Protecting Yourself From Rogues and Rascals In Your Employ

1. Protecting Yourself From Rogues and Rascals In Your Employ When Vice-Principals, Employees, Agents and Supervisors Go Astray Kevin Sadler kevin.sadler@bakerbotts.com512.322.2500

2. Employer Liability Four Main Areas • Vicarious Liability • Vice-Principal Liability • Negligent Hiring, Training, Retention, and Supervision • Quid Pro Quo -- Strict Liability for Supervisor's Sexual Harassment Conduct

3. Vicarious Liability • Employer may be held liable for its employee's tortuous acts if the act is • Within the scope of the employee's actual or apparent authority • In furtherance of the employer's business, and • For the accomplishment of the object for which the employee was employed • In other words, an employer is liable if the act fell "Within the course and scope of employment"

4. Vicarious Liability • Course and Scope • Conduct must be of the same general nature as that authorized or incidental to the conduct authorized • Employer need not approve or authorize • In furtherance of employer's business • Turns on employer's ability to control employee • No Liability where employee's act furthers self-interest • Assault based on personal animosity • Personal gratification

5. Vice-Principal Liability • What is it? • The corporation or employer is liable because the actions taken by a vice-principal of a corporation are the acts of the corporation itself • Vice-principal's acts or omissions must • Bear a relation to, • or be referable to, • or further the employer's business

6. Vice-Principal Theory • Who are vice-principals? • corporate officers • those who have authority to hire, fire, and direct employees • those engaged in the performance of non-delegable or absolute duties • those who manage the whole or a department or division of business In other words . . . • a vice-principal is a person who has the authority to hire, discharge, and direct employees of the corporation or who has the authority to manage the entire corporation or division of its business.

7. Vice-Principal Theory - Punitive Damages • The potential for punitive damages is what makes the vice-principal theory attractive to plaintiffs and their lawyers • the employer authorized the doing and the manner of the act • the employee was unfit and the employer was reckless in employing him, • the employee was employed in a managerial capacity and was acting in the scope of employment, • the employer ratified or approved the act

8. Vice-Principal Liability • Cases where punitive damages imposed • Purvis v. Prattco, Inc., 595 S.W.2d 103 (Tex. 1980): Hotel ejection case. employer liable for the acts of its manager who ejected a family from a hotel • Wal-Mart v. Itz, 21 S.W.3d 456 (Tex. App.--Austin, 2000): Wal-Mart liable for its manager's assault of a sexual nature when he "ordered the plaintiff to a back room under a business pretext" • Shearson Lehman Hutton, Inc. v. Tucker, 806 S.W.2d 914 (Tex. App.--Corpus Christi 1991, writ dim'd w.o.j): employer liable for slander when senior vice-president was considered a vice-principal and authorized to make statements about a former employee.

9. Negligent Hiring, Training, Retention, and Supervision What is it? Arises directly from the employer's conduct Plaintiff must show that • Employer owed her a duty • Employer breached that duty • Breach proximately caused her damages

10. Negligent Hiring, Training, Retention, and Supervision • Duty • Duty arises because of the special relationship that exists between the parties. • E.g., between the employer and the employee • Employer-employee relationship creates a duty to a third party only if the third party's harm is the result of the wrongdoer's employment. • No Duty if: • Individual bears no relation to the employer's business, OR • Injury cannot be traced back to the fact of the wrongdoer's employment

11. Negligent Hiring, Training, Retention, and Supervision • FORESEEABILITY • Plaintiff must establish that his injuries were brought about by the reason of the employment of the incompetent employee • Without this connection, "an employer would essentially be an insurer of the safety of every person who happens to come into contact with his employee simply because of his status as an employee."

12. Negligent Hiring, Training, Retention, and Supervision • Loram Maintenance of Way, Inc. v. Ianni • Facts: A crew member for Loram Maintenance was strung out on crystal methamphetamines, left the job site and shot and injured a police officer that approached him while he had an argument with his wife • $800,000 actual damages • $500,000 punitive damages

13. Negligent Hiring, Training, Retention, and Supervision • El Paso Court of Appeals upheld judgment because • supervisors knew of rogue employee's pervasive drug use (and rest of crew's) • prior incident where field clerk had told employee to go to next job site after he attacked another crew member's wife was "some asserted control" over employee

14. Supervisors & Sexual Harassment • Strict Liability -- Quid Pro Quo • “Something for something” • Job benefit or detriment is conditioned on submission to sexual advances • Hostile Work Environment • Conduct that alters the conditions of employment and creates an intimidating or offensive environment

15. Supervisors supervisor harassment + tangible detriment = AUTOMATIC LIABILITY The Rules supervisor no tangible good victim fails to harassment + detriment + policy + utilize policy = NO LIABILITY

16. What is reasonable care? 1. Effective and effectual anti-harassment policy 2. Prompt, thorough investigation 3. Specific, tangible action designed to stop harassment What is not reasonable care? 1. Failing to adopt/enforce anti-harassment policy 2. Failing to investigate timely, or at all 3. No record of action Reasonable Care to Prevent and Correct Harassment

17. Practical Tips To Avoid/Minimize Liability • Communication and Training • Appropriate Complaint and Investigation Procedures • Open Door Policy with Human resources • Limit Authority of Vice-Principals, Supervisors, and Managers

18. Communication and Training • Make sure employees aware of company policies • Periodic Reminder Training • Make sure that supervisors and managers are aware and routinely reminded of their • obligations under the law • company policies regarding harassment, discipline, and investigation • Train management about • their authority • how to deal appropriately with employees

19. Investigation and Corrective Action • When employee reports misconduct of a fellow employee or supervisor, employer MUST • Investigate claim • Take appropriate action such as • counseling, sensitivity training • corrective measures, disciplinary action • punishment • demotion • termination • Not appropriate to • ignore • suggest employee's talk it out • respond that "boys will be boys" or "that's just Bob"

20. Open Door Policy • Make sure • Human Resources has open door policy for employees • Have more than one channel for employee's to report misconduct or lodge complaints • Treat complaints against vice-principals, supervisors, managers, and other high-ranking officials just as seriously as those against "rank and file" employees

21. Limit Authority • Avoid granting too much authority to supervisors • Limit supervisor's authority to make ultimate employment decisions, i.e., hiring, firing, without • prior approval from higher management • advice and consent from Human Resources • Managers and Supervisors should be subject to same disciplinary procedures as other employees

22. Supervisors Should Know • Held to a higher standard • Discipline for ignoring harassment • Possible personal liability for ignoring harassment • Third party harassment • Must report all complaints • Duty to investigate if you have knowledge or should have knowledge that harassment may be taking place • No retaliation • Document everything • Confidentiality

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24. Kevin Sadler kevin.sadler@bakerbotts.com512.322.2500 www.bakerbotts.com