Can You Sue an Employee for Incompetence?

Straight answers on suing employees when they screw up.

MANY TIMES, I’ve heard myself tell an employee, “It took me years to get this client; it could take you one minute to lose them. Don’t mess up.” We all depend on our employees to further our businesses. In your case it’s the design experts, salespeople, installation and service technicians, central station operators and customer service representations, among others.

What happens when your employee screws up and the alarm doesn’t work when needed? Maybe it’s a successful burglary loss, fire damage, environmental pollution or neglected medical emergency – serious injuries, significant losses, major lawsuit. Just thinking about sending the claim to your insurance carrier is enough to make you sick.

Who’s to blame? What if you can pinpoint it to one of your employees? Can you sue that employee for the loss or expect the employee to cover your loss? The general and prevailing law is, no, you can’t sue your employee. While you are responsible and liable for the negligence of your employee (called vicarious liability), it doesn’t work the other way around.

There may be exceptions for instances where the conduct of the employee is much more than negligence; more like willful and purposeful, intending to cause damage. Why? Because this result is consistent with public policy; it just wouldn’t be fair to the employee. It’s a cost of doing business to the employer.

What happens when your employee screws up and the alarm doesn’t work when needed? Maybe it’s a burglary loss, fire damage or neglected medical emergency – serious injuries, significant losses, major lawsuit. Just thinking about sending the claim to your insurance carrier is enough to make you sick.

Surprisingly, a rather recent case illustrates the principle best. An employee working for a farmers market was boiling eggs on a hotplate, left them to burn, started a fire and burned the farmers market down. The farmers market, which was the employer, turned to its insurance carrier for coverage and reimbursement. The carrier paid and then sued the employee (talk about an exercise in futility, but who am I to question great minds?).

The carrier was suing under its subrogation rights, which means by operation of law once it paid its insured it stood in the insured’s shoes; took its place. So the carrier was essentially suing as the employer. The court dismissed on motion for summary judgment on two grounds. First, this stupid insurance carrier had actually contracted away subrogation rights against employees in the policy so on that ground alone it should never have sued the employee. The court also dismissed because it held it would be “unfair to impose a duty of care on the employee” in this circumstance (ordinary negligence).

This case was in Nova Scotia Supreme Court (Portage La Prairie Mutual Insurance Co. et al. v. MacLean et al) but U.S. federal and state courts would rule the same way. Can you withhold wages to reimburse your business for your employee’s mistake or negligence? Maybe your service tech makes a mistake and you have to send another tech to fix it. You want to charge the first tech with the service call (don’t you wish?). Well, you can’t. In fact, you can’t withhold wages in almost all circumstances.

Better to pay the wages and then seek whatever remedy you may have, which is typically just terminating the employment. One notable exception is a disloyal employee. That employee usually forfeits whatever is owed. As an employer you should be prudent in your business operations, properly select and train your employees and carry sufficient insurance to protect you when you or your employees make a mistake.

About the Author

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Security Sales & Integration’s “Legal Briefing” columnist Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters.

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