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 find my contact information here.
Best Regards,
Michael R. King
