When A Corporation Is Not Liable For Its Employees’ Actions Under New York Law

Jonathan Cooper — Mon, 30 Nov 2009 01:34:47 +0000

Although we’ve written about the concept of an employer being held legally responsible for the acts (or omissions) of its employees that were committed in the performance of their job (see, “Why A School Was Deemed Responsible For A Science Experiment That Went Awry“), there is a very important exception to this rule that should be relatively self-evident, and is grounded in notions of fundamental fairness: the employer, or principal, should not be held liable for wrongful actions (such as fraud) that the employee committed solely for his own benefit, and outside the scope of his employment (or agency). In legal speak, this concept is referred to as in pari delicto, or, the “adverse interest” doctrine.

A word of caution is in order, though, because New York’s courts have construed this exception very narrowly - the adverse interest exception applies only when the agent has “totally abandoned” the principal’s interests and is acting entirely for his own or another’s purposes (see, e.g., Center v Hampton Affiliates, 66 NY2d at 785).

And, since this is an affirmative defense, you can probably guess who has the burden of proving that the employee acted for entirely selfish reasons: that’s right – the employer.

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When A Corporation Is Not Liable For Its Employees’ Actions Under New York Law