Ohio Supreme Court Reminder That Acts of Agents Do Not Always Impose Vicarious Liability

Last week, the Ohio Supreme Court reversed the lower court judgments imposing vicarious liability upon a real estate broker for the fraudulent actions of its real estate agent without requiring the plaintiff to prove that the agent was acting within the scope of her agency.  Auer v. Paliath, Slip Opinion No. 2014-Ohio-3632.  In Auer, the plaintiff alleged and the jury found the defendant agent and broker to be liable for fraudulently inducing the plaintiff to purchase five properties (for which the agent and broker received sales commissions) and hire the agent’s personal rehabilitation business to maintain them.  The properties were never maintained as promised and the plaintiff lost her $430K investment.   The lower courts concluded that the broker was vicariously liable as a matter of law because Revised Code § 4735.21 imposed liability as a matter of law since the agent could not sell the properties and collect funds without the broker’s consent.  “In essence, the court of appeals’ decision holds that a broker is always liable as a matter of law for the tortious conduct of rogue agents whenever the broker receives a portion of the agent’s sales commission.”   The Court rejected this “bright-line rule” and held that “in order to impose vicarious liability, a jury first has to make a factual determination that the agent was acting within the scope of her agency when she committed the torts at issue.” 

Whether the agent’s actions were authorized by the broker is always a factual question to be resolved by a jury.   In this case, the agent’s fraud was arguably to further her rehabilitation business, not to further the business of the broker.  Accordingly, the trial court should have left it to a jury to decide whether the broker should also be held liable for the agent’s fraud.   

The dissent concluded that the omission of a few words from the jury instruction was harmless error.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

 
 
 

Annual Holiday Party Hangover Checklist

One of the most memorable scenes in Dickens’ A Christmas Carol is the joy Scrooge received from his first employer’s annual holiday party. “The happiness he gave to his clerks, his apprentices and everybody who knew him; it was as great as if it had cost a fortune.” Indeed, an employer’s annual holiday party is one of the most important morale boosting events of the year no matter the size of the company.

Unfortunately, in this litigious and sometimes reckless society, holiday parties also can create unintended hangovers for management and innocent bystanders if proper care is not taken to ensure that all guests enjoy themselves safely both during and after the party. A mix of holiday spirits from both the season and a bottle of vodka has the potential to create a painfully “memorable” evening that could be litigated for years:

• Someone slips and falls at the mandatory holiday party where annual awards and bonuses are distributed.


• An intoxicated supervisor attempts to show his “appreciation” to a subordinate through both verbal and physical “affection” on the dance floor.

An intoxicated employee drives home from the office party and injures the occupants of another vehicle.

Numerous Ohio courts have refused to impose liability upon employers – or other social hosts -- for injuries caused by intoxicated employees returning home from a party or other social outing, including golf outings, company picnics or other voluntary social function. The driver, and not the host, is primarily responsible for his or her own conduct. At best, liability would be imposed on a social host employer “only where the host knew that the person to whom the liquor was furnished would consume it and either was, or would become, intoxicated and would probably act in such a manner while intoxicated as to create an unreasonable risk of harm to third persons.” Baird v. Roach, Inc. (1983), 11 Ohio App.3d 16. However, those cases have frequently rested on their individual facts, where the defendant employers took extraordinary steps to keep employees from driving home drunk after voluntarily attending an office party or were unaware that intoxicated employees were driving home.

In order to avoid turning your festive event into the subject of a lawsuit, you should consider incorporating the following suggestions into your office celebration:

1. Remove any argument that attending the party is a duty of an employee.
• Make attendance at the party completely voluntary.
• Hold the party after regular working hours and maybe even off the premises.
• Do not conduct any business (like handing out bonuses or awards) at the party.
• Do not assign any employees to set up or clean up afterwards.  If you do, be sure that non-exempt employees are paid for their time working at the party.
2. Take steps to discourage boorish behavior by possible harassers:
• Remind employees before the party that the sexual harassment policy applies during the party and to any gag gifts that are exchanged.
• Invite spouses and significant others and maybe even children to the event. This will be appreciated by the spouses and has the added effect of deterring most boorish behavior towards staff by potential harassers.
3.  Discourage the over-consumption of alcohol:
• Reconsider providing an open bar with limitless alcohol. Consider a cash bar, a limited voucher system, a two-drink limit or closing the open bar earlier in the evening.
• Ensure that non-alcoholic beverages are available.
• Hire a caterer to serve the alcohol (instead of self-serve) and instruct the bartenders to refuse service to anyone who is visibly intoxicated. 
• Ensure that food is served at the party – particularly foods rich in carbohydrates and protein. Avoid salty or greasy food that will make guests more thirsty.
• Provide employees with tips for responsible drinking before the party. This could include reminders about how much alcohol it takes over an hour before an employee is too drunk to drive, to drink a glass of water between each alcoholic beverage, and to eat enough food both before and during the party.
• Consider holding the party on a weekday, instead of a weekend.
4.  Discourage anyone from driving under the influence:
• Ensure that alternative transportation (such as a taxi) is available for intoxicated guests. Providing free vouchers for cabs is the sign of a classy and caring employer.
• Assign someone (who is completely sober) to keep an eye out for visibly intoxicated guests leaving the party with car keys in hand.
• Encourage all employees to keep an eye out for intoxicated co-workers who may not realize that they have had too much to drink.
5. Be sensitive to the varying religious beliefs of your employees.
• Keep it as a "holiday" party and be sensitive to religious-symbols and decorations.
• Remember that the Sabbath for some religions begins on Friday evenings.  Holding the party then could inadvertently exclude some employees.
• Don't prohibit employees from recognizing a religious holiday by name or in popular songs.

Review the company’s insurance policy to determine coverage for furnishing alcohol both on and off the company’s “insured premises.”

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.