In some circumstances, your company may be legally responsible for harm caused by its employees. Under a handful of legal theories, courts have held employers liable for injuries their employees inflicted on coworkers, customers, or total strangers. Here, we explain those legal theories -- and a few commonsense steps you can take to steer clear of trouble. (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).)
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. In other words, 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. If the injury caused by the employee is simply one of the risks of the business, the employer will have to bear the responsibility.
But if the employee acted independently or purely out of personal motives, the employer might not be liable. Here are a few examples to illustrate the difference:
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. If your employee caused the injury while acting within the scope of employment, you will have to answer to the victim.
Workers' compensation generally protects you from lawsuits by injured employees. If an employee injures a coworker while acting within the scope of employment, the coworker probably won't be able to sue your company. Instead, the coworker can make a workers' compensation claim to receive payment for lost wages, medical bills, and so on. Employees can sometimes sue outside the workers' compensation system if their injuries were caused by their employers' intentional misconduct, but that generally won't be the case if they are hurt by another employee who is simply doing his or her job.
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 -- in fact, it is often used to hold an employer responsible for a worker's violent criminal acts while working, such as rape, murder, or robbery.
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 have had to pay up:
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: