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Be Careful Who You Leave in Charge of Your Business – Their Failures are Yours

posted 2 years ago

Every few years, some act of major corporate malfeasance attains public infamy. A few “bad apples at the top” wreak havoc on the lives of employees. We can recall Enron, WorldCom, Bre-X, Nortel Network., Bear Stearns., Wells Fargo and, most recently, Theranos Inc.

A Simplicity employee, Daniel Eynon, suffered serious injuries in the workplace, for which he sued his employer. After being challenged by a colleague, he climbed a 14-foot-high chain hoist. As he descended, he caught the crotch of his pants on a hook near the bottom of the chain.  Another hook pierced his scrotum. The employee required surgery the same day — debridement and repairing lacerations, to be precise.

After the accident, Eynon said he screamed in pain and asked that an ambulance be called. When Gary, the supervisor, came into the shop, he allegedly laughed. When Eynon tried to show Gary his injury, Eynon claimed Gary refused to even look. According to Eynon, Gary refused to call an ambulance and instead drove him to the second shop location to talk with Doug, the service manager.

Doug first said that they would arrange someone to drive Eynon home to Simcoe and would get his car home for him. After insisting on being taken to the hospital instead, the supervisors finally agreed but , before departing, allegedly told Eynon to say, “this happened at home.” When they arrived at the hospital, Gary dropped Eynon at the entrance and did not accompany him inside.

The company and its witnesses offered a starkly different version of events but the court was swayed by Eynon’s version of events.

On appeal, the court found that the jury had acted reasonably in awarding punitive damages. The court stated that “the supervisors’ instructions to an injured employee to falsely report that he was injured at home, without more, warranted an award of punitive damages.”

It is hard to imagine a business owner or executive with even a modicum of caution and judgment managing the situation the way these two supervisors did.

Unfortunately, the court went on to note that the supervisors had clearly been “left in charge of the workplace” in the absence of Simplicity’s owners. There was, in the court’s view, “no question that the conduct of the supervisors was the conduct of their employer.”

It is generally a high bar for an individual employee to attract personal liability that lets their employer off the hook. It must be established that the individual acted maliciously, fraudulently, in bad faith, or where the act in question was clearly outside the scope of their authority.

Sometimes this high bar is met. For instance, in the 2007 case of Benko v. Scott, a supervisor sent letters falsely alleging theft against a subordinate. The letters, sent to three individuals, were defamatory. Their mailing was found to be entirely outside of the scope of the supervisor’s authority and responsibilities. The employer neither knew about nor authorized them. The judge noted that “the sending of such letters was so bizarre that an employer could not reasonably be expected to have safeguarded against such actions.”

Furthermore, the letters were handwritten, unsigned, and not on paper that identified the business.

However, the supervisor also made slanderous comments about the plaintiff, telling other employees that she had stolen inventory and that the RCMP was investigating her. These comments were utterly false. The court found that there was “no evidence” that these statements were authorized by the employer. Nevertheless, the employer was found vicariously liable for the slander, because the supervisor made the remarks “in the course of her work on behalf of the business” and the employer had “permitted her to supervise the plaintiff.”

It appears that the supervisor simply being ‘on the clock’ during the misdeeds was enough to trigger vicarious liability in that case.

Potential vicarious liability can be a hanging guillotine which employers do not consider often enough, let alone protect themselves from. Every seasoned business owner knows that they can’t be everywhere at once. At some point, you must rely on your subordinates. That is why it is crucial to hire carefully, train appropriately, and, most significantly, draft policies outlining employee expectations.

As the court noted in Simplicity, the jury found a “culture within the company whereby employees failed to place adequate importance on best safety practices,” and in particular , that there was a serious lack of proper safety training and documentation.

Had Simplicity had these elements in place, their argument that the supervisors ‘went rogue’ would have carried more weight and Simplicity’s liability reduced or eliminated.

It goes without saying that it is a good idea to consult experienced employment counsel to audit your practices and policies to ensure you have a ready defence to an argument that a rogue employee’s shenanigans attach to you. If, as an employer,  you have not considered these risks, you should.

BY HOWARD LEVITT AND JUSTIN KHORANA-MEDEIROS

Howard Levitt is senior partner of LSCS Law, employment and labour lawyers with offices in Toronto and Hamilton. He practises employment law in eight provinces. He is the author of six books, including the Law of Dismissal in Canada. Justin Khorana-Medeiros is an associate at LSCS Law.

THIS ARTICLE ORIGINALLY APPEARED HERE: https://financialpost.com/fp-work/howard-levitt-be-careful-who-you-leave-in-charge-of-your-business-their-failures-are-yours?video_autoplay=true

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