Protection from liability for actions of employees

Question

A video game developer ("Smoke") has created a popular online game which features various chat features. Smoke hires a number of chat moderators to manage this, including "Joe Gooner". After a few days, Mr. Gooner's supervisor observes him sexually harassing child players. His actions are both illegal and against company policy, so the supervisor fires him immediately. Assume that Smoke had no way to reasonably know about Mr. Gooner's perversion prior to the incident, despite doing their due diligence with references and reviewing his social media accounts.

Is there anything Smoke can do to protect themselves from legal liability for the moderator's actions? If not, is there anything they can do in case another employee does something similar in the future?

I am especially interested in the law as applies to companies in the United States, but viewpoints from other countries are welcome and encouraged.

Answer 1

Pro-active management and insurance

As an employer, Smoke is vicariously liable for the acts and omissions of its employees in the course of their employment. While sexually harassing children is clearly not a function of their employment, moderation is, so the overall course of action is in the course of their employment—they were not on a frolic.

Smoke should take all reasonable steps to prevent, detect, and respond to employees' acts and omissions that could expose them to liability. This is part of a formal, documented, and ongoing risk assessment, elimination, and mitigation program. This offers the best chance of avoiding the potential liability, and if it happens despite Smoke's best efforts, it may be enough to defend against a lawsuit.

In addition, you buy insurance to cover the risk.

Answer 2

france

Is there anything Smoke can do to protect themselves from legal liability for the moderator's actions?

From a legal point of view, no. Practically, yes.

Article 1384 of the civil code, fifth paragraph:

Les maîtres et les commettants [sont solidairement responsables] du dommage causé par leurs domestiques et préposés dans les fonctions auxquelles ils les ont employés

Masters and business partners [are jointly liable] of damage caused by their servants and subordinates within the functions in which they were employed

This has been interpreted to mean that the employer is liable for anything that was done by an employee on their work time and in the workplace, even if the actions were clearly illegal or outside the employee’s delegated authority. The most striking example is Cour de cassation, 17 mars 2011, 10-14.468, where a music teacher sexually assaulted and raped students during lessons (and was condemned and sentenced criminally for that); the employer (and its insurance) are found liable for indemnity. (The refund scheme is a bit complicated - in fact the victims had already been indemnified by the state’s "fund for crime victims", so that is the entity party to the lawsuit asking for repayment.) The employer (and insurance company) may in turn sue the employee for repayment, but that is only worth it if the amount in dispute is large enough to justify legal fees and small enough that the employee can pay a significant part of it, so that does not happen often.

While Smoke cannot entirely remove the risk that a rogue employee causes them legal issues, they can (and, in some cases, must) take insurance against civil liability. They can also organize work in such a way that no single employee can cause a tremendous amount of civil liability; train employees to detect and avoid potentially-dangerous situations; etc.

Answer 3

germany

In Germany, like in many other countries, in principle the employer is liable for mistakes made by an employee while performing their duties:

The obligor is responsible for fault on the part of their legal representative, and of persons of whose services they avail themselves in order to perform their obligation, to the same extent they are responsible for fault on their own part. The provision of section 276 (3) does not apply.

BGB (German civil code), sec. 278

This is referred to as Arbeitgeberhaftung ("employer liability"). However, this liability is limited by, among other things, BGB (German civil code), sec. 831:

A person who deploys another person to perform a task is liable to provide compensation for the damage that the other unlawfully inflicts on a third party when carrying out the task. Liability in damages does not apply if the principal exercises the care required in business dealings when selecting the person deployed and, to the extent that they are to procure devices or equipment or to manage the business activity, in such procurement or management, or if the damage would have occurred even if this care had been exercised.

So, in plain language:

• The employer is generally liable for employees' unlawful acts, no matter whether they were accidental (mistakes) or intentional.
• However, this only applies to actions required or directly connected to carrying out their assigned tasks.
• Also, the employer can avoid liability by exercising care when selecting the employee, or proving that the damage would have occurred even if this care had been exercised.

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So, Mr Gooner's actions would probably fail both of the criteria listed above:

• his actions (harassment) were not directly connected to their task, and
• the employer has demonstrated sufficient care when selecting the employee

Of course, a court might see this differently - so there is no way to tell for sure. For example, there is some debate on how closely linked the employee's assigned task and the unlawful act need to be (see e.g. Die Haftung für den Verrichtungsgehilfen, § 831 BGB - some opine that it is enough if the assigned task provided a helpful opportunity for the unlawful act, even if the act itself was not part of the assigned tasks).