Utah Court Holds Employers Liable Even When Workers Hide Mistakes

Despite well-settled case law in Utah regarding Respondeat Superior and the theory that an employer cannot be held liable for the actions of an employee if the employee’s conduct was outside the course and scope of his or her employment, the Utah Court of Appeals issued an opinion  January 19 that seems to eclipse that doctrine with a theory of “imputed knowledge” under agency law. The case is Lane v. Provo Rehabilitation and Nursing.

Provo Rehabilitation and Nursing (Provo Rehab) is a Utah residential nursing facility. Plaintiff is the daughter of a patient (Patient) who passed away while a resident at Provo Rehab.  A nurse (Employee) employed by Provo Rehab gave Patient narcotics that were prescribed for another patient. Employee, after discovering her error, concealed that error from Provo Rehab for fear of losing her job. Employee achieved her concealment by giving the Patient’s medications to another patient, falsifying medical records, and not informing subsequent care providers of her error. Patient died two days later.

Provo Rehab conceded that the medication error itself was committed in the course and scope of Employee’s employment, but disputed that the concealment was in the course and scope of her employment. This distinction was important because the expert witnesses for both sides testified that Patient would not have died if Patient had timely received ameliorative care. Because of Employee’s concealment, Provo Rehab did not learn of the mistake until it was too late. At trial, the jury found that Employee was not acting in the course and scope of her employment when she concealed the medication error.

In the opinion, the appeals court never addressed the doctrine of Respondeat Superior or the defense of course and scope of employment.  Rather, the court focused on Principal/Agency law. Citing the Utah Supreme Court decision Wardley Better Homes and Gardens v. Cannon, the appeals court held that because “imputation of knowledge from agent to principal is a broad concept,” Provo Rehab is imputed to have had knowledge of the medication error at the moment it occurred.

Because the court determined that Provo Rehab had “imputed” knowledge of the medication error, there was no reason to reach the concealment issue. If Provo Rehab is imputed to have known of the error at the time it happened, the court reasoned, there was no concealment of that knowledge.

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Unprecedented ruling

The opinion is unprecedented in Utah; it uses imputation of knowledge under agency principals to hold employers vicariously liable for the actions of their employees, even when those actions were concealed by the employee from the employer.

It has been the law in Utah for decades that while an employer can be held vicariously liable for an employee’s acts under the doctrine of Respondeat Superior, an employer is not liable for an employee’s actions that were not taken in the course and scope of that employee’s employment. This opinion will surely be appealed, as it is an extreme extension of the Wardley case and ignores the long-settled course and scope of employment rubric that has been in place for decades.

In the meantime, all Utah employers should be aware that, as the law now stands, where an employee’s negligence may have occurred during the course and scope of his or her employment, it appears that an employer will not prevail in arguing that the employee’s subsequent bad or fraudulent act of concealment of that act was not in the course and scope of employment. Under this opinion, it can be argued that the employer will be imputed to have knowledge of any action of its employee in the course and scope — even if the employee conceals it. Employers may accordingly be held strictly liable for all consequences of those acts, even consequences that could easily have been avoided, but for the employee’s concealment.

Lisa Petersen is a partner in Michael Best’s Labor & Employment Relations Practice Group focusing her practice on employment litigation. Her experiences includes representing employers in all types of employment disputes, drafting employment contracts, employment policies and procedures, appealing both civil litigation and administrative proceedings, defending against employment discrimination claims, and representing clients in non-compete and trade secret cases.

Judson Stelter is senior counsel in Michael Best’s Labor & Employment Relations Practice Group representing management in all phases of employment law, including issues related to discrimination and harassment, wage and hour, family and medical leave, employment contracts, non-compete agreements, criminal background checks, and affirmative action. He also assists employers in investigating and responding to charges of discrimination and unfair labor practices, and advises clients on the avoidance and/or management of litigation in these areas.

Evan Strassberg is a partner in Michael Best’s Litigation Practice Group who holds active licenses in both Utah and California. Evan has extensive experience in a wide variety of litigation matters, including defense of consumer class actions and disputes regarding trademarks, breach of contract, fraud, securities, employment discrimination, eminent domain, and personal injury.


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