Depending on the circumstances, an employer can be held liable for the harm that results from an employee’s illegal act. This is true even if the employer did not participate in the wrongful act and had no intention of causing the harm.
It’s also true regardless of the size of your business. This aspect of the law, which is more broadly known as agency law, applies with equal force to small and large businesses.
The best way for an employer to be prepared for and hopefully avoid this type of liability is to understand how it occurs.
At the outset, it’s important to understand and distinguish two legal terms: direct liability and vicarious liability.
To determine whether vicarious liability applies, it's critical to understand what it means to be acting “within the scope of employment.” Generally, anytime an employee is doing something to benefit the employer, the employee is acting within the scope of employment. In these situations, the employer can be held liable for the employee’s illegal acts even if it did participate in or condone the employee’s conduct.
The responsibility falls on the employer to control employees who are working on the employer’s behalf. If the employer would have been liable for committing the illegal act, it stands to reason that the employer should also be liable when the act is performed for its benefit by an employee.
Example. Jack, a delivery person for a pizzeria, is running behind on a customer's order. To make up time, Jack speeds through a red light and accidentally crashes into Meg’s car, injuring Meg. The collision also damages a utility pole. The pizzeria is vicariously liable for the harm caused by Jack’s illegal act of speeding through a red light. This includes the damage to Meg’s car, her bodily injuries, and the cost of replacing or repairing the utility poll. The pizzeria is liable even though it had a policy against speeding and routinely disciplined employees for doing so.
What if the employee commits an illegal act during business hours that injures a third party, but the employee had deviated from his usual job of working for the employer's benefit at the time of the act?
Generally, courts hold that an employer will not be vicariously liable when the deviation is “substantial.” What constitutes a substantial deviation is a fact-specific analysis, but courts will analyze such things as the reason for the deviation, the nature of the employee’s work, whether there was any link between the deviation and the employee’s job duties, and the duration and location of the deviation in relation to the employer’s location.
Example. Jack, a pizzeria delivery person, works from 8:00 p.m. to midnight. Jack drives 10 minutes north of the pizzeria to make a delivery. After the delivery, Jack remembers that he left the oven on at home. Jack races an additional 20 minutes north to check on his house, and when he turns down his street, he crashes into Meg. Jack’s deviation is substantial and the pizzeria will not be vicarious liable for Meg’s damages. At the time of the accident, Jack was pursuing a personal endeavor that had nothing to do with his job duties and was at least 30 minutes away from the pizzeria.
When it comes to vicarious liability, remember that the employee will always remain personally liable for his own wrongful conduct. In our examples, Meg would most likely sue Jack and the pizzeria. While the pizzeria will probably have insurance that allows it to pay Meg for her damages, the employer could seek reimbursement from Jack.
Under direct liability, an employer is liable for damages if it breaches a legal duty it owed to a third party such as a client, customer, or tenant.
In some cases, an employer can be held directly liable even for an act committed by a third party. One example would be when a commercial property owner or landlord hires a worker who has direct contact with tenants, such as a security guard, maintenance person, groundskeeper, or custodian. Generally, an employer who hires these types of workers has a legal duty to conduct a background check.
Suppose a landlord hires a security guard without conducting a background check and a tenant is sexually assaulted by the guard. If the background check would have revealed that the guard has a criminal record for sexual assault, the landlord could be held legally liable for the victim’s damages in a civil lawsuit.
In this situation, the landlord is not vicariously liable for the illegal act because it did not occur in the scope of the security guard’s employment. Rather, the landlord’s direct liability stems from failing to conduct an adequate background check.
Direct liability is also common when the employee is required to drive. In fact, in these cases, an employer can be faced with both vicarious and direct liability.
Example. A pizzeria hires Jack to make deliveries. Jack drives through a red light and crashes into Meg while he is delivering pizza to a customer. The pizzeria is vicariously liable for any damages that Jack caused. Suppose, however, that the pizzeria never checked Jack’s driving record before hiring him. A routine check would have revealed that Jack’s license was suspended because he is an unsafe driver. The pizzeria could be directly liable for its failure to check Jack’s driving record before hiring him. Note that Meg cannot recover twice for the same accident, but she now has two legal theories she can use in a lawsuit against the pizzeria.
An employer can also be directly liable when it knows of a problem with one of its employees but fails to act. If the pizzeria, for example, knew that Jack was a reckless driver but continued to allow him to make deliveries, it could be directly liable for any harm that results from Jack’s reckless driving. The same reasoning would apply if an employer knew of an employee’s propensity for violence but continued to allow the employee to come into contact with customers.
It’s difficult to guard against everything that can go wrong when employees interact with third parties. But there are things an employer can do—and they start as early as the hiring process. Here are a few steps to consider:
For individualized advice about how to protect your business, consider contacting an employment law attorney.
