What is Vicarious Liability?

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During the course of business, there may be times when employees act inappropriately or in ways that negatively impact others. This could be anything from sexual harassment to hiring discrimination to theft. Employee misdeeds on the job may be handled appropriately on your end after they occur, but it is still possible for your business to be held liable for the employee’s actions, even after that employee is no longer working for your company.

This is what is known as “vicarious liability,” or instances in which your business is held responsible for the actions of an individual. Vicarious liability exists because of the way the law protects victims. Employment discrimination laws, for example, are in place to protect individuals from being denied a job due to hiring discrimination, or from losing a job for similar reasons. Laws against sexual harassment also exist to help protect victims from the effects of a hostile workplace.

Who Has Vicarious Liability?

Any business with employees, or even volunteers, can have vicarious liability. As long as you have others performing duties for your business, those individuals’ actions may be seen as reflective of your company’s lack of solid policies or protocols intended to prevent incidents from occurring.

Your liability extends beyond just purposeful acts by employees as well. Your business can be held liable for acts of omission by employees, as long as those omissions resulted in harm to someone else. In legal terms, your business is considered liable under the “respondeat superior” doctrine, which makes your business or an authority figure within your business liable for the actions of an employee, as long as those actions occurred while the employee was performing contracted duties.

How to Protect Against Vicarious Liability

There are several ways you can protect your business against the high risk of vicarious liability. One important step to take is to ensure that your business has created, distributed, and trained employees on policies in the areas where you may face such liabilities. Ensure that your business has updated policies and employee training in areas such as:

  • Employment discrimination
  • Harassment
  • Racial, cultural, and religious sensitivity

Of these, employment discrimination and harassment are the areas where employers most often face vicarious liability scenarios. It’s important to update policies and hold regular staff training in these areas to reduce incidents and help to limit your liability.

Aside from updating policies and providing regular training for employees, certain insurance policies may cover such incidents as well. Employment Practices Liability Insurance (EPLI) is a key insurance designed to protect against employment discrimination issues where your business might be vicariously liable. EPLI will also mitigate your liability for harassment claims.

In other vicarious liability issues outside of discrimination and harassment, you may need to consider Professional Liability Insurance. This policy is designed to handle issues of employees who commit professional, work-related errors that could come back to your business.

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