UNRAVELING THE THREADS OF RESPONSIBILITY: A NEW LENS ON EMPLOYER LIABILITY FOR EMPLOYEE MISCONDUCT
Employers can be liable for negligent hiring and supervising employees. Recently, the Court of Appeals examined the issue of employer liability for negligent supervision and retention, providing us valuable insight into the ever-changing world of employer liability. Let’s explore this concept, its limitations, and when it applies.
Employer Liability for Negligent Conduct
Negligent supervision and retention is a legal concept based on negligence. The court in Solomon v. City of New York held that to plead negligence, a plaintiff must allege that (1) the defendant had a duty to the plaintiff; (2) the defendant breached that duty; and (3) the plaintiff’s injuries proximately resulted from that place. The court in Moore Charitable Found. v. PJT Partners, Inc. ruled that when claiming negligent supervision and retention, a plaintiff must allege (1) the employer knew or should have known of the employee’s propensity for the sort of behavior that caused the plaintiff harm; (2) the employer knew or should have known of their ability to control the employee and the need to exercise that control; and (3) the employee committed tortious acts on the employer's premises or using resources accessible to them solely through their status as an employee. Regarding the first element, the “notice” element, the Brandy B. v Eden Cent. Sch. Dist. court ruled that for prior conduct to satisfy the part, “that conduct must be similar to the injury-causing act.”
The Case at Hand
A. Facts of the Case
Moore Charitable Found. v. PJT Partners, Inc., involved an employee of the defendant's investment bank who stole over $8 million in fees from the defendant to fund his gambling addiction. When the defendant’s back office inquired about the missing commissions, the employee provided a “sloppy” cover-up. After gambling away the $8 million, the employee, using his company-affiliated email address, emailed the plaintiff, a charity organization, and sold them on a purportedly safe $25 million investment. Of course, the employee gambled away most of the money and got caught.
B. At Trial and First Appeal
The trial court dismissed the negligent supervision and retention claim, ruling that the defendant did not have notice of the employee’s propensity to commit the behavior that caused the plaintiff’s harm. The Appellate Division affirmed the dismissal of the claim. Further, it noted that the plaintiff was not a “customer” of the defendant, which is fatal to a negligent supervision and retention claim as the defendant did not owe a duty to the plaintiff.
C. The Court of Appeals Overrules
The Court of Appeals disagreed on both issues. First, the court held that the defendant did have notice of the employee’s propensity to commit such acts because of the employee’s sloppy cover-up regarding the missing fees. Thus, the defendant had reason to know the employee had a propensity for such behavior. Additionally, after balancing multiple factors, the court ruled that the defendant owed the plaintiff a duty even though the plaintiff was not the defendant’s customer. The court emphasized society’s reasonable expectations of the parties involved and determined that the employer should carry the risk. More importantly, the court ruled that no special relationship must exist between the victim and the employer/employee for a Plaintiff to succeed under a negligently hiring and supervising claim.
Implications for Employers
The court ruling carries significant implications for employers regarding their legal obligations and risk management strategies:
A. Proactive Measures
Employers should proactively address and manage the actions of their employees, particularly when there are indications of potential harm. This includes implementing policies, training programs, and appropriate supervision to mitigate risks. Furthermore, employers should promptly investigate and address any complaints against their employees.
B. Duty of Care
Employers must exercise ordinary care to identify and address employees' tortious propensities. By fulfilling their duty of care, employers can create a safer work environment and reduce the likelihood of harm caused by employees.
The recent court ruling clarifies the notice element for a negligent supervision and retention claim and highlights the need for employers to be proactive. Employers should be aware of their legal obligations and take steps to prevent foreseeable harm caused by their employees. If you have been a victim of a tortious act resulting from an employer's negligent supervision and retention, Yassi Law possesses the specialized expertise required to handle your case. With our extensive understanding of the relevant legal precedents, you can trust Yassi Law to advocate for your rights effectively.
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