|
Click
here to view newsletter PDF
Workplace Torts and Other Sources of Potential
Employer Liability
by Roy Klein
Introduction
Lawyers frequently summarize employment law in New York like this:
New York is an employment-at-will state. In the absence of a written
employment contract, an employer therefore can hire, discipline
or fire an employee for any reason or for no reason at all, as long
as the action is not discriminatory (i.e., based on such statutorily
proscribed classes as age, gender, disability or race/religion/national
origin).
Although generally accurate, this summary is misleading because
it only tells part of the story. In fact, it fails to address several
entire bodies of law under which employment claims can arise. This
article examines three such areas of potential employer liability
– workplace torts; violations of public policy; and disciplining
employees for their off-duty conduct.
Workplace Torts
The word “tort” encompasses a wide array of civil wrongs,
from negligence to defamation to fraud to false imprisonment to
invasion of privacy to assault to infliction of emotional harm.
Being in an employment relationship doesn’t insulate the employer
from liability for such torts. To the contrary, it may impose legal
duties on the employer that make him vulnerable to certain tort
claims. Chief among these are the torts of misrepresentation and
negligent hiring.
1. Misrepresentation
The term “misrepresentation” actually refers to two
separate, but closely related, torts – fraud and negligent
misrepresentation.
Fraud claims often arise in the workplace in the following contexts:
(a) “truth-in-hiring” cases, in which the plaintiff
employee alleges that the prospective employer made false statements
about the future to induce the employee to accept a job; (b) “continued
employment” cases, where the employer is accused of making
false representations to induce an existing employee to remain with
the company; and (c) “employee benefit cases,” where
the employer’s alleged misrepresentations concerned the terms
of the company’s benefits plan.
To prevail, the employee must prove that the employer knowingly
made false representations of material fact to induce the employee
to take certain actions, that the employee reasonably relied on
the employer’s false statements, and that the employee suffered
damages as a result of such reliance. In addition to compensatory
damages, the employer may be liable for punitive damages if the
employee can prove that the fraud was gross, wanton or willful,
or that the employer was guilty of a high degree of moral culpability.
Employers can minimize the risk of fraud claims by keeping a contemporaneous
written record of all communications with their employees. They
should also avoid unnecessary “puffing” about specific
jobs, employee benefits or the company in general. Any question
an employee or job applicant asks about the company should be answered
openly and honestly.
Unlike fraud, the tort of negligent misrepresentation does not require
a showing of
intentional misconduct (i.e., knowingly false representations).
Rather, the employee must prove that: (a) the employer had a duty
to impart correct information based on a special relationship with
the employee; (b) the employer imparted false or incorrect information
to employee; and (c) the employee reasonably relied on the incorrect
information to his detriment.
Significantly, the employer-employee relationship, taken alone,
generally is not sufficient to create the special fiduciary duty
necessary to establish a negligent misrepresentation claim. Rather,
some kind of confidential relationship within the employment arrangement
must be established in order to impose fiduciary duties on the employer.
These special relationships typically have been found to arise in
two contexts: (a) reductions in force (“RIF”)/early
retirement cases, where employers sometimes induce employees to
take early retirement by making promises or representations about
retirement plans or benefits that turn out to be inaccurate, and
(b) ERISA cases in which promises or misrepresentations made by
an employer’s plan administrators or
other fiduciaries about retirement and benefit plans turn out to
be false
2. Negligent Hiring And Retention
Negligent hiring and retention claims are different from most other
workplace torts because
– while they arise out of employers’ decisions to hire
and/or retain employees
– they typically are brought by third parties who were allegedly
injured by the employees in question rather than by any employees
themselves. In fact, an employee may be barred by Worker’s
Compensation laws from asserting a tort claim for damages arising
out of the misconduct of a negligently hired or retained co-worker.
To prevail on this tort against an employer, the plaintiff must
prove each of the following:
- the individual who committed the wrongful act was an employee
of the defendant employer.
- the employer owed the plaintiff a duty to hire an employee fit
for the
position.
