Civil Litigation: "I'm Responsible for What?!?!?," Said the Business Owner
It will come as no surprise to even the most inexperienced business owner that their business will be liable for what its employees do while in the course and scope of there employment. If you own a plumbing business and one of your plumbers forgets to cut the water causing water to rush out and destroy the customer's hardwood floors, the business is going to be responsible for that. No surprises there. But what if that same plumber decides he just doesn't like the snooty client and comes back after hours to slash their tires? Is Joe's Plumbing on the hook for a new set of Goodyears? Well, maybe.
In Keith v. Health-Pro Home Care Services, Inc., 381 N.C. 442, 873 S.E.2d 567, 2022-NCSC-72 (2022), our Supreme Court clarified when and how an employer will be responsible for its employee's intentional torts (intentional as opposed to accidental wrongful acts). The facts in Keith are pretty egregious. The Keiths were an elderly couple with serious health issues and limited mobility. They hired the defendant, a home health care agency, to provide home health aides to assist them with their activities of daily living. The home health care agency, without performing much in the way of background checks, hired a Ms. Clark to serve as one of the Keiths' aides. During the course of her time in the Keiths' home, Ms. Clark learned their patterns, the location of their valuables, and the location of their hidden key. Ms. Clark then passed this information on to her accomplices who used it to break into the Keith's home and perpetrate an armed robbery. The perpetrators were subsequently identified when security cameras caught them at the local Walmart after the crime putting $500.00 in stolen coins into a Coin Star machine. Ms. Clark went to jail, and her employer found itself in a civil lawsuit.
Under the doctrine of respondeat superior, employers are liable for the actions of their employees that are performed in the course and scope of their employment. They are not, however, liable under that doctrine for actions that our not performed as part of furthering their employer's business. As stated by our Supreme Court as far back as 1938, and as reiterated in Medlin v. Bass, 327 N.C. 587, 398 S.E.2d 460 (1990), "if an assault is committed by the servant, not as a means or for the purpose of performing the work he was employed to do, but in a spirit of vindictiveness or to gratify his personal animosity or to carry out an independent purpose of his own, then the master is not liable." So does this mean the home health care agency could not be liable for Ms. Clark's armed robbery performed outside of working hours and not for any purpose related to her employment? The answer to that is "no."
In Medlin, our Supreme Court also recognized that an employer can be liable for negligent hiring, retention, or supervision where the plaintiff can prove:
(1) the specific negligent act on which the claim is founded;
(2) incompetency of the employee, by inherent unfitness or previous specific acts of negligence, from which incompetency may be inferred;
(3) either actual notice to the master of such unfitness or bad habits, or constructive notice, by showing that the master could have known the facts had he used ordinary care in ‘oversight and supervision; and
(4) that the injury complained of resulted from the incompetency proved.
But what about when the employee's acts are intentional as opposed to negligent? What duty does an employer have to protect a third party from intentional bad acts of its employee?
In Little v. Omega Meats I, Inc., 171 N.C. App. 583, 615 S.E. 45 (2005), our Court of Appeals acknowledged that question had not been clearly answered under North Carolina law. Relying on scholarly writing, the Little Court held that there must be nexus between the wrongful conduct and the employer-employee (or independent contractor) relationship, meaning:
(1) the employee and the plaintiff must have been in places where each had a right to be when the wrongful act occurred;
(2) the plaintiff must have met the employee as a direct result of the employment; and
(3) the employer must have received some benefit, even if only potential or indirect, from the meeting of the employee and the plaintiff.
At trial, the jury found for the Keiths, and the home health care agency appealed. The Court of Appeals held the the home health care agency was entitled to judgment notwithstanding of the verdict (which in layman's terms means an action by the trial judge stating the jury got it wrong and entering a judgment contrary to the jury's action). The Court of Appeals based its holding on its assertion that none of the three Little elements were satisfied since Ms. Clark and her co-conspirators did not have a right to be in the Keiths' house after hours, the "meeting" was for a robbery and therefore not part of the home health care providers services, and that the home health care agency did not benefit from the "meeting."
The Supreme Court then reversed the Court of Appeals and held that Little did not provide a rigid recitation of requirements that must be proven, but rather listed non-determinative factors to be considered when deciding whether the employees wrongful acts were foreseeable to the employer, thus creating a duty to protect third parties. As stated by the Court, the Keiths simply needed "to present evidence to support each elements of negligent hiring, retention, and supervision set forth in Medlin and to support a nexus between the employment and the injury as required by Little. Per the Court's analysis, the Medlin elements were satisfied where:
1. the employer had hired Ms. Clark despite her criminal record;
2. the existence of the criminal record was sufficient for the employer to have constructive notice of Ms. Clark's unfitness;
3. as demonstrated by her criminal history, Ms. Clark was unfit to serve in a position looking out for vulnerable persons; and
4. the decision to put Ms. Clark over the Keiths' care resulted in the robbery.
The Court held Little's nexus requirement was satisfied where:
1. the Keiths were daily customers of the defendant employer and had been for years;
2. the defendant employer assigned the intentional tortfeasor employee to work for the plaintiffs inside the Keiths' home, thus participating in the meeting between Ms. Clark and the Keiths; and 3. the defendant employer gained financially from the continued meetings between Ms. Clark and the Keiths.
Based on that analysis, the Supreme Court reversed the Court of Appeals, which reinstated the jury's verdict for the Keiths.
So, what does a business owner do with all that? The case seems to make it a lot easier for client to hold a business responsible for an employee's intentionally wrongful acts. The case takes much of the punch out of Little to the point it will almost have no real application where the injured third party is a client as opposed to a random person on the street. It is thus even more important for businesses to be sure they are not going to be liable under Medlin for negligent hiring, retention, and supervision. This means thorough background checks, stringent ongoing supervision, and other screening and monitoring measures to be sure your employees are not the types of people who commit armed robberies in order to steal $500.00 in rolled coins!