Negligent hiring and staffing practices could expose employers to a claim by a third party hurt by an employee
Employers have an obligation to use skill and care when hiring employees. In certain circumstances the failure to do so could result in a claim by a third party for damages against the employer based on negligent hiring.
A claim in negligent hiring can have a powerful advantage over a claim based on vicarious liability. In order for an employer to be liable under the doctrine of vicarious liability, a third party must show an employee engaged in misconduct while in the course of employment. In a claim for negligent hiring, an employer can be held directly liable for its conduct and liability can be imposed even when an employee’s acts were outside the scope of employment. It is therefore important for employers to become familiar with the circumstances in which claims for negligent hiring could arise and, more importantly, to learn ways to guard against such claims.
In 1990 Carey Dennis began the application process to become a sales agent for Mutual Life (now known as Clarica Life.) He underwent an extensive application process which involved a number of tests to determine his suitability as a sales agent.
As part of the process Clarica required a number of references in order to consider his working history. A Mutual Life agent spoke with one of Dennis’ former employers. He was told Dennis was suspected of stealing from the company, both before and after he was terminated. The agent was told “they could hire Mr. Dennis if they wished, he is a smooth talker, but he’ll hurt somebody. Maybe not right away, but eventually he will get somebody.”
This information was apparently not passed on to Mutual Life. In January 1991 Dennis was hired as a Mutual Life sales agent.
In 1992 Nanna Wilson was referred to Dennis because she wanted to invest money she received from her late husband’s estate. Dennis told her she could get a good rate of return from Mutual Life. Over the next several months, Wilson issued cheques at the direction of Dennis. The first cheque was payable to Mutual Life for $30,000 and the balance of the cheques were payable to Dennis personally for $230,000. Wilson relied on Dennis’ advice and believed she was investing her money with Mutual Life.
In 1997 Wilson heard rumours that Dennis was in trouble. She visited the Mutual Life office to inquire about her investments. She was shocked to learn Mutual Life had no record of her having any monies on account with Mutual Life at the time. Wilson subsequently brought a lawsuit to recover her money.
One of the claims advanced by Wilson was that Mutual Life was negligent in hiring Dennis. Wilson asserted that Mutual Life knew, or should have known, about his prior employment problems and, as a result, should not have hired him. The court agreed with Wilson and found Mutual Life was negligent in hiring Dennis because it put him “in a position where he could clothe himself with the reputation of Mutual and as a result be in a position to misappropriate funds which he received on behalf of Mutual.”
The British Columbia Court of Appeal recently affirmed the trial judge’s decision that Mutual Life was negligent in its hiring of Dennis. The appellate court rejected Mutual Life’s argument that prospective employers would refuse to hire individuals who are alleged to have committed fraud to avoid the risk of potential exposure for liability if the trial judge’s finding were upheld.
How to guard against a claim
To prevent a claim for negligent hiring, employers should conduct a pre-hiring investigation of candidates. Employers have many screening tools: applications; resumes; references; interviews; education verifications; checks of criminal and credit records; driving records; professional licence verifications; drug testing; and personality testing. Which, if any, of these methods should or could be used depends on provincial and federal statutes as well as the common law.
The more a position exposes third parties to harm, the greater the duty to investigate. A daycare worker may require more screening than an office administrator. It is possible that even if an employer performs an adequate investigation of a job candidate, the employer may still not uncover damaging information. The standard courts appear to impose on employers is a common law duty of reasonable care. Employers should record the details of all steps taken when investigating candidates.
Negligent retention
Closely related to the concept of negligent hiring is negligent retention and negligent supervision. The law on both negligent retention and negligent supervision cases recognizes an employer’s duty to avoid employing dangerous people does not end at the hiring .
A claim for negligent retention or supervision can be made in addition to or instead of a negligent hiring claim. In some circumstances a negligent hiring claim is not viable but a negligent retention or supervision claim is. The difference between negligent hiring and negligent retention or supervision is the time at which the employer’s negligence occurs. With negligent hiring it occurs at the time of hiring; with negligent retention or supervision it occurs in the course of employment.
An employer may be liable for its negligence in retaining or supervising an employee if an employer knew or should have known the employee would likely harm third parties and failed to take reasonable steps to prevent such harm. In circumstances relating to negligent retention or supervision, an employer may be obliged to conduct an investigation and depending on the results of the investigation, the employer may want to consider reassigning or even discharging the employee.
For more information see:
• Wilson v. Clarica Life Insurance Co., [2001] B.C.J. No. 2668 (B.C.S.C.)