- the employee was unfit for the position.
- the employer knew or should have known through its exercise of
reasonable diligence that the employee was unfit.
- there was a foreseeable risk that that the employee could harm
the
plaintiff.
- the employer’s negligence in hiring or retaining the employee
proximately caused the plaintiff’s injury.
- the plaintiff suffered damages.
While a negligent hiring/retention claim theoretically could be
made in almost any business or industry, they most often arise where
the employee is placed in a sensitive and/or unsupervised position
– e.g., child care workers (teachers, camp counselors, day
care workers), home health care aides, nursing home aides, security
guards, bouncers. Cases frequently turn on whether the employer
had a duty of care to the plaintiff and, if so, whether the employer
satisfied its duty of care in the hiring and retention of the employee.
The best way for an employer to avoid potential liability for negligent
hiring is to perform background checks on all applicants, the results
of which should be documented and maintained with the employer’s
other records. However, employers must take care in doing so in
order to avoid violating the prospective employee’s privacy
rights. For example, an employer must give the prospective employee
notice before seeking background verification from a consumer reporting
agency, and it should obtain a release from the applicant authorizing
the employer to obtain full and complete information from the person
or institution providing it.
Also, employers cannot ask applicants whether they have been arrested,
although they can inquire whether the applicant has ever been convicted
of a crime. But even if the applicant answers in the affirmative,
it may not automatically disqualify him from employment. The employer
must weigh all relevant aspects of the conviction to determine its
impact, if any, on the employee’s fitness for the job in question;
the employer cannot deny employment to an applicant based on his
history of criminal convictions unless there is a direct relationship
between a previous offense and the employment being sought or such
employment would involve an unreasonable risk to property, safety
or welfare.
But an employer’s obligations to third parties don’t
end once it has hired an employee. To the contrary, it has an ongoing
duty not to continue his employment if the employer knows, learns
or should know that the employee has dangerous propensities that
present a foreseeable risk of harm to others.
To avoid negligent retention claims, employers obviously should
carefully train and supervise their employees to evaluate their
fitness and – to the extent practical and possible –
dismiss any employee who it learns has dangerous propensities that
constitute foreseeable risks to third parties. In addition, pre-hiring
background checks should minimize negligent retention claims by
screening out potentially dangerous employees before they are hired.
Wrongful Termination In Violation Of Public Policy
As a general rule, there is no public policy exception in New York
to the employment-at-will doctrine. Historically, therefore, an
employer could discharge an employee who acted against the employer’s
interest, even if the employee’s conduct was for the public
good.
However, there are several recognized exceptions to this rule. First,
courts have held that employment in professions that require their
members to comply with codes of ethics and/or disciplinary rules,
such as the legal and medical professions, may create an implied
contract between the employer and employee that neither party will
be required to act outside the ethical standards of the profession.
Under this rationale, both law firms and medical practices have
been found liable for discharging employees who had insisted that
their employers comply with specific provisions of their respective
codes of conduct.
Second, New York has enacted “Whistleblower Laws” prohibiting
employers from taking retaliatory action against employees for reporting
certain types of unlawful employer activities. Third, the federal
False Claims Act authorizes qui tam actions – lawsuits in
which employees of government contractors bring suit on behalf of
themselves and the government alleging that their employers have
engaged in fraud against the government. As an incentive and reward
for bringing the lawsuit, the individual plaintiff is paid a portion
of any penalties assessed against the entity, with the remainder
paid to the government. And any employee who is discriminated against
by his employer for lawfully taking action under the False Claims
Act is entitled to “make whole” relief, including reinstatement,
twice the amount of lost back pay (as well as interest on back pay),
and compensation for special damages (including litigation costs
and reasonable attorneys’ fees).
How can an employer protect itself against these kinds of claims?
