Claims Against an Employer Can Proceed Even After Employer Admits Vicarious Liability

The  Tennessee Court of Appeals recently considered an issue of first impression in Tennessee—whether a plaintiff who sues an employee and employer for negligence can proceed on direct negligence claims against the employer after the employer admits that they are vicariously liable for the employee’s negligence. After considering arguments both ways, the Court determined that in Tennessee, “an employer’s admission of vicarious liability does not bar a plaintiff from proceeding against the employer on independent claims of negligence.”

In Jones v. Windham, No. W2015-00973-COA-R10-CV (Tenn. Ct. App. Mar. 11, 2016), employee, acting within the scope of her employment with a local daycare, was transporting kids in a van when she struck a minor child. The child’s mother, plaintiff, brought an action for negligence against employee, and also asserted claims for negligence per se, negligent hiring, and negligent retention against employers, as well as a claim for punitive damages against all the defendants. In their answer, employers conceded that they were vicariously liable for any negligence attributed to employee. Accordingly, employers moved for summary judgment on the direct negligence claims against them, arguing that Tennessee should adopt a rule adopted by other states “under which a plaintiff would be prevented from proceeding on any direct negligence claim against an employer once vicarious liability has been admitted.” The trial court granted summary judgment as to all direct negligence claims against the employer, though it denied summary judgment on the punitive damages claim. This Rule 10 appeal followed.

Since this issue had not been considered before by Tennessee courts, the Court began by summarizing both approaches to this issue. The “preemption rule,” as the Court coined it, states that “[o]nce an employer has admitted vicarious liability for the actions of its agent, a plaintiff may no longer proceed against the employer on a direct negligence claim such as negligent entrustment or negligent hiring.” (internal citation omitted). The rationale for this approach is that evidence of the direct claim becomes “unnecessary, irrelevant and prejudicial” at that point. “The concern is that the independent negligence claims, which are often supported by prior bad acts of the employee, may be used merely to permit the introduction of evidence intended unduly to influence the jury’s decision on the issue of the employee’s negligence.” (internal citation and quotation omitted). Further, the direct claims are argued to be of no benefit to the plaintiff, as “[t]he liability of the employer is fixed by the amount of liability of the employee.” (internal citation omitted).

Under the non-preemption rule, on the other hand, “the employer’s admission to the existence of an agency relationship from which vicarious liability may arise does not supplant that the employer’s own negligence, independent of the negligence of the employee, may have caused or contributed to the injury.” (internal citation omitted). This rule recognizes the employer’s negligence, arising from potential negligent entrustment, hiring, supervising, training, or retaining of an employee, as distinct from the negligence of the employee himself.

Here, the Court ultimately held that the preemption rule was “not in accord with our system of comparative fault and thereby inconsistent with existing Tennessee jurisprudence.” The Court found that “an employer’s admission of vicarious liability does not bar a plaintiff from proceeding against the employer on independent claims of negligence.” The Court noted that while claims directly against the employer may be dependent upon the employee himself having been negligent, on these independent claims “liability is not imputed by virtue of the employer-employee relationship” but instead “because the acts of the employer fall below the applicable standard of care that is required.” (internal citation omitted).

The Court appeared to base its decision largely on the fact that Tennessee operates under a comparative fault system.

If we adopted the preemption rule, we would effectively force a jury to allocate fault between parties who were not wholly responsible. Although this would not be of any consequence to a plaintiff’s recovery in cases where a plaintiff’s comparative fault is not at issue, it is certainly significant when a plaintiff’s comparative fault is raised as a defense. Indeed, if a party’s negligence is taken out of the equation, the other parties necessarily have to fill in the vacuum that is left by the absent party. This can have profound consequences in a jurisdiction such as ours where plaintiffs are denied any recovery if their fault equals or exceeds 50%. Accordingly, it is incorrect to suggest that an independent negligence claim against an employer serves no purpose once the employer has admitted vicarious liability. Although there is no doubt that the amount of compensatory damages sustained by a plaintiff is fixed, a plaintiff’s ability to recovery for his or her injuries is certainly impacted by removing an alleged tortfeasor from the allocation of fault. Moreover, removing an employer from the fault apportionment process subjects other defendants to potentially assume a greater percentage of liability than they would otherwise be assigned if the jury were able to consider the alleged fault of the employer.

