Employer may be liable for what employees do
Published 04/06/99

An employer may be liable for its employee's actions which cause damage to others, not only as a result of the employee's negligence when acting within the scope of his employment, but also under the legal theory of negligent hiring, retention, or supervision in which it is not necessary that the employee or agent of the employer be found negligent. Under that legal theory, liability to the employer may occur when it is established that the employer was negligent or reckless:

• in giving improper or ambiguous orders;
• in failing to make proper regulations;
• in the employment of improper persons or instrumentalities in work involving risk of harm to others;
• in the supervision of the activity.

For an example, a computer consultant company may hire a junior technician to install a computer network for an executive office, and because of inadequate installation the computer "crashes" resulting in customers of the executive office suffering damages. Under this example, not only may the customers have a legal claim against the executive office, the computer consultant company, and the junior technician for any negligence of the junior technician but they may also have a legal claim against the computer consultant company for the negligent hiring, retention, or supervision by the company of the junior technician, irrespective of whether the junior technician under the facts was found negligent himself. Furthermore, the executive office may have a possible breach of contract claim, an implied warranty claim, and/or an indemnification claim against the computer consultant company depending on what the contract between them states as to their respective rights and obligations.

Another example where a claim of negligent hiring, retention, or supervision may be brought is in the case when an employee does an intentional, wrongful act within the scope of their employment. While the employer may be vicariously liable for its employee's intentional, wrongful acts, the injured party may be seeking to assert an alternative claim that will increase the likelihood that there would be insurance coverage. While there is often an exclusion for intentional acts under insurance policies, the claim of negligent hiring, retention, or supervision by the employer of the employee may be covered. To illustrate, if an employee physically assaults a patron of the employer, if the employee had a violent past, to the extent that a court or jury could find that the employer was negligent in hiring, retaining, or leaving that employee unsupervised, a claim for damages by the assaulted person against the employer may be afforded insurance coverage by the employer's insurance carrier. With or without coverage, there may be liability exposure on either claim.

To limit such liability, an employer must be extremely careful in properly training employees in their jobs and promptly addressing serious personnel issues such as drug abuse, criminal activities, or violent tendencies exhibited by an employee. An employer should also consult with their attorney as to the proper, corrective action while minimizing the exposure to a disability discrimination claim under state or federal law. Furthermore, both as to potential employees and independent contractors, employers should thoroughly check references and consider further background checks with signed authorizations. As to independent contractors, proof of liability insurance coverage should be demanded by the employer as a prerequisite before retention for any particular job. Consideration should also be given to naming the employer on the independent contractor's policy as an additional insured under appropriate circumstances.

J. Daniel Marr is a director and shareholder at Hamblett & Kerrigan, PA whose legal practice includes counseling businesses and business persons on a variety of legal issues and advocating on their behalf. Attorney Marr is also an adjunct professor at Daniel Webster College where he teaches business law. You can reach Attorney Marr by e-mail at: dmarr@hamker.com

This information is general information and may not reflect the most current legal developments, verdicts or settlements. The information provided should not be relied upon as an indication of the actual state of the law or of future developments. The information contained on the Hamblett & Kerrigan website is for informational purposes only and does not constitute legal advice. If the information referenced may be of legal importance to you, you should consult with an attorney to provide you with legal guidance and opinion as the the effect of the current law upon your situation.