Can an Owner Be Sued for Something a Manager Does?

Managers can cause lawsuits

Unraveling the Concept of Employer's Agents

In the intricate landscape of employment law, a critical question surfaces: Can an owner face legal repercussions for the actions of a manager? This article delves into the concept of "employer's agents" and explores the legal nuances surrounding managers' actions, providing valuable insights for business owners seeking clarity on their potential liability.

The Short Answer: Yes!

Business owners often are legally liable for unlawful acts by their company's 'agents.'

The Notion of Employer's Agents:

When contemplating legal ramifications for an owner based on a manager's actions, understanding the role of "employer's agents" becomes paramount. Let's explore the  implications of managers as agents and how this dynamic affects owners' liability.

Employers, including business owners, operate within a framework where their representatives, such as managers, are considered "agents" of the organization. An agent, in legal terms, is an individual authorized to act on behalf of another party—the principal. In the employment context, a manager is typically viewed as an agent of the employer, and their actions can have significant consequences for both the manager and, potentially, the owner.

Who Qualifies as an Employer’s Agent?

In the eyes of the law, employer's agents are managers or supervisors who have been delegated supervisory authority to direct employees on behalf of the company. Some examples include:

Department Heads

Store Managers

Shift Supervisors

Office Managers


Essentially, anyone in charge of overseeing employees or operations can potentially qualify as an "employer's agent." Their management role means the business owner has authorized them to act as their representative.

Vicarious Liability: Unveiling the Legal Landscape:

The legal principle of vicarious liability comes into play when assessing whether an owner can be sued for the actions of a manager. Vicarious liability holds employers responsible for the wrongful acts or omissions of their agents, such as managers, committed within the scope of their employment. This means that if a manager, while carrying out their job responsibilities, engages in conduct that harms others, the employer (owner) may be held liable for those actions.

Under the concept of vicarious liability, the owner may be legally responsible for actions taken by agents who abuse their managerial authority.

To unravel the intricacies of vicarious liability—a pivotal legal principle determining an owner's accountability for a manager's actions within the scope of employment, let's delve into real-world scenarios to illustrate the application of this legal concept. Some examples of inappropriate behavior include:

  • Discrimination in hiring/firing decisions
  • Allowing harassment or hostile work environments
  • Mishandling sensitive employment issues
  • Retaliating against whistleblowers
  • Mishandling medical leave requests

Even if the owner did not directly know about or participate in the manager's unlawful actions, the doctrine of respondeat superior means they can still be held accountable under civil lawsuits. The law views the agent's actions as an extension of the owner's legal responsibilities over operations.

Scope of Employment: Connecting the Dots:

Key to understanding vicarious liability is determining whether the manager's actions occurred within the "scope of employment." If the manager's actions are reasonably connected to their job responsibilities, the employer is more likely to be held liable. However, if the manager's actions fall outside the scope of their employment, the employer may have a stronger defense against liability.

Determining the "scope of employment" is a pivotal aspect of assessing an owner's potential liability. Analyze the manager's actions, when connected to their job responsibilities.  Are they empowered to make hiring and firing decisions?  Can they assign duties, shifts, and work assignments?  Is the manager responsible for disciplne and corrective action? These responsibilities put the manager in an "agent" position.

Exceptions and Defenses:

While vicarious liability is a significant consideration, there are exceptions and defenses that owners can explore. If the manager's actions were expressly against company policy or if the manager was clearly acting for personal motives unrelated to the job, the owner may have grounds to distance themselves from the manager's behavior.

Safeguarding Owner Interests:

To mitigate the risk of being held liable for a manager's actions, owners should implement robust policies and procedures. Clear communication of expectations, regular training on company policies, and diligent supervision can contribute to a strong defense against claims of vicarious liability.

Mitigating Risk: Proactive Strategies for Owners:

While business owners can't prevent all legal action from ever arising, they can take proactive steps to reduce liability risks. These include:

Owners should also verify their insurance policies cover employment practices legal claims. Ultimately, ensuring managers understand the law and company policies is the top defense against unwanted lawsuits down the road.

In conclusion, unraveling the complexities of employer's agents and vicarious liability empowers business owners to navigate the legal intricacies of employment law. 

Remember, for personalized legal advice, consult with an experienced employment law attorney familiar with your jurisdiction.

How HR Outsourcing Can Save You From Many Employee Headaches

Many business owners don’t realize just how much legal risk they take on from their managers’ day-to-day decisions. As we discussed in this article, even well-intentioned supervision can expose you to liability for harassment, discrimination, retaliation, and more under employment legalities.

However, there are steps you can take to significantly mitigate these risks. Creating or upgrading your HR function is a first step.  Hiring a full HR department is a real option through HR Outsourcing. Our HR outsourcing and consulting packages are designed specifically to train your managers, coach them through delicate employee relations issues, and put guardrails in place to avoid lawsuits down the road.

Our team has centuries worth of real-world expertise guiding companies on proper hiring protocols, writing policies, handling discipline, preventing retaliation claims, and supporting compliant terminations. We become an on-call resource for your managers so they always have somewhere to turn for guidance.

While no one can eliminate legal risk completely, our 16+ years in business prove how effective our approach is. Our clients can see their exposure drop by up to 80% while also enhancing compliance, productivity and manager confidence in their abilities.

 Now is the time to invest in the right HR solutions to support your managers, train them on employment protocols, and shield your organization from unwanted actions. The peace of mind alone is invaluable.