• Wilson v. Clarica Life Insurance Co. (2002) B.C.J. No. 2042
Mark Mason is an employment law lawyer and litigator with Goodman and Carr LLP in Toronto. He can be reached at (416) 595-2171 or [email protected].
A claim in negligent hiring can have a powerful advantage over a claim based on vicarious liability. In order for an employer to be liable under the doctrine of vicarious liability, a third party must show an employee engaged in misconduct while in the course of employment. In a claim for negligent hiring, an employer can be held directly liable for its conduct and liability can be imposed even when an employee’s acts were outside the scope of employment. It is therefore important for employers to become familiar with the circumstances in which claims for negligent hiring could arise and, more importantly, to learn ways to guard against such claims.
In 1990 Carey Dennis began the application process to become a sales agent for Mutual Life (now known as Clarica Life.) He underwent an extensive application process which involved a number of tests to determine his suitability as a sales agent.
As part of the process Clarica required a number of references in order to consider his working history. A Mutual Life agent spoke with one of Dennis’ former employers. He was told Dennis was suspected of stealing from the company, both before and after he was terminated. The agent was told “they could hire Mr. Dennis if they wished, he is a smooth talker, but he’ll hurt somebody. Maybe not right away, but eventually he will get somebody.”
This information was apparently not passed on to Mutual Life. In January 1991 Dennis was hired as a Mutual Life sales agent.
In 1992 Nanna Wilson was referred to Dennis because she wanted to invest money she received from her late husband’s estate. Dennis told her she could get a good rate of return from Mutual Life. Over the next several months, Wilson issued cheques at the direction of Dennis. The first cheque was payable to Mutual Life for $30,000 and the balance of the cheques were payable to Dennis personally for $230,000. Wilson relied on Dennis’ advice and believed she was investing her money with Mutual Life.
In 1997 Wilson heard rumours that Dennis was in trouble. She visited the Mutual Life office to inquire about her investments. She was shocked to learn Mutual Life had no record of her having any monies on account with Mutual Life at the time. Wilson subsequently brought a lawsuit to recover her money.
One of the claims advanced by Wilson was that Mutual Life was negligent in hiring Dennis. Wilson asserted that Mutual Life knew, or should have known, about his prior employment problems and, as a result, should not have hired him. The court agreed with Wilson and found Mutual Life was negligent in hiring Dennis because it put him “in a position where he could clothe himself with the reputation of Mutual and as a result be in a position to misappropriate funds which he received on behalf of Mutual.”
The British Columbia Court of Appeal recently affirmed the trial judge’s decision that Mutual Life was negligent in its hiring of Dennis. The appellate court rejected Mutual Life’s argument that prospective employers would refuse to hire individuals who are alleged to have committed fraud to avoid the risk of potential exposure for liability if the trial judge’s finding were upheld.
How to guard against a claim
To prevent a claim for negligent hiring, employers should conduct a pre-hiring investigation of candidates. Employers have many screening tools: applications; resumes; references; interviews; education verifications; checks of criminal and credit records; driving records; professional licence verifications; drug testing; and personality testing. Which, if any, of these methods should or could be used depends on provincial and federal statutes as well as the common law.
The more a position exposes third parties to harm, the greater the duty to investigate. A daycare worker may require more screening than an office administrator. It is possible that even if an employer performs an adequate investigation of a job candidate, the employer may still not uncover damaging information. The standard courts appear to impose on employers is a common law duty of reasonable care. Employers should record the details of all steps taken when investigating candidates.
Negligent retention
Closely related to the concept of negligent hiring is negligent retention and negligent supervision. The law on both negligent retention and negligent supervision cases recognizes an employer’s duty to avoid employing dangerous people does not end at the hiring .
A claim for negligent retention or supervision can be made in addition to or instead of a negligent hiring claim. In some circumstances a negligent hiring claim is not viable but a negligent retention or supervision claim is. The difference between negligent hiring and negligent retention or supervision is the time at which the employer’s negligence occurs. With negligent hiring it occurs at the time of hiring; with negligent retention or supervision it occurs in the course of employment.
An employer may be liable for its negligence in retaining or supervising an employee if an employer knew or should have known the employee would likely harm third parties and failed to take reasonable steps to prevent such harm. In circumstances relating to negligent retention or supervision, an employer may be obliged to conduct an investigation and depending on the results of the investigation, the employer may want to consider reassigning or even discharging the employee.
For more information see:
• Wilson v. Clarica Life Insurance Co., [2001] B.C.J. No. 2668 (B.C.S.C.)
• Wilson v. Clarica Life Insurance Co. (2002) B.C.J. No. 2042
Mark Mason is an employment law lawyer and litigator with Goodman and Carr LLP in Toronto. He can be reached at (416) 595-2171 or [email protected].
