Your Employee Did What? Limiting Your Exposure When Employees Misbehave
According to my local Costco, the holiday season is upon us already, which means it is time to plan your office holiday party. The question I get asked a lot every year is whether or not to allow alcohol at that party. As a business owner, you want everybody to have fun, but you also do not want to deal with the consequences of questionable judgment calls induced by alcohol. Deep inside you are positive people would revolt if you ban alcohol completely. Well, you don't have to. That said, it would be a good idea to limit alcohol to 2-3 drinks maximum and to encourage (and pay for) alternative transportation to and from the party for your employees.
Hopefully, that would prevent about 90% of possible issues. But what is exactly your liability for the other unlucky 10% that you cannot possibly foresee or prevent? The good news is, there are some ways to reduce your exposure if your employees get you sued (and you will, just because in most situations, you are the only one with "deep pockets" worthy of a lawsuit). I'm going to let you insert your own joke about greedy, blood-sucking lawyers here.
Potential issues may come up not only from your office holiday party, but also from an accident with a company vehicle, harassment of an employee by a co-worker, and about a thousand other ways.
As an employer, you can be held liable based on the actions or omissions of your employees in one of two ways: direct liability, or vicarious liability.
Direct liability claims examples are negligent hiring, retention, supervision, and discrimination, just to name a few. Your can also become liable for your employees' intentional misconduct and negligent behavior if the you are found to have "ratified" the misconduct after the fact.
Vicarious liability may exist when the employee's negligent behavior generally occurs "in furtherance" of the company business (i.e. running a red light at an intersection while making a delivery to the employer's customer). Employer is also generally liable for bad acts of employees in management roles.
Just like limiting employees' access to alcohol during the holiday party and provide them with transportation shows prudent intent on behalf of employees and reduces the likelihood of "ratification" of bad behavior, there are general steps you should take to limit your liability:
Document, document, document. Make sure you have a piece of paper memorializing your efforts.
Conduct background and reference checks. This will not prevent negligent hiring claims, but can be helpful while defending claims based on direct liability.
Your subcontractors, temporary employees, and vendors should uphold your standards. Bonus points for creating and using company's Code of Conduct.
Insure yourself against potential liability. Insurance policies seem to reverse the course of Murphy's laws, and minimize your exposure in the event of a lawsuit.
Oh, and enjoy that party. 'Tis the season, y'all.
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