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By: Melissa Iyer Julian, Esq.
Burch & Cracchiolo, P.A.
Phoenix, Arizona

Employees are the lifeblood of your business. They provide the necessary work to produce the products and services that keep the lights on and your investors happy. You expect them to act ethically and assume they’re doing their best until misconduct occurs leaving you wondering if you have to be your employee’s keeper.

In this article, I’ll share tips on what employers and business owners can do to protect themselves from liability for employee misconduct.

Who is responsible for employee misconduct?

You have employee job descriptions, and you’ve searched to find the right employees to grow your business. While it might feel like you can hand off duties and responsibilities, you must be aware of employee misconduct and its impact on the business.

As a business owner, you may be liable for damages caused by employee misconduct simply because the employee’s actions, loosely fall within the scope of the employee’s job.

Under Arizona law, “[c]onduct falls within the scope [of employment] if it is the kind the employee is employed to perform, it occurs within the authorized time and space limits, and furthers the employer's business even if the employer has expressly forbidden it.” Baker ex rel. Hall Brake Supply, Inc. v. Stewart Title & Trust of Phoenix, Inc., 197 Ariz. 535, 540, 5 P.3d 249, 254 (Ct. App. 2000).

In short, a business may be held responsible for its employee’s misconduct if it relates (even marginally) to the employee’s job duties.  Thus, even if it violates your policies or amounts to a crime, your business may be held 100% responsible for all of the damage your employees’ misconduct causes to third-parties.

How can employers prevent employee misconduct?

There are four actions that you can take to prevent employee misconduct. They include hiring the right people, ongoing training, and having checks and balances in place.

  1. Hiring the Right People: Employers and business owners must first find and hire the right candidate through a careful interview and selection process. Behavioral interviewing, background checks and references can help eliminate employees with poor track records. If you have managers, help them understand not only the mission and vision of the company – which are highly important to growing an organization – but also their role and expectations in the hiring process.
  1. Onboarding Employees: Employees must be qualified for the jobs in which they are placed. While you can assess skill in an interview, you may find that employees still need additional training to function efficiently in your business. Begin to integrate new employees into your company on day one by sharing your mission, vision and values, as well as your policies, procedures, and employee conduct expectations.
  1. Ongoing Training: Remind employees of their responsibilities and the standard of care that is expected in their role. Train them on policy or law changes related to the business, especially as it relates to their role. Help them understand why it’s important to follow the law and the consequences of misconduct. The more they are educated, the less likely they are to engage in misconduct because they have a greater understanding of how their actions impact the business and their livelihood.
  1. Checks and Balances: Create a system of checks and balances after you’ve hired and trained the employees that you believe are a good fit for your company. You never want to have one person overseeing a part of the business without accountability to others. Implement multi-layered supervision in key areas because employee misconduct often occurs when no one is watching. Having an audit or review process in place will go a long way to protecting the business and your bottom line.

Once you’ve done your best to prevent employee misconduct, you’ll want to make sure you’re covered in the event that it occurs. Review your insurance policies to make sure you have a clear understanding of the coverage you have in place for damage caused by employee misconduct as well as what you must do to abide by the policy to ensure coverage is provided fully and promptly when needed.  If you have concerns over the legal issues of employee misconduct in your business, contact us today.

For more information about Burch & Cracchiolo, P.A., please visit the International Society of Primerus Law Firms.