto insurance, including hired and non-owned automobile insurance, is another way of protecting the employer. Professional liability or errors and omissions insurance also protects the business from claims for employee errors, potentially including claims for failure to perform the work as contractually obligated.”
Vicarious liability is a constant concern for business owners. It is important for businesses to know the rules and guard against potential legal exposure. It is also important to make sure suitable business organizational structures are selected and that proper insurance coverage is maintained. While there is no escaping vicarious liability, employers can effectively manage the risk.
Brian Walker represents businesses and individuals in commercial, business, employment, and real estate related litigation and transactions from the Wenatchee office of Ogden Murphy Wallace PLLC.