rules

most employers are well aware that they may be held liable for injuries or damages to a third party resulting from the actions of their employees. Typically, for a retailer, this is considered in the context of an employee being negligent while performing his or her duties at the store. Employers may also be liable, however, for the actions of employees when they're away from the store. You need to be aware of these potential sources of "off-premises liability" and take steps to avoid them.



Vicarious Liability. An employer may be "vicariously" liable for the negligent acts of an employee, and may be jointly and separately liable for any damages caused by the negligent acts of employees. Vicarious liability applies only if injuries occur while the employee is conducting business, and if the acts that cause injury occur within the scope of the employee's work for the employer. Often, when determining whether workers have acted within the scope of employment, they are asked whether they put aside the employer's interests to pursue their own.

For example: You send one of your salespeople off on a trip to visit a key account. Things go well, the order gets placed and your salesperson takes the client out skiing to celebrate, at which time, the client takes a bad spill and breaks a leg. Are you liable for his injuries? Yes, an employee's negligence while demonstrating products or teaching clients in the field may be your liability. Some courts have even held that an employer may be held liable for an employee's slanderous statements made within the apparent scope and course of employment. Exposure to off-premises liability can be extensive.

Another common source of liability comes when an employee operates a vehicle on behalf of the employer, such as while delivering goods to a trade show or transporting clients to promotional events. The employer can be held liable for any damages resulting from an accident involving the employee.

To control the potential for vicarious liability, business owners should set clear guidelines concerning the activities an employee may undertake in the course of his or her employment. Prepare written job descriptions for your employees stating which actions are authorized and which actions are prohibited when employees are involved in company business. Establish 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 Relationship. 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 these goods or services. In many circumstances, an employer wants employees to be able to make commitments on behalf of the company. For example, you might give a salesperson the responsibility of writing orders at a trade show. The scope of the employee's authority to make such commitments must be clearly understood, however, by both of you. An actual agency relationship may be created through an express agreement, either written or oral, or through an agreement implied through the behavior of the employer and, perhaps, the employee. Problems occur when employers imply that an employee is an authorized agent, or when employees act without authority from their employer, 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 based on the actions of the employee, the employer or some other party. For example, if you give an employee authority to order goods at a trade show by directing that person to submit certain orders, others may then assume that the employee has the authority to make additional orders, even when you haven't consented. As a business owner, you should realize that if you carelessly create the impression that an employee is authorized to make certain commitments, you may be held to those commitments, especially if you don't promptly correct the error.

Make it clear to your employees what they are authorized to do, and let them know the possible consequences of making unauthorized commitments. Encourage professionalism and 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. 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're aware of the results of such unintentional acts, they may be more easily avoided. If appropriate, purchase orders may state that all orders must be authorized by specific individuals, that all orders must be in writing, and that terms cannot be modified by employees.

Intentional Acts. Employers may also 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 (a 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 acted in a similar inappropriate manner.

When hiring, 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 misbehavior, such as complaints from customers or other employees. An employee handbook should establish clear guidelines for appropriate behavior and set forth straightforward procedures for disciplining and/or terminating employment for inappropriate behavior. If you don't reasonably investigate questionable activities or consistently implement employee disciplinary actions, you may be held liable for failing to properly supervise an employee who has exhibited a pattern of bad behavior.

Be sure that your insurance policies cover acts of employees, and consult your legal advisor for advice pertaining to the laws of your state.

Even when away from the premises, the actions of employees can impose significant liabilities on an employer. The best defense is to be aware of potential problems and, when a problem rears its head, be prepared to act fast. Just because your employees are out of sight, doesn't mean they should be out of mind.