liability for supervisor's actions

Employers are strictly liable for the actions of its supervisors, managers or agents under the doctrine street cafeof respondeat superior.  Here are five key concepts employers must understand about the liability that could be created by managerial employees.

1. Respondeat superior holds employers automatically liable for actions by managers

The respondeat superior doctrine provides that “an employer may be held vicariously liable for torts committed by an employee within the scope of employment.”  As explained by the California Supreme Court in Patterson v. Dominio’s Pizza, there are “three policy justifications for the respondeat superior doctrine…prevention, compensation and risk allocation.”

2. Employers liability for non-supervisory employees

Under California’s FEHA, the employer is strictly liable for harassing action of its supervisors.  However, an employer is only liable for harassment by a coworker if the employer knew or should have known of the conduct and failed to take immediate corrective action.

3. Managers/supervisors under the respondeat superior doctrine

Under California’s FEHA, an employer is strictly liable for all acts of a supervisor.  A supervisor is generally defined as someone who has the discretion and authority to hire, direct, transfer, promote, assign, reward, discipline, direct, or discharge other employees or to recommend these actions.  See Government Code section 12926(t).

4. Which entities may be considered the employer under the respondeat superior doctrine

 In terms of defining who is the employers, courts in FEHA cases have looked to “the control exercised by the employer over the employee’s performance of employment duties….This standard requires a ‘comprehensive and immediate level of `day-to-day’ authority’ over matters such as hiring, firing, direction, supervision, and discipline of the employee.”  FEHA also defines employer to mean “any person action as an agent of an employer, directly or indirectly….”  This means that people not directly employed by the company can still create agency liability for the employer.

5. Issue: Can a franchisor be held liable for a franchisee’s supervisor’s conduct?

How far does the doctrine of respondeat superior extend when there are levels of agency, such as in a franchisor-franchisee relationship?  This was the issue addressed by the California Supreme Court in Patterson v. Domino’s Pizza.  The Supreme Court held that given the facts in that case, Domino’s Pizza was not liable for the franchisee’s manager’s acts.  The Supreme Court explained:

A major incentive is the franchisee’s right to hire the people who work for him, and to oversee their performance each day. A franchisor enters this arena, and becomes potentially liable for actions of the franchisee’s employees, only if it has retained or assumed a general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee’s employees.  Any other guiding principle would disrupt the franchise relationship.

The Supreme Court did not hold the franchisor liable in the case because it did not “control the workforce, and could not have prevented the misconduct and corrected its effects.”  However, the Court issued a warning to franchisors:

A franchisor will be liable if it has retained or assumed the right of general control over the relevant day-to-day operations at its franchised locations that we have described, and cannot escape liability in such a case merely because it failed or declined to establish a policy with regard to that particular conduct.