“Hot” Off the Press from the Courts – Another Victory for Employers

Rhonda Shelton Kraeber

California employers have enjoyed some relatively rare victories in recent months. Most recently, in June 2011, the California Supreme Court – in a unanimous decision no less – sided with employers on an issue involving employer liability for employee actions at work. In so doing, the Court also provided a helpful primer on the history and rationale behind tort liability / comparative fault system.

In Diaz v. Carcamo, Docket No. S181627, filed June 23, 2011, the California Supreme Court ruled that when an employer admits vicarious liability for the negligent act of its employee, the plaintiff is precluded from also pursuing a negligent entrustment claim against the employer.

Plaintiff Dawn Diaz was severely and permanently injured when the vehicle she was driving on southbound Highway 101 in Ventura County was struck by a truck driven by defendant Jose Carcamo, an employee of Sugar Transport of the Northwest, LLC. The Carcamo/Sugar Transport truck had come across the center divider after it had been struck by a vehicle driven by defendant Karen Tagliaferri. Diaz sued Carcamo, Sugar Transport, and Tagliaferri, alleging 1) negligent driving by Carcamo and Tagliaferri; and 2) vicarious liability for employee Carcamo’s negligent driving and direct liability for its own negligent hiring and retention by Sugar Transport.

Before closing argument, Sugar Transport stipulated with plaintiff to vicarious liability for employee-driver Carcamo’s negligence, if any. Over Sugar Transport’s objections, the trial court admitted evidence of Carcamo’s driving and employment history (which included two prior accidents – one occurring only 16 days before the Diaz accident – Carcamo’s illegal immigration status, use of a “phony” Social Security number, lies on his employment application, and negative information garnered from reference checks).

The jury awarded over $17.5 million in economic damages and $5 million in non-economic damages, finding Carcamo and Tagliaferri had both driven negligently and that Sugar Transport had been negligent in hiring and retaining Carcamo as a driver. The Court of Appeal affirmed. Because of a conflict with prior decisions [Jeld-Wen, Inc. v. Superior Court (2005) 131 Cal.App.4th 853 and Armenta v. Churchill (1954) 42 Cal.2d 448], the California Supreme Court granted the petition for review of defendants Sugar Transport and Carcamo.

In reviewing the history of tort liability, the Court noted that when Armenta was decided in 1954, the California courts imposed tort liability on an “all-or-nothing” basis; that is, if the plaintiff contributed in any measure to his/her own injury, recovery was barred. Similarly, once an employer admitted vicarious liability for an employee’s tortuous conduct within the scope of employment, it didn’t matter whether it was submitted to the jury on a negligent entrustment claim and/or on a negligence claim against the employee. Either way, the employer would be liable for 100% of a plaintiff’s damages, or else not liable at all.

The “all-or-nothing” system was replaced with the comparative fault system in 1975. Under comparative fault, a plaintiff’s negligence merely reduced the damages awarded in proportion to the amount of negligence attributable to plaintiff, and damages among tortfeasors were now apportioned on a comparative negligence basis.

Finally, in 1986, California voters adopted Prop. 51 (as codified by Civil Code Sec. 1431.2) that limited the scope of joint liability amongst tortfeasors. More specifically, in cases based upon principles of comparative fault, each defendant is liable for all of the plaintiff’s economic damages, but only his/her/its proportionate share of the non-economic damages. Thus, non-economic damages are to be apportioned amongst the universe of tortfeasors, including non-joined defendants.

One group of defendants excluded from allocations of fault under Prop. 51 are employers who face only vicarious liability under the respondeat superior doctrine for torts committed by its employees in the scope of employment. In such cases, the universe of tortfeasors does not include the employer; rather, the employer’s share of liability corresponds to the share of fault allocated to the employee.

In reaffirming its holding in Armenta, the Court expressly disagreed with the plaintiff’s argument that an employer can potentially be held responsible for two shares of fault; one based on the employee’s negligent driving in the scope of employment (vicarious employer liability) and one based on the employer’s own negligence in hiring or retaining (direct employer liability). The Court reasoned that assigning to the employer a share of fault greater than that assigned to the employee whose negligent driving was a cause of the accident would be an inequitable apportionment of loss.

In a noteworthy footnote, however, the Court allowed that it could conceive of instances in which the employer may be liable for its own negligence independent of its employee’s acts. The example given was if an employer provides a driver with a defective vehicle. However, when, as in Diaz, the plaintiff’s theory of employer liability was based solely on a negligent hiring/retention, the admission of vicarious liability precluded a separate claim for direct negligence on the part of the employer.

Thus, to recap, when an employer admits to various liability for the negligent act (if any) of its employee, the plaintiff is precluded from also bringing a negligent hiring/retention/entrustment claim against the employer.

Rhonda Shelton Kraeber has practiced in all areas of employment law, including wrongful termination and discrimination and harassment litigation, since 1991. Formerly with Shapiro Buchman Provine, Rhonda counsels employers and employees on all aspects of the employer-employee relationship, including compliance with the many state and federal laws that apply in the employment context, and drafts, reviews, and negotiates all types of employment-related agreements such as severance agreements, employment contracts, and confidentiality agreements. Rhonda has also practiced general commercial litigation, including real estate disputes, contract issues, and corporate control disputes, and is licensed to practice in both California and Oregon.

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