(internal citations and quotations omitted).

Responding to some of the criticism of this approach, the Court asserted that instead of “shield[ing] the jury from unnecessary evidence,” the preemption approach actually “inappropriately withholds consideration of an actor’s alleged legal fault.” Further, the Court stated that the preemption approach was problematic from a judicial economy standpoint, as an employer that pays a claim under vicarious liability may then seek contribution from the employee, requiring a factfinder to then apportion fault between the employer and employee. Finally, in response to the criticism that evidence introduced regarding the negligence of the employer might prejudice the factfinder against the employee, the Court pointed out that trial courts can give limiting instructions and bifurcate trials when necessary, allowing a jury to first assess damages and then consider allocations of fault.

Judge Brandon Gibson wrote a dissent in this case, asserting that Tennessee should adopt the preemption rule. She wrote that “once an employer has admitted respondeat superior liability for an employee’s negligence, it is improper to allow a plaintiff to proceed against the employer on a negligent hiring or negligent supervision theory of liability.” Reasoning that direct claims against the employer “can impose no additional liability,” Justice Gibson wrote that such claims “serve no real purpose.”

The majority opinion here engaged in a reasoned, lengthy analysis of the merits of both approaches to this issue, and they reached the correct result. One can imagine a case where a bus company negligently hired a driver who had had multiple previous driving incidents or charges, and the driver then negligently caused an accident. Perhaps, though, the plaintiff in this accident were also engaging in somewhat questionable driving behavior, such that the factfinder determined the plaintiff was 20% at fault. A jury or judge in such a scenario should be allowed to apportion the remaining 80% of fault between the employer and employee as it sees fit, as both engaged in conduct falling below the standard of care and ultimately leading to this accident. That is a fair result consistent with Tennessee’s comparative fault system. If, however, the employer were taken completely out of the fault-apportionment equation, fault could not be divided across all relevant parties. Facing such a scenario, factfinders might even increase the amount of fault attributed to a plaintiff, which would be a clearly unjust result.

Remember too that the employer always has a claim back against the employee for causing loss to the employer.  This is a right rarely exercised (because most employees lack assets or an income stream sufficient to pay a judgment) but having a blanket rule prohibiting fault to a party (the employer) who might fairly be determined to be at fault increases the risk that too much fault (and therefore financial risk) will be allocated to the employee.

Finally, remember that vicarious liability for punitive damages is severely restricted under Tennessee’s recent tort reform legislation.  The inability to allocate fault to an employer who admits vicarious liability for an employee even further restricts a potential punitive damage award.  How?  Assume that a truck driver fell asleep at the wheel, crossed the center line, and killed plaintiff’s decedent.  The truck driver, employed by a large company, testified that his employer knew he regularly violated the on-duty hours regulations, encouraged him to do so, and taught him how to falsify his logs so that he could avoid detection.    Assume further that the truck driver admitted to driving in violation of the on-duty regulations in the 24-hours before the crash and in fact that he had been driving for twenty straight hours at the direction of his employer.  Under the tort reform law there would be no vicarious liability for the truck driver’s reckless actions but the employer (if found at fault) would face potential liability for punitive damages.  But not if the Judge Gibson’s  view were adopted.  Why?  Because the employer would block any fault allocation simply by admitting that vicarious liability applied to the trucker’s actions.

The majority opinion correctly adopted the non-preemption rule for Tennessee, and it will be interesting to see whether this issue is appealed to the Supreme Court.  My bet?   It will, and the High Court will affirm.