A boss may have to pay for her employees’ mistakes. Under the legal doctrine of respondeat superior and as well as under principal and agency law, an employer may be held liable for the negligent or intentional actions of her employees if the actions are committed by the employee within the scope of his employment. This legal doctrine attempts to allocate the risk to business enterprises for the accidents and damages which are a foreseeable result of the employee’s employment.
An employee’s act is within the scope of his employment if it is incidental to the employer’s business and is done to further the employer’s interest. The employer may also be responsible for the employee’s actions if the employee was trying to serve the employer’s business to some extent even if the primary motive of the employee’s action was to benefit himself or another.
For example, companies may have employees use their own vehicles to handle company business. If the employee, while driving on company business, negligently hits and injures a pedestrian, the employer is vicariously liable for the employee’s negligence. The fact that the employer did not expect or encourage her employee to drive negligently is irrelevant.
In this case the employee is acting as the agent of the employer. The driver is also directly liable to the injured person for the negligence but, as a practical matter, the injured person, if intent on pursuing an action for damages, will more likely pursue it against both the employee and the employer to enhance his chances of financial recovery.
Many employers have a general commercial automobile policy or other insurance which specifically covers the employee’s actions. An employee’s personal automobile policy may have a business purpose exclusion which excludes coverage when the vehicle is being used for a business purpose. The employer must be aware of this risk and make a business decision, after meeting with the insurance agent, as to what insurance is critical or prudent for the business.
In some cases, an employee’s willful or malicious act may also be held to be legally within the scope of employment and thus subject the employer to liability. For example, if a salesperson knows that a competitor has a contract with a customer and the salesperson then convinces that potential customer to breach its contract with the competitor and go with your company, your employee as well as your company could be sued by the competitor for wrongful interference with contractual relations. Under those circumstances, it is highly unlikely there would be any insurance coverage available for either the costs of the defense of the claim or payment of any damages.
The foregoing issues illustrate some of many reasons why employers must be diligent in training employees on safety procedures and monitoring employees’ actions.
J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at [email protected].