Employer sues Employee (2)

Just last month I noted the case where KFC sued their employee, Mr Bond, for the costs involved in investigating Mr Bond’s thefts from KFC.  I said how rare it was for employers to sue employees but this month we have another case of an employer suing its employee: Goodman v Rooney Earthmoving Limited [[2012] NZERA Christchurch 102; 25/05/2012; D Appleton].

Mr Goodman was a truck driver for Rooney Earthmoving Limited.  In June 2011 Mr Goodman was driving the company truck and trailer.  Just before he had to make a right turn into a side road, he pulled into the right lane to overtake a tractor.  While he was still on the right hand side of the road overtaking the tractor, a car appeared over the brow of the hill.

Mr Goodman swerved right and crashed the truck into a tree on the corner of the side road.  The front of the truck was extensively damaged.  Rooney required Mr Goodman to undergo a drug and alcohol test which showed a high level of cannabinoids.  Rooney subsequently dismissed Mr Goodman and he sued the company for unjustified dismissal.  Rooney, in turn, sued Mr Goodman for damage to the truck.

The Authority accepted that during the investigation process, Mr Goodman admitted that he was a regular user of cannabis.  The Authority found his dismissal to be justified because, as a regular user of cannabis, he was clearly in breach of the stringent health and safety standards in the truck driving industry.

Of real interest though, is the Authority’s finding (1) that Mr Goodman had breached the implied duty to exercise reasonable care in the discharge of his duties and (2) that damages as a result of that breach could be recovered.  At paragraph 42 the Authority held:

“In order to be able to claim damages from Mr Goodman, the respondent must show that there has been a breach of a contractual duty from which the damage flowed. Although there was no signed [employment] agreement between the parties, there was obviously a contractual arrangement governing the relationship.  This contractual arrangement comprised express terms, terms incorporated by statute and terms implied by various mechanisms.”

And then at paragraph 43:

“There is a pertinent contractual term that has been recognised for many years as being implied into all employment relationships; namely that the employee will exercise reasonable care in the discharge of his duties; that negligence by the employee resulting in damage to the employer can be recovered by the employer, Lister v Romford Ice & Cold Storage Co Ltd [1957] AC 555 HL.  It should be mentioned that the Court of Appeal in Katz v Mana Coach Services [2011] NZCA 610 (2 December 2011) recently questioned, obiter, whether an employer could recover damages from an employee where the employee has been negligent in the performance of his duties, but until a higher court has determined otherwise, Lister remains good law …”

Ultimately, at paragraph 51, the Authority held:

“All in all, I am satisfied that Mr Goodman was significantly at fault in causing the accident, which in turn caused damage to the truck belonging to the respondent. That in turn caused it financial loss, as the cost of the replacement parts needed for repair was greater than the respondent's insurance of $10,000.”

The Authority directed Mr Goodman to pay the amount of damage, less the GST component, and dismissed Mr Goodman's claims for unjustified dismissal.

Most employers, when an employee has caused loss or damage, just pay for the damage themselves or claim insurance. If the employer does take disciplinary action, it might warn or dismiss the employee. Only rarely does the employer seek to sue the employee for the damage. Even in the Goodman and Rooney case, the company didn’t act first – its claim was a counter-claim to Mr Goodman’s personal grievance.

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