Employer Liability for Employee Wrongs

At what price does all the employee information come? One cost often ignored by employers is potential employer liability for employee wrongs (torts) committed outside the scope of employment. That is, employer knowledge of employee activities opens employers to responsibility for employee misdeeds. Consider Jerry Sandusky as an example.

The Sandusky Scandal

On Nov. 5, 2011, Jerry Sandusky was arrested, charged with sexually abusing eight boys over a 15-year period. On June 22, 2012, Sandusky was found guilty on 45 counts of sexual abuse. Beyond Mr. Sandusky, his former employer, Penn State University, is facing many civil lawsuits for his crimes.

Jerry Sandusky was hired by the Penn State University football team as a defensive line coach in 1969. Sandusky worked for the football program until he retired as defensive coordinator after the 1999 football season. After retirement, Jerry kept campus privileges, including a Penn State athletic office and keys to the team locker rooms.

Sandusky was convicted for assaulting young boys in various locations, including the Penn State locker rooms and shower facilities. His assaults occurred before and after he left employment with the football program. According to a 267-page report commissioned by Penn State, the Freeh Report, Penn State leaders, including former President Graham Spanier and the late football coach Joe Paterno, knew about Jerry Sandusky's sexual abuse of young boys. That employer knowledge and absence of immediate corrective action opened the university to liability. As a result, legal experts estimate Penn State could eventually agree to lawsuit settlements and pay judgments exceeding $100 million. In a similar setting, sexual abuse cases by U.S. Catholic clergy have cost the church over $3 billion in settlements and attorneys' fees. Knowledge and inaction is a dangerous combination.

Bases for Liability

Negligent Hiring, Retention and Supervision

Lawsuits often are brought by injured parties against employers for the actions of tortfeasor employees. Using the doctrine of respondeat superior, employers are liable for an employee's wrongs committed within the scope of employment. When the employees commit intentional torts, as opposed to wrongs like negligence, respondeat superior usually provides no relief for victims. It is difficult for plaintiffs to prove intentional torts, like Sandusky's alleged child abuse, are within the scope of the employment relationship, the required test for respondeat superior.

Moving beyond the vicarious liability concepts of respondeat superior, employers also have potential liability for their own negligence. In all 50 states in the U.S., an employer has some form of a duty of reasonable care in selecting, retaining, or supervising its employees. The employer's liability rests on proof the employer knew ' or through the exercise of ordinary care should have known ' an employee's conduct would subject third parties to an unreasonable risk of harm. This is the exact point where employer actual or constructive knowledge of an employee's behavior is critically dangerous. It is not necessary under the law for an employer to foresee the particular injury that occurred to a third party, but only that the employer should reasonably foresee an appreciable risk of harm to others.

Application of Law to Penn State

In the case Brezenski v. World Truck Transfer, the Superior Court of Pennsylvania pronounced the legal test for the Sandusky torts: “It has long been the law in this Commonwealth that an employer may be liable in negligence if it knew or should have known that an employee was dangerous, careless or incompetent and such employment might create a situation where the employee's conduct would harm a third person.”

As an artificial entity, Penn State can only know facts through the knowledge of university agents. Based on the Freeh Report, various key Penn State agents such as Spanier and Paterno knew of the danger posed to third parties by Jerry Sandusky. This knowledge came while Sandusky was still a Penn State employee.

Employers and Information

We are coming to the end of the “ostrich era” for employers. In the past, employers often lacked extensive employee personal information or lacked extensive information about employee misbehavior. Employers would be able to claim ignorance about risks posed by employees committing torts outside the scope of employment. This is not true today, as data collected by employers on employees is great.

Actual employer knowledge of employee activities is not necessary for liability to attach. That is, it may not be a sufficient legal defense for an employer to claim ignorance of information captured electronically but not viewed by the employer. The court may hold the employer had constructive knowledge of information collected.

