Most people know that the employer is normally responsible for injury to others caused by an employee engaged in the business of the employer. See our article on Torts.
But is that employer still liable if the employee was engaged in acts never authorized by the Employer, indeed perhaps specifically prohibited by the Employer?
That is the subject of this article.
The Basic Law:
In California, an employer is vicariously liable for the negligent and wrongful acts of his employees that are committed within the scope of employment. Thus, even if the employer did nothing wrong and was not negligent itself, if the employee was negligent or acting wrongful and a party is injured, the employer is liable. California Civil Code Section 2338; (“Unless required by or under the authority of law to employ that particular agent, a principal is responsible to third persons for the negligence of his agent in the transaction of the business of the agency, including wrongful acts committed by such agent in and as a part of the transaction of such business, and for his willful omission to fulfill the obligations of the principal.”) See also Carr v. Wm. C. Crowell Co. (1946) 28 Cal. 2d 652, 654 (“It is settled that an employer is liable for willful and malicious torts of his employee committed in the scope of the employment.”).
Whether an employee is acting within the scope of his employment is viewed broadly. John R. v. Oakland Unified Sch. Dist. (1989) 48 Cal. 3d 438, 447; “‘The fact that an employee is not engaged in the ultimate object of his employment at the time of his wrongful act does not preclude attribution of liability to an employer. [Citation.]”
The Personal Business Test:
Note that the employer is not liable if the employee substantially departs from his or her duties for purely personal reasons, but, ‘…where the employee is combining his own business with that of his employer, or attending to both at substantially the same time, no nice inquiry will be made as to which business he was actually engaged in at the time of injury, unless it clearly appears that neither directly nor indirectly could he have been serving his employer.’” Carr at 654.Farmers Ins. Grp. v. Cnty. of Santa Clara (1995) 11 Cal. 4th 992, 1004.
“[A]n employee's tortious act may be within the scope of employment even if it contravenes an express company rule and confers no benefit to the employer.” Farmers at 1004; see alsoPerez v. Van Groningen & Sons, Inc. (1986) 41 Cal. 3d 962, 970 (“the proper inquiry is not “'whether the wrongful act itself was authorized but whether it was committed in the course of a series of acts of the agent which were authorized by the principal.”); John R. v. Oakland Unified Sch. Dist. (1989) 48 Cal. 3d 438, 463-64 (“‘an employer can be liable for his employee's unauthorized intentional torts committed within the scope of employment despite lack of benefit to the employer.’”). Moreover, even though the employee may be serving his own interests, the employer may still be liable if those personal motivations were generated by or an outgrowth of workplace responsibilities, conditions, or events. Lisa M. v. Henry Mayo Newhall Mem'l Hosp. (1995) 12 Cal. 4th 291, 301-02. The key issue is whether the employee’s acts were foreseeable as it relates to the employee’s scope of employment.
However, if the employee’s actions were entirely for personal purposes and “substantially deviates” from his employment duties, then the employer may not be held vicariously liable. Farmers at 1004-05.
For example, “if the employee ‘inflicts an injury out of personal malice, not engendered by the employment’ or acts out of ‘personal malice unconnected with the employment’, or if the misconduct is not an ‘outgrowth’ of the employment, the employee is not acting within the scope of employment. Stated another way, ‘[i]f an employee's tort is personal in nature, mere presence at the place of employment and attendance to occupational duties prior or subsequent to the offense will not give rise to a cause of action against the employer under the doctrine of respondeat superior.’ In such cases, the losses do not foreseeably result from the conduct of the employer's enterprise and so are not fairly attributable to the employer as a cost of doing business.” Id.
Additionally, “an employer may be liable for an employee's act where the employer either authorized the tortious act or subsequently ratified an originally unauthorized tort. [Citations.] The failure to discharge an employee who has committed misconduct may be evidence of ratification.” Baptist v. Robinson (2006) 143 Cal. App. 4th 151, 169; California Civil Code Section 2339. “The theory of ratification is generally applied where an employer fails to investigate or respond to charges that an employee committed an intentional tort, such as assault or battery. . . A principal may be liable when it ratifies an originally unauthorized tort.” C.R. v. Tenet Healthcare Corp. (2009) 169 Cal. App. 4th 1094, 1110-11.
The danger for the employer is quite real if an employee engages in misguided efforts to “help” the business by engaging in wrongful actions, either negligent or intentional. So long as the employee was directing his or her efforts primarily for the business and not for personal reasons only, the employer is liable. As one client remarked, “If he commits fraud, I pay the bill if he did it trying to help the business despite what I told him?” Yes.
And note the danger of ratification. Recall that if the employer does not promptly and effectively take steps to counter the wrongful act, including reprimands, perhaps firing, making restitution, correcting the error…then even if the act was originally prohibited, the employer is directly liable.
This becomes acute since while the employee may also be liable, the employer is normally the “deep pocket” sought by a plaintiff. For all practical purposes, the employer is truly “his brother’s keeper” for the employee.
Protection for the employer is to be vigilant not only in training but in supervision of employees and the moment any dishonest towards third parties is noted…or negligent performance…to take immediate corrective action. Do not wait for the litigation, move now before the litigation erupts.