While people are not normally responsible for the actions of others, employers are sometimes sued under the doctrine of “respondeat superior” when their employees’ actions or omissions create liability. Employers become liable under this doctrine when their employees injure a third party through negligent or intentionally harmful acts committed within their employment. Vicarious liability for the actions of an employee may arise even if the acts were not ordered or approved.
When determining whether an employee’s actions were within the scope of their employment, the court examines a number of factors. If the actions were performed at work or during the employee’s shift, the court will likely consider claims of vicarious liability. Similarly, if the actions were intended to benefit the employer and were foreseeable by the employer, claims under vicarious liability will likely succeed.
Typically, the doctrine of “respondeat superior” is applicable to employer-employee relationships. Whether or not such claims are valid depends on whether the negligent worker is an employee or not. In this context, the courts usually consider this by examining who has the right of control over the worker. If the employer can control the worker’s performance of tasks that they were hired to perform, the worker is likely an employee for the purpose of claims under vicarious liability.
The best way for employers to avoid vicarious liability is to supervise employees and to terminate careless or troublesome workers. Oversights in an employer’s supervision and a negligent employee’s rocky performance history provide fuel for claims, as the plaintiff will argue that the employer should have known that oversights and poor employee performance could lead to the harm that the plaintiff suffered. When employers do not thoroughly investigate an employee’s misconduct and a claim against them later arises due to that misconduct, courts sometimes infer that such willful blindness either ratifies the employee’s actions or is itself cause for liability due to the employer’s negligent oversight.
The Benefits of Employer-Employee Agreements
The foundation of an employer’s relationship with employees is the employment contract. An effective contract will clearly communicate the expectations and responsibilities of both parties so that the employee does not later feel like he was misled. This fosters a healthy business relationship and reduces the likelihood of lawsuits. Employers sometimes face breach of contract claims from current and former employees, siphoning money away from the business for settlements and legal fees. These claims often arise from the use of standard form contracts with poor or ambiguous phrasing. Since KM&A’s team of business and employment experts regularly craft custom contracts for all kinds of employment situations, we know the tricks that plaintiffs’ attorneys use to wrestle money out of employers’ pockets. While no contract can eliminate the possibility of legal trouble, strategic measures lay the groundwork for defensive maneuvering later on should the threat of litigation arise.
While courts in Pennsylvania do uphold some restrictive covenants such as noncompete agreements, these agreements are generally disfavored by the courts who view restrictions of trade with suspicion. Because they are afforded such a high level of judicial scrutiny, noncompete agreements need to be custom crafted by an experienced team of business attorneys. Pennsylvania’s courts have three main requirements that all noncompete agreements must fulfill in order to be upheld:
- The restrictions that are imposed by the agreement must be incident to the employment relationship between the contracting parties;
- The restrictions must be reasonably necessary in order to protect the employers legitimate business interests;
- The restrictions must be reasonably limited both geographically and in duration.
Each of these requirements is highly dependent upon the context of the agreement and nature of the business, which means that legal research is required for a sound agreement. Noncompete agreements cannot be deployed to stifle competition from former employees because there must be a tangible business interest that is protected by the agreement. Both sides have to receive something from the agreement. In signing noncompete agreements, the employer typically receives protection for legitimate business interests and an employee receives employment. Meanwhile, a current employee must also receive a tangible benefit from a noncompete agreement such as a raise or some other material consideration.
If employees have access to the trade secrets of your business, have them sign confidentiality agreements to prevent those secrets from leaking to competitors. A trade secret may be a number of things from a formula to client or operations information; it must, however, be substantially secret and valuable to competitors. If the information is publicly available or easily attainable, it is not a trade secret.
These agreements restrict former employees from soliciting either former clients or business colleagues. This prevents former employees from competing with their former employers by pursuing their client base or using contacts with business associates to poach employees or gain some other competitive edge. Like the noncompete, this type of agreement is only enforceable if its terms are reasonable and relevant to the employer relationship that exists or existed and must also be supported by some form of material consideration.
Take a scenario in which a former employee of yours has been picked up by the competition and is now competing with your business or divulging trade secrets despite the fact that they signed a restrictive agreement. Between the time it takes to file, settle, or win a case like this, great damage to your business could already be done. In this type of situation, we pursue preliminary injunction to immediately stop the former employee from causing harm. These temporary court orders stand until a final decision has been made, and a high standard must be met before the court orders them.
