QUESTION:    WE WORRY ABOUT GETTING SUED FOR FIRING PEOPLE, BUT NOW ARE WE BEING SUED FOR NOT FIRING SOMEONE?

ANSWER:        NEGLIGENT HIRING, RETENTION AND SUPERVISION OF EMPLOYEES CAN COST YOUR COMPANY MONEY!

Employers are conditioned by discrimination lawsuits to avoid background checks and to avoid disciplining and firing workers.  For example, so called “ban the box” statutes forbidding including questions about past criminal convictions on employment applications have caused employers to be lax in hiring standards. Wrongful termination lawsuits have made employers wary of disciplining or firing underperformers.

Nevertheless, members of the public can and do sue companies
whose workers commit crimes or cause other harm.

The employees stole from the customers???!!!

Employees of American District Telegraph Corporation (“ADT”) stole thousands of dollars worth of liquor from International Distributing Corporation (“liquor store”).  Ironically, ADT was hired by the liquor store to provide burglar alarm services. International Distributing Corporation v. American District Telegraph Company, 569 F.2d 136 (D.C. Cir. 1977).

ADT agreed to provide burglar alarm service to the liquor
store.  When ADT received an alarm signal
at its monitoring station, its employees were dispatched to the liquor
store.  The ADT employees could enter the
liquor store using keys provided to ADT for that purpose.  “Unfortunately, this practice proved
tantamount to letting the wolf into the sheep fold.” 

The ADT employees, George E. Hines and Walter T. Smith, Jr.,
“Repeatedly stole large quantities of liquor after using their keys to enter
and check on real or bogus alarms.”

The liquor store sued ADT for breach of contract and for
tort claims.  ADT won the breach of
contract case, but the court limited damages to “$446.00 dollars in accordance
with a limitation of damages clause in the contract.” 

We can’t be responsible for our workers’ criminal acts, can we?

George and Walter “regularly stole” from the liquor store by
disabling the burglar alarms and misusing the keys they were provided.  The court said ADT was not liable on a theory
of respondeat superior for the acts
of its agents because the thefts were not “undertaken on the employer’s
behalf.”  “It is clear that the thefts in
this case were ‘simply a personal adventure’ which did not spring from any
purpose to serve the employer.”

But that wasn’t the end of the story for ADT.

If you’re going to hire crooks, at least supervise them!

Employers can be liable for negligently breaching the duty
to supervise employees.  Restatement (Second) of Agency § 213(c)
and Restatement (Second) of Torts §
317.  The employer has a duty to exercise
reasonable care to supervise and control employees to prevent them from
intentionally or negligently harming others or their property.  If an employer breaches this duty of care in
its hiring, retention, or supervision of its workers, it can be liable for the
damages caused by the workers.  As you
can imagine, those damages can sometimes be very large!

ADT did not use reasonable care in supervising George and
Walter.  “The thieves were able to bypass
the alarm system and enter the protected premises at will, conducting a
burglary of ADT’s customers nearly every other day and looting [the liquor]
store 10 to 15 times.” 

Occasionally spot checking on George and Walter was
inadequate when they were put in positions where they could conduct major
thefts under the guise of servicing the burglar alarm systems.  ADT should have done more to oversee its
workers.

Lessons learned?

While you have to be careful about firing employees and discriminating against employees, you also must be careful not to let your employees harm customers and the public.  If you need advice about proper hiring, retention and supervision of employees please call me.

Michael R. King mking@gblaw.com 602-256-4405

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