One of our corporate clients had an employee whose negligence resulted in him cutting electric lines to mobile homes, costing the company $3,500.00 to repair. The company wanted to make the employee pay for the damage, and if he refused, terminate him and use a third party collection service to recover the remaining amount owed. New Jersey’s labor laws forbid the employer from deducting this amount from the employee’s wages. So would the law allow the company to use a collection service to go after the employee if the employee refused to voluntarily pay for his negligence?
The Appellate Division has recognized “that an agent or employee is generally liable to his principal or employer for loss sustained by the latter due to the former’s negligence or defalcation.” Male v. Acme Markets, Inc., 110 N.J. Super. 9, 12 (App. Div. 1970). However, in Eule v. Eule Motor Sales, 34 N.J. 537, 540 (1961), the Supreme Court rejects the rule in part. “It opined that the liability of the employer to third parties is derived from the doctrine of respondent superior which in turn ‘rests on a public policy that the employer bear the burden as an expense of the operation he expends through the employment of others.’” Brown v. United Cerebral Palsy/Atl. & Cape May, Inc., 278 N.J. Super. 208, 211–12 (Law. Div. 1994). Brown extended the Eule rule to all third party claims, holding that the law “prohibits an employer from recouping from an employee any sums the employer may be required to pay to a third party as a result of the employee’s negligence.” Id. at 213. However, Brown does allow employers to sue an employee if “it alleges negligence resulting in loss to the employer occasioned other than by third party claims” and “the specific act of negligence must be causally related to a specific loss.” Id. at 216-17.
So the company could sue the employee directly, but they would have to allege negligent performance that resulted in the $3,500 loss the company had to pay, and not for recovery on the third party claim alone. This seems odd because a third party claim due to an employee’s negligence would trigger the negligent performance claim, but that’s how the courts want the issue framed.
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Written by Stephen W. Kornas, Esq. of Hanlon Niemann & Wright