Today, with workplace monitoring of employees commonplace, employers are on notice of dangerous employee tendencies. For example, employers know which employees view Internet pornography at work. Most employers record employee Internet traffic. One court held that, based on knowledge of an employee's pornography viewing at work, the employer was liable to the victim when the employee later sent child pornography over the Internet. The victim was the 12-year-old stepdaughter of the employee. He sent nude pictures of his stepdaughter to Internet child pornography sites while he was at work. The court held the employer, knowing the employee visited pornography sites, should have stopped the behavior and was liable for the harm caused to the stepdaughter. In a similar fashion, employers know which employees are gambling over the Internet at work. Liability could be present to families harmed by gambling lost income. The possibilities for liability are many and varied.

The Solution

Knowledge of employer liability potential is the first step toward reducing a company's legal exposure. When the liability threat is recognized, an action plan may be developed to reduce liability risks. An action plan could involve the following steps:

1. Review all employee data collected by the employer to ensure the data collection does not violate federal and state privacy laws.
2. Next, ask if the data collected is necessary and relevant to the employer's business. Any data collection that is not strategically relevant to employer operations should stop. Some data is collected simply because the collection is technically possible, or because other firms are collecting similar data.
3. Establish a review process for collected employee data. Red flags should be set up for employee behaviors that pose risks to other employees or third parties.
4. Last, senior managers for the employer must ensure that timely and effective review of all red flags leads to necessary employment actions protecting others from unreasonable risk of harm.

Jeffrey Pittman is a Professor of Business Law at Arkansas State University.

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The late Joe Paterno and the recent Penn State football scandal illustrate a growing area for employer liability. Penn State's knowledge of an employee's misdeeds ' Jerry Sandusky ' has opened the university to enormous liability. While outside observers may agree that Penn State deserves liability for ignored child abuse, other companies may find they too are liable for situations where they are not so clearly culpable.

In the Workplace

Employers today are collecting more information on their employees than imagined possible even a decade ago. Employee e-mail messages are monitored; text messages also are monitored if company telephones are used. Workplace cameras are common. Using GPS technology, tracking devices are inserted into company cars. Employers know exactly where employees are in real time. Internet use is recorded at work, tracking websites visited and pages opened. Most employers will soon routinely check employee personal, off-duty use of social media such as Facebook. Employee background checks are commissioned. All of this information provides actual or constructive employer knowledge of employees' deeds and misdeeds.

At what price does all the employee information come? One cost often ignored by employers is potential employer liability for employee wrongs (torts) committed outside the scope of employment. That is, employer knowledge of employee activities opens employers to responsibility for employee misdeeds. Consider Jerry Sandusky as an example.

The Sandusky Scandal

On Nov. 5, 2011, Jerry Sandusky was arrested, charged with sexually abusing eight boys over a 15-year period. On June 22, 2012, Sandusky was found guilty on 45 counts of sexual abuse. Beyond Mr. Sandusky, his former employer, Penn State University, is facing many civil lawsuits for his crimes.

Jerry Sandusky was hired by the Penn State University football team as a defensive line coach in 1969. Sandusky worked for the football program until he retired as defensive coordinator after the 1999 football season. After retirement, Jerry kept campus privileges, including a Penn State athletic office and keys to the team locker rooms.

Sandusky was convicted for assaulting young boys in various locations, including the Penn State locker rooms and shower facilities. His assaults occurred before and after he left employment with the football program. According to a 267-page report commissioned by Penn State, the Freeh Report, Penn State leaders, including former President Graham Spanier and the late football coach Joe Paterno, knew about Jerry Sandusky's sexual abuse of young boys. That employer knowledge and absence of immediate corrective action opened the university to liability. As a result, legal experts estimate Penn State could eventually agree to lawsuit settlements and pay judgments exceeding $100 million. In a similar setting, sexual abuse cases by U.S. Catholic clergy have cost the church over $3 billion in settlements and attorneys' fees. Knowledge and inaction is a dangerous combination.

