Like it or not, you might be responsible for harm caused by your employees. Under a handful of legal theories, courts have held employers liable for injuries their employees inflicted on coworkers, customers and total strangers. Here, we'll explain those legal theories and a few commonsense steps you can take to steer clear of trouble.
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Like it or not, you might be responsible for harm caused by your employees. Under a handful of legal theories, courts have held employers liable for injuries their employees inflicted on coworkers, customers and total strangers. Here, we'll explain those legal theories and a few commonsense steps you can take to steer clear of trouble.
Accidents or Misconduct
Under a legal doctrine sometimes referred to as "respondeat superior" (Latin for "Let the superior answer"), an employer is legally responsible for the actions of its employees. However, this rule applies only if the employee is acting within the course and scope of employment; the employer will generally be liable if the employee was doing his or her job, carrying out company business, or otherwise acting on the employer's behalf when the incident took place.
The purpose of this rule is fairly simple: to hold employers responsible for the costs of doing business, including the costs of employee carelessness or misconduct. But if an employee acted independently or purely out of personal motives, the employer might not be liable. Here are two examples to illustrate the difference:
A wood flooring dealer gives its sales staff company cars to make certain sales calls. After work hours and while doing a personal errand, a salesperson hits a pedestrian using the company car. Most likely, the company will not be held responsible for the incident.
A finish manufacturer issues cell phones to all of its field reps to allow them to call into the office and check in with clients when they are on the road. While driving, a rep hits a pedestrian because he is completely engrossed in a telephone conversation with a superior at the plant. The manufacturer will probably have to pony up for the pedestrian's injuries.
If you are sued under this legal theory of respondeat superior, your employee's victim generally won't have to show that you should have known your employee might cause harm, or even that you did anything demonstrably wrong.
Careless Hiring and Retention
Under a different legal theory, someone who is injured by your employee can sue you for failing to take reasonable care in hiring your workers ("negligent hiring") or in keeping them on after learning the worker poses a potential danger ("negligent retention"). This rule applies even to what your workers do outside the scope of employment.
However, under this theory you are legally responsible only if you acted carelessly; that is, if you knew or should have known that an applicant or employee was unfit for the job, yet you did nothing about it. Here are a few situations in which employers might have to pay up:
A distributor hires a delivery driver without looking into his criminal past, which includes a sexual assault conviction and an arrest for stalking a woman he met while delivering products for another company. If he attacks a customer, the distributor could be held liable to his victim for negligent hiring.
An installation company hires a man who later steals from a customer's home. Had the company verified his résumé claims, it would have discovered that he was in prison for robbery during the years he claimed to be in high school and college. The company could be liable to the homeowner.
Avoiding Claims
Many states have allowed claims for negligent hiring and negligent retention. Although these lawsuits have not yet appeared in every state, the clear legal trend is to allow injured third parties to sue employers for hiring or keeping on a dangerous worker. What can you do to stay out of trouble? Here are a few tips:
Perform background checks. Make it your policy to run a routine background check before you hire an applicant. Verify information on résumés, look for criminal convictions (to the extent allowed in your state), and check driving records.
Use special care in hiring workers who will have a lot of public contact. This could include deliverymen or installers. You are more likely to be held responsible for a worker's actions if the job involves working with the public.
Root out problem employees immediately. Under the theory of negligent retention, you can be responsible for keeping a worker on your payroll after you learn (or should have been aware) that the worker poses a potential danger.
For more information on handling potentially dangerous workers, see "Dealing With Problem Employees: A Legal Guide," by Amy DelPo and Lisa Guerin (Nolo), and "The Essential Guide to Workplace Investigations," by Lisa Guerin (Nolo).
Business Q & A by Jim Blasingame
Q: What are the different kinds of business liability insurance?
A: Business liability insurance covers liability exposure that occurs as a result of the activities of a business. It should protect in case of a claim or lawsuit and can cover damages, medical costs, attorney fees for defense and damages in the case of a settlement. Policy types and coverage can include: General liability: primary coverage for injury claims, property damage and advertising claims Professional liability: coverage protects against malpractice, negligence, errors and omissions Product liability: protection for consumer injury by your product.
Jim Blasingame is the creator and award-winning host of the nationally syndicated radio/Internet talk show, “The Small Business Advocate,” and author of Small Business is Like a Bunch of Bananas and Three Minutes to Success. Find Jim’s show and more at www.SmallBusinessAdvocate.com, plus instant answers to your questions at his small business knowledgebase, www.AskJim.biz.