The Legal and Ethical Environment of Business - Essay Example

The Legal and Ethical Environment of Business The notion of vicarious liability or the legal doctrine of “respondeat superior” holds business principals responsible for the torts of their agents1, therefore in the case of DWI, this would mean that the firm could be responsible for the illegal harmful acts of their agents or employees. Liability under tort arises when conduct falls short of society’s standards in that it causes harm to another. Therefore vicarious liability can hold one party like DWI for example, liable for the injury or damages that are sustained by another party, inspite of the fact they may not have had any kind of active involvement in the injury that was caused.

This is not the case where recoveries can be made directly from the agent or person causing the harm, rather the principle behind vicarious liability is that an employer exerts control over the physical conduct of an agent and is therefore responsible for harmful conduct. In a recent case, Arena Group 2000, the maker of a sign that fell on a San Diego man and paralyzed him, was held vicariously liable for the injury caused.2 There are also several cases where private actions for securities fraud under Section 10(b) show that corporate officers and law firms are being held vicariously liable for preparing misleading disclosure documents.

3 It was held in this case that even where secondary agents are involved, where they participate in a fraudulent activity to an extent which could characterize them as authors or co-authors they may be liable for damaging accruing from such harmful activity4. Another case where vicarious liability for tort was imposed upon an employer was in the case of American Society of Mechanical Engineers Inc v Hydrolevel Corp5 where common law agency principles were used to impute liability upon an employer in a position of sufficient authority to exert control.

An employer can also become liable for vicarious liability for the harm caused by its employees under a theory of negligent hiring, where adequate checking of references and skills are not carried out by an employer before the hiring is completed6. The Strict liability rule may be enforced in corporations such as DWI and especially public corporations where the corporation will be expected to assume the liability for the tortious acts of its employees. In view of the above, it may be noted that DWI must exercise the greatest of care in setting out standards of conduct that must govern its employees behavior, especially those of managers and those in supervisory positions, who often take important decisions on behalf of the Company.

Any negligence on their part that causes harm could impute liability on the Company, especially through fraud or negligent acts. Therefore it is recommended that existing regulations be examined and revised where necessary in order to incorporate stricter codes of conduct in order to protect against negligent and tortious acts taking place. The actions of employees, especially those in supervisory positions, should also be scrutinized carefully and subjected to periodic inspections so that potential shortcomings can be identified and necessary preventive action taken to correct them before they result in tortious acts.

Bibliography* American Society of Mechanical Engineers Inc v Hydrolevel Corp, 456 US 556 (1982)* Incollingo, Robert J, no date. “Liability: where does it come from: where does it end?” [online] available from:ww.rjilaw.com* Klein v Boyd, 1998 U.S. App LEXIS 4121 (3rd Cir 1998)* Prosser, W, 1971. “The Law of Torts” (4th edn) pp 458-475* “San Diego man awarded $12.7M in falling sign lawsuit.” Sports Arena lawsuit [online] http://www.onlinelawyersource.

com/news/san-diego-sports-arena-la.html* ZZZZ Best Securities Litigation, 864 F. Supp. 960 (C.D. Cal. 1994)