Bases for Liability

Negligent Hiring, Retention and Supervision

Lawsuits often are brought by injured parties against employers for the actions of tortfeasor employees. Using the doctrine of respondeat superior, employers are liable for an employee's wrongs committed within the scope of employment. When the employees commit intentional torts, as opposed to wrongs like negligence, respondeat superior usually provides no relief for victims. It is difficult for plaintiffs to prove intentional torts, like Sandusky's alleged child abuse, are within the scope of the employment relationship, the required test for respondeat superior.

Moving beyond the vicarious liability concepts of respondeat superior, employers also have potential liability for their own negligence. In all 50 states in the U.S., an employer has some form of a duty of reasonable care in selecting, retaining, or supervising its employees. The employer's liability rests on proof the employer knew ' or through the exercise of ordinary care should have known ' an employee's conduct would subject third parties to an unreasonable risk of harm. This is the exact point where employer actual or constructive knowledge of an employee's behavior is critically dangerous. It is not necessary under the law for an employer to foresee the particular injury that occurred to a third party, but only that the employer should reasonably foresee an appreciable risk of harm to others.

Application of Law to Penn State

In the case Brezenski v. World Truck Transfer, the Superior Court of Pennsylvania pronounced the legal test for the Sandusky torts: “It has long been the law in this Commonwealth that an employer may be liable in negligence if it knew or should have known that an employee was dangerous, careless or incompetent and such employment might create a situation where the employee's conduct would harm a third person.”

As an artificial entity, Penn State can only know facts through the knowledge of university agents. Based on the Freeh Report, various key Penn State agents such as Spanier and Paterno knew of the danger posed to third parties by Jerry Sandusky. This knowledge came while Sandusky was still a Penn State employee.

Employers and Information

We are coming to the end of the “ostrich era” for employers. In the past, employers often lacked extensive employee personal information or lacked extensive information about employee misbehavior. Employers would be able to claim ignorance about risks posed by employees committing torts outside the scope of employment. This is not true today, as data collected by employers on employees is great.

Actual employer knowledge of employee activities is not necessary for liability to attach. That is, it may not be a sufficient legal defense for an employer to claim ignorance of information captured electronically but not viewed by the employer. The court may hold the employer had constructive knowledge of information collected.

Today, with workplace monitoring of employees commonplace, employers are on notice of dangerous employee tendencies. For example, employers know which employees view Internet pornography at work. Most employers record employee Internet traffic. One court held that, based on knowledge of an employee's pornography viewing at work, the employer was liable to the victim when the employee later sent child pornography over the Internet. The victim was the 12-year-old stepdaughter of the employee. He sent nude pictures of his stepdaughter to Internet child pornography sites while he was at work. The court held the employer, knowing the employee visited pornography sites, should have stopped the behavior and was liable for the harm caused to the stepdaughter. In a similar fashion, employers know which employees are gambling over the Internet at work. Liability could be present to families harmed by gambling lost income. The possibilities for liability are many and varied.

The Solution

Knowledge of employer liability potential is the first step toward reducing a company's legal exposure. When the liability threat is recognized, an action plan may be developed to reduce liability risks. An action plan could involve the following steps:

1. Review all employee data collected by the employer to ensure the data collection does not violate federal and state privacy laws.
2. Next, ask if the data collected is necessary and relevant to the employer's business. Any data collection that is not strategically relevant to employer operations should stop. Some data is collected simply because the collection is technically possible, or because other firms are collecting similar data.
3. Establish a review process for collected employee data. Red flags should be set up for employee behaviors that pose risks to other employees or third parties.
4. Last, senior managers for the employer must ensure that timely and effective review of all red flags leads to necessary employment actions protecting others from unreasonable risk of harm.

Jeffrey Pittman is a Professor of Business Law at Arkansas State University.

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