In 1997 I had the privilege and the pleasure of being one of Associated Industries
of Florida’s appointee to the negotiations between the business community and the
trial lawyers to forge a compromise on tort reform. The input of this poor, simple,
"country" labor lawyer was limited to a suggestion that an effort be made to fix
some employment-related problems in Florida’s tort laws that created difficulties for
employers (and thus employees and consumers).
Those negotiations failed but the reform effort continued and eventually succeeded,
thanks to the leadership of Associated Industries of Florida, its President and CEO Jon
Shebel, and others.
The overarching theme of the 1999 tort reform law is protection for employers and
businesses who run honest and trustworthy operations, but no protection for those who
don’t deserve it. I was pleased to find that, among its many provisions, the new
tort-reform act provided significant and much-needed relief in the employment laws,
providing better employment opportunities and lower production costs. As a result, all of
Florida’s workers and consumers
will benefit, rather than the small army of personal injury lawyers and those clients
of theirs who hit the litigation jackpot.
John-Edward Alley
New Limitations on Punitive Damage Awards
Punitive damages have long been the bane of Florida
defendants. The mere threat of a claim for punitive damages often gives a plaintiff the
leverage needed to extract a settlement.
In 1986 the Legislature imposed an evidentiary requirement
upon plaintiffs before a claim for punitive damages could be made. Under the 1999 reforms,
even more qualifications on claims for punitive damages — from pleading to proof to
limitations on the amount — were enacted.
Under the new act, punitive damages will only be awarded upon
proof by clear and convincing evidence of intentional misconduct or gross
negligence, although the amount of punitive damages may still be established by a preponderance
of evidence. "Intentional misconduct" means that the defendant had actual
knowledge of the wrongfulness of the conduct and the high probability that injury or
damage would result, but intentionally pursued that course of conduct, resulting in injury
or damage. "Gross negligence" means the defendant’s conduct was so reckless
or wanting in care that it constituted a conscious disregard or indifference to the life,
safety, or rights of others.
A business, of course, does not have "intentions" or
"conscious disregard" and can only act through its employees and agents. Thus,
the 1999 reforms set a new standard for legal entities, such as a business. Punitive
damages for intentional misconduct or gross negligence may only be imposed on the business
for the conduct of an employee or agent if one of the following occurs:
- the business actively and knowingly participated in the conduct
- the officers, directors, or managers of the business knowingly condoned, ratified, or
consented to the conduct
- the business engaged in conduct constituting gross negligence and that conduct
contributed to the injury or damage
The new standard gives employers and businesses a safe harbor
from punitive damages based on the actions of its employees and agents. If an employer has
made "good faith efforts" to comply with laws and to act reasonably, and if it
has taken reasonable and prompt remedial action in response to a complaint, it cannot be
required to pay punitive damages. An example of the kind of protective policies that an
employer can implement were outlined in an article published in the May/June 1998 edition
of this magazine, "Sexual Harassment: Shielding Your Company From Liability."
The new law also imposes some limits on the amount of punitive
damages that may be awarded. As a general rule, punitive damages now cannot exceed the
greater of three times the compensatory damage award or $500,000 (punitive damages under
the Florida Civil Rights Act remain capped at $100,000). Punitive damages may exceed that
general cap in either of the following two situations only:
- there was a specific intent to harm, in which case there is no cap
- the wrongful conduct was motivated solely by unreasonable financial gain and the
decision-maker knew of the dangerous nature of the conduct and the high likelihood of
injury, in which case punitiv damages will be capped at the greater of four times the
compensatory damage award or $2 million
Finally, punitive damages may generally be awarded only once
per act or single course of conduct, unless clear and convincing evidence reveals that
prior punitive damage awards were inadequate to punish the defendant.
Background Checks to Protect Against Negligent Hiring Claims
In recent years, negligent hiring and retention
claims have been a source of anxiety for Florida employers. Florida cases such as Williams
v. Feather Sound, Inc., and Tallahassee Furniture Co. v. Harrison established the
liability of employers for injuries inflicted by their employees on third parties. The
liability sprang from a determination that the employees were unfit for their positions,
knowledge the courts believed the employers would have discovered through adequate
background checks.
Two issues in these cases are pertinent in light of the 1999
tort-reform amendments. First, the employers did little or no background check and the
employees in question had access to people’s homes by virtue of their jobs. Hence,
the 1999 amendments likely would not have protected these employers.
Second, the rule arising out of these cases is that the nature
of the job will determine the nature of the investigation that should be done. In Feather
Sound, for example, the lack of investigation may not have mattered when the employee
was hired since he had no contact with customers and worked outside with no access to
people’s homes. Once the employee was transferred to a position in which he had
access to the residences, however, the employer had a duty to conduct an investigation
that was reasonable in light of the access allowed to him by that position.
