Corporate Liability for Employee Actions, Quirky Question # 112
Quirky Question # 112:
We are interested in expanding and diversifying our business in Alaska and are looking at acquiring and operating assisted-living facilities. Although this is a logical spin-off from our primary business, we do not have any actual experience in this area. We are attempting to sort through numerous issues related to the operation of these facilities.
We are concerned about local and national news stories detailing patient abuse by employees in such facilities. Our initial thought is that we should not be responsible for the intentional conduct of our employees in such situations. However, the tenor of the news reports has us re-thinking that view. Can you provide any guidance? We are interested in expanding and diversifying our business in Alaska and are looking at acquiring and operating assisted living facilities. Although this is a logical spin-off from our primary business, we do not have any actual experience in this area. We are attempting to sort through numerous issues related to the operation of these facilities. We are concerned about local and national news stories detailing patient abuse by employees in such facilities. Our initial thought is that we should not be responsible for the intentional conduct of our employees in such situations. However, the tenor of the news reports has us re-thinking that view. Can you provide any guidance?
Your concern about employer liability for patient abuse by employees in assisted-living facilities is certainly justified. To fully appreciate the extent of that problem, a brief discussion of the sources of employer liability in Alaska would be helpful.
Employers frequently view their liability for the acts of their employees simply in terms of whether the employee was acting within or outside the “scope of his employment” when he committed his acts. The issue is more complex than that and the inside/outside scope analysis is not necessarily determinative of an employer’s liability.
There are three sources of liability for the operators of assisted-living facilities for the acts of its employees in Alaska. First, Alaska, by statute and regulation, regulates and protects the rights of residents in assisted-living facilities and prohibits the owners and the staff at those facilities from engaging in certain conduct. Violation of these statutes and regulations give rise to “direct” employer liability for the violations. Second, in certain circumstances, the intentional conduct of employees, their criminal acts and performing acts that the employer actually forbids them to do may fall within the scope of their employment thus making the employer “vicariously” liable. Third, an employer may be vicariously liable for an employee’s acts committed outside the scope of the employee’s job.
Alaska, like virtually every other state, regulates assisted-living facilities. The statutes and regulations are straight forward and easily understood. Residents of assisted living facilities have statutory rights ranging from the right to “live in a safe and sanitary environment” to “receiving and sending unopened correspondence.” See AS 47.33.300(a)(1)(4) In addition, there are statutory prohibitions on certain types of conduct that specifically apply to both the owners of the facility and to the staff. These prohibitions range from depriving a resident “of the rights, benefits or privileges” guaranteed by law to compelling “a resident to perform services for the home.” See AS 47.33.330(a)(1)(6) Violation of these statutory rights and prohibitions can result in administrative sanctions, criminal penalties and civil liability. See AS 47.33.550 and 570.
Second, as a general rule, an employer is vicariously liable for the wrongful acts of its employee when the employee is acting “within the course and scope of their employment.” However, there are notable exceptions to this rule. In certain circumstances the following acts may be within the scope of employment: (1) acts forbidden by the employer, (2) acts which are consciously criminal or intentionally wrongful, and (3) the failure to act. See Restatement (Second) of Agency §230, 231 and 232
Over time, the Alaska Supreme Court has drifted away from the scope of employment analysis in assessing employer liability. Nearly twenty years ago the Alaska Supreme Court stated “‘scope of employment’ as a test for the application of respondeat superior would be insufficient if it failed to encompass the duty of every enterprise of the social community which gives its life and contributes to its prosperity . . . the basis of respondeat superior has been correctly stated as the “‘the desire to include in the costs of operation inevitable losses to third persons incident to carrying on the enterprise, and thus distribute the burden among those benefited by the enterprise.’” Doe v. Samaritan Counseling Center, 791 P.2d 344, 349 (Alaska 1990).
In Veco, Inc. v. Rosebrock, 970 P.2d 906 (Alaska 1999) the Court wrestled with an employer’s liability for the sexual harassment committed by a supervisor. This was an issue of first impression in Alaska. The Court recognized that the supervisors were acting beyond the scope of their employment and were acting for personal reasons and not, even in part, to serve their employer. 970 P.2d at 910. Despite that recognition, the Court proceeded to adopt Restatement (Second) of Agency §219(d)(2) which provides that an employer may be liable for acts outside the scope of employment if the employee was “aided in accomplishing the tort by the existence of the agency relationship.” Vicarious liability was imposed on Veco, Inc. based upon the principle that the employee was vested with “power” by the employer. The Court reasoned that the supervisor’s sexual harassment was the direct result of the supervisor’s position with the employer. 970 P.2d at 911.
In Ayuluk v. Red Oaks Assisted Living, Inc. et al., 207 P.3d 1183 (Alaska 2009) the Court found that “a caregiver in an assisted living home who has supervisory power or authority over vulnerable residents is, for the purposes of the aided in agency theory, in a position that is analogous to that of a supervisor of employees. A caregiver, as a provider of food, comfort, hygiene, and medication for residents, has the power to hold or delay any of these basic needs. Thus, like the supervisor of employees, a caregiver is in a position to punish in direct or subtle ways a resident who resists sexual advances. While the sexual advances themselves may neither be authorized nor reasonably appear to be authorized by the employer, the caregiver’s power that enables him to further his improper conduct is an inherent part of the employment relationship.” 201 P.3d at 1200 (emphasis added).
Although, not discussed by the court, a strong argument certainly exists that vicarious liability can be imposed on employers for public policy reasons including: (1) deterring abusive conduct and, (2) assuring compensation for the victim.
I am hopeful that this insight provides you sufficient information to evaluate the potential liability in operating assisted living facilities in Alaska. Remember, there are other jurisdictions in the United States that view these issues differently. See, e.g., Meyers v. Trendwest Resorts, Inc., 56 Cal. Rpt. 3d 501, 525 (Cal. App. 2007).