Potential Liability for Off-Premise Employee Actions

by Charles H. Van Gorder

Most employers are well aware they may be held liable for injuries or damages resulting from the actions of their employees. Typically, this is considered in the context of an employee being negligent while performing his or her duties at the store - failing to properly adjust equip-ment for a client or not taking appropriate safety precautions when demonstrating products or instructing in their use. Employers may also be liable, however, for the actions of employees when away from the store. You need to be aware of these potential sources of "off-premise liability" and take steps to avoid such liabilities.

Vicarious Liability
An employer may be "vicariously" liable, under the doctrine of respondeat superior, for the negligent acts of an employee, and may be jointly and severally liable for any damages caused by the negligent acts of an employee acting within the scope of his or her duties. The acts of the employee that resulted in the alleged injury must: (1) have occurred while the employee was acting in furtherance of the employer's business, and (2)  have been within the scope of the employee's work for the employer. When determining whether the employee acted within the scope of employment, the question will often be asked whether the employee put aside the interests of the employer in order to pursue his or her own interests?

Exposure to off-premise liability of employees can be extensive. If an employee operates a vehicle on behalf of the employer, such as while delivering goods to a trade show or a client, or transporting clients on a trip or to promotional events, the employer can be held liable for any damages resulting from an accident involving the employee. This can be the case if the employee acted negligently or was driving under the influence of alcohol. Another source of liability is an employee's negligence while demonstrating products or teaching clients in the field. Some courts have held an employer may be held liable for an employee's slanderous statements made within the apparent scope and course of employment.

One key to controlling the potential for vicarious liability is to set clear guidelines for the authorized scope of activities an employee may undertake in the course of his or her employment. Prepare written job descriptions for your employees stating what actions are, and are not, authorized. State which actions are prohibited when employees are involved in company business. Set forth a clear company policy regarding employee behavior when conducting business away from the workplace. Explain to what extent employees may be permitted to pursue personal pursuits when away on company business. Specifically address issues regarding social interaction with clients and the use of drugs or excessive use of alcohol when involved with company business. Let your employees know that you can be held liable for the results of their actions, and that any violation of company policies will result in disciplinary actions.

Agency
A very different type of potential liability lies in the perceived principal/agent relationship between an employer and employee. Under this theory of law, an agent (employee) may have the authority to bind the principal (employer) to certain commitments such as contracts for the purchase or sale of goods, the performance of services and the quality of any such goods or services. In many circumstances, an employer wants employees to be able to make commitments on behalf of the company. The scope of their authority to make such commitments must be clearly understood, however, by both the employer and the employee. An actual agency relationship may be created through an express agreement, either written or oral, or through an agreement implied througfh the behavior of the employer and employee. Problems occur when employees act without authority from their employee, or beyond the scope of their actual authority.

"Apparent" agency occurs where an employee reasonably appears to a third person to be authorized to act on behalf of an employer because of the actions of the employee, the employer or some other party. For example, if an employer appears to have given an employee authority to order goods at a trade show by directing an employee to submit certain orders, others may then assume that employee has the authority to make additional orders even when the employer may not have consented. Indeed, an employer's usual course of dealing in permitting employees to make commitments on behalf of the company may be sufficient reason for third parties to assume employees retain such authority. Employers also need to realize that if they intentionally or carelessly create the impression an employee is authorized to make certain commitments on behalf of the company, whether intentionally or not, the employer may later be "estopped" from denying the agency relationship and avoiding a commitment that might actually have not been authorized. Also, even though the acts of an employee may not have been authorized, failure of an employer to promptly correct the error may result in an unintentional ratification of the employee's act.

The best way to protect against unintended liabilities created through agency representation is to be aware of such potential liabilities and take steps to avoid them. Employees should be clearly advised the extent to which they may be authorized to make commitments on behalf of the company; let them know the possible consequences of making unauthorized commitments. Advise employees to be careful about comments regarding the quality and suitability of certain products or services. The scope of authorized agency should be expressed in a written contract so there will be less of a possibility the scope of agency will be misunderstood. Both employers and employees need to be aware that a principal-agent relationship can be inferred by the unintentional acts of either one directed toward a third-party. Once you are aware of the results of such unintentional acts, they may be more easily avoided. If appropriate, purchase orders may specifically state all orders must be specifically authorized specific individuals, and may state all orders must be in writing. Once a company has established its preferred manner of conducting business, care should be taken to adhere to that method whenever possible. When an employer becomes aware that an employee has exceeded his or her authority to act on behalf of the company, the employer must promptly to correct the situation.

Intentional Acts
Finally, it is possible for an employer to be held responsible for the results of intentional acts of an employee. For example, if an employee acts inappropriately, either within or outside the scope of employment (as in an instance of loss of temper, sexual harassment or substance abuse), you may face claims of negligent hiring if you knew, or should have known, of past instances where the employee had similarly acted inappropriately. When hiring a new employee, check personal and professional references. If the employee will have duties away from your immediate supervision, conduct a reasonable background inquiry to be sure there are no skeletons in the employee's closet. Pay attention to potential warning signs of employee misbehavior, such as complaints from customers or complaints of other employees. An employee handbook should establish clear guidelines for appropriate behavior and set forth straight forward procedures for disciplining and/or terminating employment for inappropriate behavior. If an employer does not reasonably investigate questionable activities of employees or consistently implement employee disciplinary actions, you may be held liable for failing to properly supervise an employee who has exhibited a pattern of inappropriate behavior. Finally, if there are certain licensing or certification requirements for the work your employees will be doing for you, require and retain documentation that all of your employees are fully trained and properly qualified.

Conclusions
Even when away from the premises, the actions of employees can impose significant liabilities on an employer. Awareness of these potential liabilities may be the best defense against them. One you are aware of such potential problems, you can take the actions necessary to minimize liability from unauthorized actions of your employees.