Compensation and Severance Packages
Severance packages serve as a benefit to employees, providing compensation after their employment ends while they search for or transfer into a new job. From an employer’s standpoint, the essential function of these packages is to limit their liability by making the benefits of the package contingent upon the employee waiving subsequent claims against the employer. Similarly, noncompete, non-solicitation, and confidentiality agreements can be included. This does not mean that severance packages should just be blunt instruments. A well-crafted severance package creates good will between parting employees and their employers while clearly outlining in plain English the requirements of the agreement.
In Pennsylvania, an employer may at any time terminate their workers’ employment and barring a contractual or statutory exception the worker will have no legal recourse. Considering the fact that there are at least a few dozen state and federal statutes that prohibit employers from discharging their employees for a myriad of reasons, “at-will” employment is somewhat of a misnomer. One of the most important things owners and managers can do to protect their businesses from lawsuits and fines is to become familiar with the major federal and states laws that govern the rights of employees.
Title VII of the Civil Rights Act of 1964, as amended
Workers are protected against employment discrimination on the basis of race, skin color, religion, sex, and national origin. Employers may not make decisions affecting a person’s employment if the decision is motivated by any of the above factors. When the effect of a decision motivated by any of these factors causes disparate treatment of or disparate impact on employees, those affected individuals have cause to file suit for employment discrimination.
Americans with Disabilities Act
The ADA prohibits employers from discriminating against qualifying employees with a disability. To qualify under the law, employees must have a physical or mental impairment that significantly limits one or more of their major life activities or be regarded as having such an impairment by their employer. Under the ADA, employers are saddled with a number of duties with respect to their disabled employees. KM&A’s employment law attorneys advise business clients on best practices and preventative measures against unwanted and expensive litigation. If you have a question about one of your disabled employees, ask before acting.
Age Discrimination in Employment Act
Employees who are more than 40 years old are protected from employment discrimination under the ADEA. Employers with more than 20 employees must comply with ADEA. Only when age is a “bona fide occupational qualification,” usually as a result of safety concerns, may an employer discriminate on the basis of age. Sound business practices like obtaining legal waivers of liability can greatly reduce the likelihood of having to face discrimination claims under the ADEA.
Fair Labor Standards Act
Every employer should be familiar with the basic provisions of the FLSA, which establishes a federal minimum wage and sets requirements for record-keeping, overtime pay and administrative procedures for recovering unpaid wages. One common violation under the law is failure to regularly pay wages. Employees may sue their employers under the act when they do not receive their pay for over a week of work. If the suit is successful, the employer may be liable for the unpaid wages as well as the employee’s attorney’s fees.
Family and Medical Leave Act
Under FMLA, eligible employees receive up to 12 weeks of unpaid leave for qualifying family or medical reasons. Employees are eligible for FMLA leave if they have worked for their current employer for at least 12 months or 1,250 hours and if their employer has at least 50 employees that have worked 20 or more weeks a year. Much like the Americans with Disabilities Act, FMLA protects qualifying employees from being discriminated or retaliated against due to their status under the law. Generally, employers may not take any adverse employment action against their employees due to their participation in FMLA leave. Participating employees are legally expected to return to the same or a comparable position after their leave, and any harassment by management due to an employee’s FMLA leave may be considered illegal interference with the employee’s exercise of rights.
There are a number of situational advantages in utilizing an independent contractor instead of an employee for certain services. The distinctions between employees and independent contractors entail a number of tax and legal implications, but business owners and managers should be aware that just because a worker is contractually designated as an independent contractor does not necessarily mean that they are legally not an employee. Workers that satisfy the legal criteria for being considered an employee are covered by state and federal wage and labor laws, regardless of their contractual classification or title.
Independent contractors are free from direction and control over their services, both contractually and in fact. They set their own hours, offer services to the general public, and perform services that are not completely unique to the business they are contracted with. In essence, an independent contractor is someone who offers services from an independently established trade. They do not hire or supervise for their employer, receive training, or have to comply with instructions that are outside of the scope of their contractual relationship.
Given the wide range of circumstances under which someone may be contracted, the intersection of state and federal statutes and regulations can be difficult to untangle. Willful or accidental misclassification of employees exposes businesses to costly litigation, fines, and liquidated damages. Before business owners solicit the services of an independent contractor, they should ensure that they are following all applicable state and federal laws.
Contact us if your business is dealing with any of the above issues because our team knows what to do in each of these situations.