As a threshold matter, of course, the employer should refrain from
engaging in any improper, unethical or otherwise unlawful conduct
in the first place. If anemployee brings such conduct to the employer’s
attention, the employer should investigate it immediately and cure
any violations promptly. And any adverse personnel action against
the whistleblower should be based on grounds entirely separate from
and independent of the whistleblower’s complaints. See Labor
Law § 740(4)(c); Rogers v. Lenox Hill Hosp., 251 A.D.2d 244,
674 N.Y.S.2d 670 (1st Dep’t 1998).
Disciplining Employees For Their Off-Duty Conduct
Not surprisingly, whether an employer can discipline an employee
for his off-duty conduct turns on the nature of the particular conduct
in question. Such conduct generally falls into two categories –
lawful activities and unlawful activities.
As for lawful activities, New York law prohibits discrimination
against employees who engage in certain conduct outside work hours,
off work premises and without using the employer’s equipment.
The conduct includes: (1) engaging in political activities; (2)
engaging in lawful “recreational” activities; and (3)
using legal “consumable products.”
So, while it may be human nature to ask seemingly innocent questions
about an applicant’s or an employee’s hobbies or interests,
employers should refrain from doing so. Employers also should avoid
making statements (or rules) about employees’ off-duty activities
unrelated to work. Comments such as “the boss hates Mets fans”
or “we generally don’t hire smokers” later could
lead to claims.
As for unlawful conduct, we have already seen that certain off-duty
activities – such as violent criminal conduct – may
not merely allow an employer to discipline the employee in question;
it may actually compel the employee's discharge to protect the employer
against third-party claims of negligent hiring and/or retention.
On the other hand, we have also seen that a job applicant’s
past criminal conduct may not necessarily be a basis for refusing
to hire her. To reconcile these competing interests, the threshold
question is this: When does an existing employee’s unlawful
off-duty conduct become an employment issue?
The answer is that any adverse employment decision must be based
on conduct that indicates that the employee is unsuitable for the
particular position in question. In other words, the employer must
demonstrate that its decision was based on “business necessity.”
An arrest record alone does not constitute reliable evidence that
the employee is unsuitable. And even with respect to a criminal
conviction, the employer must show that it considered three factors:
the nature and gravity of the offense; the time that has passed
since the conviction and/or completion of the sentence; and the
nature of the job in question.
Because of the many variables that this standard raises, the legality
of any employment decision based on unlawful off-duty employee conduct
will depend on the unique and peculiar facts of the particular case.
This best can be demonstrated through a hypothetical fact situation.
- Your employee operates heavy machinery in a warehouse, where he
does not deal with other employees or the general public. He is
a reliable, productive worker. You learn that he has been arrested
for statutory rape. He denies the charges, claiming that he was
unaware of the girl’s age and that she consented to his conduct,
but he agrees to plead guilty to a lesser charge of sexual assault.
His unlawful conduct may not give you a basis for terminating him.
If the employee were charged with DWI, though, you might have a
basis for terminating him (unless, possibly, he was an alcoholic,
which could raise issues of disability discrimination).
- If, on the other hand, the employee were a high school teacher,
a sexual assault conviction would give the employer stronger grounds
for dismissal than a DWI conviction.
The combinations and permutations are endless. The point is that
an employer faced with unlawful, off-duty employee conduct should
carefully consider and evaluate the nature of the specific conduct
involved and its impact, if any, on the employee’s fitness
to perform his particular job before determining whether or how
to discipline the employee.
Conclusion
Tort law, discharge in violation of public policy and disciplining
employees for their off-duty conduct each provides fertile areas
for employment claims. An employer’s best defense is an active
awareness of the law coupled with accurate and complete record-keeping
policies. Employers also should obtain the advice of counsel before
discharging or significantly disciplining any employee. While these
steps cannot ensure that an employer will never be faced with lawsuits,
they increase the chance that such lawsuits will be disposed of
quickly and cost-effectively.
Roy A. Klein
November, 2009
This publication is distributed with the understanding that
the author, publisher and distributor are not rendering legal, accounting
or other professional advice or opinions on specific facts or matters,
and, accordingly, assume no liability whatsoever in connection with
its use.
Legal
Disclaimer
|
