To what extent can employers be held vicariously liable for the acts of their employees?

This post was also contributed by Ebru Tirel, Trainee, Norton Rose Fulbright LLP (Munich).

Imagine a forklift truck driver damaging the car of a customer of the employer, resulting in a loss of EUR 200,000. Who will be liable for the damage?

Generally speaking, of course, the employee is directly liable for the damage caused by a negligent act or intentional fault. However, the employer can also be held responsible for wrongful acts of employees, even if the employer has not committed any wrongful act himself, provided that the fault occurred in the course of the employment and while fulfilling an obligation of the employer: It is the employer’s enterprise that created the risk in the first place.

When performing contractual obligations, employers usually do not perform all obligations towards third parties themselves, but use employees. It could appear that the employees would bear the full risk of any damage they cause, while the employers who benefit from using employees, bear none of the risk themselves.

To avoid such a result, an employee has recourse against his employer according to a principle developed in German jurisdiction since 1957 (called ‘innerbetrieblicher Schadensausgleich’). According to this principle, the employee’s claim against the employer, in cases where the damage was caused by an action arising from and in the course of employment, depends on the level of negligence.

• If the employee acted in a slightly negligent manner, he is not liable at all. In this case the employee can claim a full indemnity from the employer.
• In a case of “average” negligence (mittlere Fahrlässigkeit), the liability is proportional. For example a proportional liability of fifty percent could be reasonable when considering all the circumstances such as the period of employment and the employee’s reliability in the past.

It should also be noted that the employer is obliged to maintain adequate insurance to cover the risk of such damage. If the employer could have taken out such insurance but failed to do so, he will be liable as though insurance cover were in place. If the damage caused is fundamentally disproportionate to the employee’s salary, the employee’s liability is further limited, generally speaking, to a maximum of three months’ salary.

• If the wrongful act of the employee is due to his malicious intent or gross negligence (grobe Fahrlässigkeit), generally speaking, the employee cannot claim recourse from the employer at all.