Limiting Liability for Businesses

Employers are sometimes held legally responsible for injuries caused by their employees while they are working within the scope of their employment. For example, your employee is a delivery driver and while driving his delivery route, he rear-ends another vehicle at a stop light. You clearly did not go out and tell your driver to rear-end someone, but you as the employer would be responsible for your employees’ actions. Your employee was hired to make deliveries, and while acting within his scope of employment, a.k.a making deliveries, an accident happens. This responsibility of the employer is known as vicarious liability. There’s not always a way to prevent liability exposure, but your best shot is by understanding the concepts around limiting liability for businesses.

So, what if your employee is not acting within their scope of employment?

Say you are a restaurant owner in a tourist-friendly city. The visitors love their server and offer them a shot while they are finishing up their dinner. Your employer is well-liked, and this happens a few more times throughout the night. You as the owner have a no-drinking policy for all your employees.

As the night comes to a close all customers leave, and your employees are cleaning up the restaurant. Your employee who had taken several shots is now intoxicated but insists to the other servers that she is fine and will get a ride home. Your employee instead walks to her car and begins to drive home. On her way home she crosses the median and toward an incoming vehicle. The incoming vehicle swerves to avoid your employee and ends up running off the road and hitting a tree. No personal damage was done to either party, but the incoming vehicle is now severely damaged. Your employee has the minimum insurance coverage, in South Carolina $25,000 so the damaged vehicle decides to sue you, the employer, because your employee was coming home from work.

So, what is the difference between the two scenarios, and would you be liable for the latter? In the first scenario, your employee was hired to drive and while driving an accident occurred. The second scenario, your employee was acting after work had ended and clearly violated your no drinking on the job policy. You as an employer would state that the employee was not acting within their scope of employment, and you should not be held liable for their actions or injuries caused. You as the employer would try and limit your liability by removing your employees’ actions as far away from their employment by you. To be successful, the employer will need to be able to show they took actions to prevent such behavior or at least were not negligent in allowed it. For example, just having the no drinking policy would not be enough, but having a history of enforcing it and training employees that such behavior is not permissible would be quite persuasive.

As you can see, it’s not always clear as to why an employer may or may not be held liable. Employers can take precautionary steps to limit their liability and help remove themselves from situations in which they may be brought into a lawsuit.

  1. Define your employee’s scope of employment.

Clearly state in the job description what a prospective employee will be doing. If hired, have the job description signed by the employee stating they understand the description is what their scope of employment will be.

  1. Enforce your employee’s scope of employment equally.

If you as an employer have a policy in place, it is best to equally enforce this policy to the entire company. In the above example, if the restaurant owner let certain servers take alcohol offered to them but not others, this would be seen as an unequal policy enforcement. This unequal enforcement could be used against them. You also must be prepared to terminate employees that violate policies particularly safety-related policies. Read here to understand more about terminating employees.

  1. Have an employee guideline which outlines your company’s policies and procedures.

In order to let all employees know of policies and procedures, it is a good idea to have them in writing. These guidelines could be given out upon employment or their first day of work. For more tips on handbooks, read here.

If you are a bar or restaurant it is important to outline serving alcohol policies. Dram Shop laws govern injuries that arise from people who buy alcoholic drinks at bars and restaurants. Dram Shop lawsuits occur when an injured party brings suit for damages caused by an intoxicated individual. The injured party can sue the bar or restaurant for overserving a customer alcohol. A key aspect of Dram Shop law is negligently serving someone who they know or should have reasonably known to be drunk. Policies for serving and overserving alcohol should be addressed.

  1. Limiting Liability For Businesses By Utilizing Employee and Manager Trainings.

Companies may choose to host a training session separate from an employee’s first day of official work. During this session a company may choose to have different areas (human resources, security, etc.) come and present and explain the company’s policies and procedures. This opens the forum for employees to ask questions and have them answered in a timely manner.

  1. Identify potential risks and ways to reduce these risks.

As instances come up, it is important to reevaluate policies and procedures. If a better alternative is available, it may be a good option to see if this is feasible and/or necessary for your company.

  1. Have regularly scheduled training sessions to refresh employee’s scope of employment and company policies.

To ensure employees are kept up to date about your company’s policies and procedures, companies may require employees to attend additional training sessions or yearly meetings. This may serve as a refresher for all employees and ensure everyone is aware of any changes within the company.

Contact H|H’s business attorney to learn more about limiting liability for businesses.

Note that this is distinct from my law practice. If you are searching for personalized legal advice for your business in South Carolina, please contact me, Wesley Henderson, directly at wesley@hhlawsc.com or check out our firm’s website for more information.

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