According to the new law, an employer should hire an employee
only after conducting a background investigation that "[does] not reveal any
information that reasonably demonstrate[s] the unsuitability of the prospective employee
for the particular work to be performed or for the employment in general." Doing so
gains for the employer a presumption of immunity from liability to third parties injured
by the intentional conduct of an employee.
There is some confusion as to the scope of the background
investigation that will immunize employers. According to the amendments, the background
investigation "must include" one of the following:
- a criminal background investigation, which shall consist of a report from the Florida
Department of Law Enforcement
- reasonable efforts to contact references and former employers of the applicant
- a job application form that includes questions about convictions and whether the
applicant has been a defendant in a civil action alleging an intentional tort
- obtaining a driver’s license record if such information is relevant to the work to
be performed
- interviewing the employee
While the statute uses the word "or" —
suggesting that an interview would be a sufficient background check — it is possible
the Legislature intended to use "and," with the result that an employer must do
each of the above items to the extent demanded by the particular duties of the job in
question.
Of course, the act does not operate in a vacuum. There are
other statutes and laws affecting what employers can and cannot do, and how they must do
what they can. For example, background investigations implicate the federal Fair Credit
Reporting Act, which covers investigations of persons done by third parties. It also
limits both the ability to obtain such background reports (by, among other things,
requiring disclosure to the prospective employee) and to use whatever information is
obtained (by, among other things, requiring the employer to notify the prospective
employee before deciding to take adverse action on the basis of the report). For more
information, please see "Disclosure and Approval: The New Fair Credit Reporting
Act," Florida Business Insight (July/August 1998).
As a final measure, the new law provides that the absence of
an extensive background investigation as outlined in the statute will not create a
presumption that the employer failed to use reasonable care in hiring.
The Freedom to Give Honest References
Until now, the risk of negligent hiring and retention claims
went hand-in-hand with another risk, forming a Catch-22: An employer who gave a negative
reference to a prospective employer could be sued by the employee for defamation or
tortious interference with a business relationship. That created a situation whereby an
employer seeking a reference might get access to only the most general, and often
inadequate, information from the former employer.
To further complicate matters, the fear of litigation made
some employers leery about conducting background investigations for fear of running afoul
of the Fair Credit Reporting Act. Thus, the background check undertaken to protect the
employer against a negligent hiring claim could well have resulted in the filing of a
lawsuit by the job applicant who was investigated.
The 1999 reforms now give employers who perform thorough
background investigations some protection against negligent hiring claims. But what about
getting those references? Since the new negligent hiring provisions will not work unless
an employer can obtain sufficient information through an adequate background
investigation, the new law gives employers much greater freedom to release information on
former employees.
The new standard allows employers to "disclose
information about a former or current employee"; this presumably would extend to any information about the employee. Furthermore, under the previous statute, liability could
be imposed if the information disclosed was deliberately misleading or rendered with
malicious purpose; the new statute eliminates those two grounds for liability. Unless the
employee can prove by clear and convincing evidence that the employer disclosed
information it knew was false or that violated any civil right of the employee, the
employer gains immunity from civil liability.
In sum, employers may more freely give references about their
former and current employees. A reasonable policy with respect to employee references
would still limit the number of people who have the authority to give out references. The
information provided, however, can safely be much broader than in the past, better
allowing employers to escape the contradictory situation whereby the employer could be
held liable both for disclosing and for failing to disclose negative information about
current and former employees.
Reducing Liability for Employee Leasing Companies
Prior to the 1999 reforms an employee leasing company could be
held liable for the misconduct of and injuries caused by a leased employee who was under
the supervision of the leasing company’s client. This was justified on the grounds
that the employee leasing company and the client to whom the employee was leased were
joint employers and thus jointly responsible for any damages or injuries.
The new law reduces this threat by providing that a party to a
joint employment arrangement is not liable for the tortious acts of shared employees if
the following are true:
- the party did not authorize or direct the tortious action
- it did not have actual knowledge of the tortious action
- it did not exercise control over work performed, including the day-to-day job duties of
the shared employee or of the job site from which the tortious acts arose
The party seeking to avoid liability must have a clause in the
written joint employment relationship contract that absolves it of control over the
day-to-day duties of the shared employee and of actual control over that portion of the
job site where the shared employee worked or from which the tortious acts arose. To avoid
liability, that written contract must also require joint employers to report complaints,
allegations, or incidents of any tortious misconduct or workplace safety violation to each
other; the party seeking to avoid liability must not have failed to respond appropriately
to any such report.
This section of the 1999 reforms does not otherwise alter the
responsibilities of the joint employer who does have actual control over the day-to-day
job duties of the shared employee or actual control over the job site.
John-Edward Alley Youndy Cook are with the law firm of Ford &
Harrison, LLP, where Alley is a partner (e-mails: jalley@fordharrison.com or ycook@fordharrison.com).
