What Every Business Owner Should Know About Vicarious Liability When Contracting Out Security Services

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What Every Business Owner Should Know About Vicarious Liability When Contracting Out Security Services

When a business needs security personnel, whether it is undercover store detectives, “bouncers,” or traditional uniform guards, more and more businesses are deciding to enter into contracts with private security companies rather than establishing and managing a proprietary “in-house” security force. No one knows for sure, but in a voluminous document with all kinds of charts, graphs, and data entitled “The Private Security Industry: A Review of the Definitions, Available Data Sources, and Paths Moving Forward” published by the U.S. Department of Justice, it was estimated that about 60% of all private security personnel in the USA are contractual security personnel rather than proprietary security personnel.

There are many good business reasons for this trend. Chief among the reasons is that a business can focus on running their business without the hassle of managing security personnel. Also, contracting out security is often more cost effective than establishing and managing an “in house” security force.

When contracting with an independent contractor to provide security some business owners and managers believe they are insulating themselves from legal liability that may arise from the negligent or intentional actions or inactions of the contract security personnel. After all, security contracts often include indemnity clauses, hold harmless agreements, and other language designed to limit business liability or transfer liability to the independent contractor. This common belief may not be so true.

You can be assured that if someone files a law suit because of the actions or non-actions of the security personnel, plaintiff’s lawyer will name the contract security company and the business that hired the contract security company as defendants. How can a business be legally responsible for a company whose expertise in security they relied upon?

While there are a number of legal theories that an aggrieved party can advance in an effort to win their case, plaintiffs often rely on the legal doctrine of Respondeat Superior. In very simple terms, it is a legal doctrine that holds an employer or principal legally responsible for the wrongful acts of an employee or agent within the scope of employment. Generally, when a business contracts with an independent contractor, the business is not responsible for the negligent or intentional tortuous conduct of an independent contractor as they are not “employees” in the regular sense. Contract security personnel are employees of the contractual security company and are not employees of the business.  Well . . . maybe, but maybe not.

Independent Contractor or Employee?

First, you can expect plaintiff’s counsel to vigorously challenge the classification of the security personnel as an “independent contractor.” Despite the fact that the employee is labeled in the contract between the security company and the business as an independent contractor and receives his/her paycheck from the security company – not the business that contracted with the security company, this is not determinative. Ultimate classification is not up to the employer or what label has been attached to the security personnel. The law has developed rules on who qualifies as an independent contractor that must be followed, and the distinction between an employee and an independent contractor is determined by multiple factors.

A thorough discussion of the multiple factors that determine whether an employee is a true independent contractor or merely an employee improperly labeled as one is beyond the scope of this article. But central to the determination is the right of control and supervision exerted by an employer. The Maryland Court of Special Appeals in L.M.T. Steel Products v. Piersen, 47 Md. App. 633, 636 (1981) explained it well when it said: “To have an employment relationship, the ’employer’ must have some ability, should he care to exercise it, to tell the ’employee’ what to do and how and when to do it. If there is not this minimal power of control–if the worker’s agreement is to perform the work ‘according to his own means and methods free from control of his employer in all details connected with the performance of the work except as to its product or result’–the worker is deemed to be an independent contractor and not an employee/servant.”

Consequently, some have recommended that businesses contracting out their security should attempt to maintain an independent contractor status by not getting involved in the minutia of security plans or work schedules, policies, and training. The business needs to make sure adequate security plans, policies, and training exist and that they are comfortable with the types of action security personnel may take, but they should not be involved in the day-to-day operations of the contract security personnel. For example, whether or not to have armed guards is a decision for the business to make but the business should not be deciding which specific type of Taser or brand of gun, or other equipment security personnel carry.

This is generally good advice, but is likely not adequate. The test is not only whether the business actually gets involved in directing the activities of security personnel. It is also whether the business has the right to control the activities of the security personnel. And, all this is moot if the duty of providing security is deemed a non-delegable duty. In brief, the non-delegable duty doctrine means that the party with such a duty may not absolve itself of liability by contracting out the performance of that duty. It is an exception to the general Respondeat Superior rule that an employer may not be held liable for the torts of independent contractors.

Consider the case of Margaret Lois Dupree v. Piggly Wiggly Shop Rite Foods, Inc.

In Dupree v. Piggly Wiggly, 542 S.W.2d 882, 888 (Tex. Civ. App.–Corpus Christi 1976), a mother was doing her normal grocery shopping at a Piggly Wiggly grocery store. She paid for her groceries and then remembered she forgot to buy some milk and other items. She headed back into the Piggly Wiggly and purchased some additional groceries. As she was leaving the store two security agents for Denco Security Systems accused her of stealing merchandise and they took her into the Piggly Wiggly’s storage room. She provided the guards with her receipts showing she had purchased the items during her first visit into the store and denied stealing anything. All of this was to no avail. The security guards detained the shopper for an hour and forty five minutes and filed a criminal complaint against the shopper. Mrs. Dupree was taken to the police station, fingerprinted, and placed in jail until she was later released on bail. The criminal complaint filed by the security guards was later dismissed.

Mrs. Dupree brought a lawsuit against the security guards and Piggly Wiggly. Piggly Wiggly argued that the Denco security guards were acting as independent contractors during the detention and that Piggly Wiggly was not responsible for the actions of Denco security. The court agreed with Piggly Wiggly and found that the woman was falsely detained by the security guards and that Denco security company was liable for money damages to the woman.

Mrs. Dupree appealed and on appeal, Piggly Wiggly was also held liable on a theory of respondeat superior. The appellate court held that Piggly Wiggly had a non-delegable duty to provide the woman with a safe place to shop and when the two Denco security guards acted on behalf of Piggly Wiggly to detain the woman that duty was breached. Piggly Wiggly and Denco Security Company were both liable for money damages to Mrs. Dupree.

What does this all mean?

There are a number of cases similar to Dupree in many states throughout the country. While the facts are different in each case and the laws vary from state to state, many courts have rendered the same basic ruling. When it comes to security services, business owners or owners or occupiers of a premise are free to contract out the performance of security duties, but they cannot divest themselves of liability by assigning protection services to an independent contractor. In many states, there is a duty to provide security, and that duty has become a non-delegable duty.

What about those indemnity and hold harmless agreements typically found in security contracts? I will discuss these in a future article but they may not always offer the type of liability protection many people think they do.

George Babnick
George W. Babnick, is a 34 year law enforcement veteran with an extensive background in physical security, criminal and administrative investigations, training, school policing, supervision and management, and criminal forensics. He recently retired as a Captain in the Portland Oregon Police Bureau where he managed the Training, School Police, and Forensic Evidence Divisions. He holds criminal justice degrees from Portland Community College and Portland State University and a law degree from Northwestern California University School of Law, Sacramento California.

Mr. Babnick is a longtime member of the Western Society of Criminology and is the author of articles on security and law enforcement, investigations, supervision and management, and risk management related to these subjects.

As a physical security expert, George Babnick provides private physical security consultations across the United States and consults with clients outside the United States. He specializes in assessing security problems for small and medium businesses as well as select individuals. He offers independent, honest advice and expertise, with the goal of providing all clients with practical and cost-effective security solutions to enhance security and effectively manage business and personal security risks.

Mr. Babnick is also a licensed Private Investigator and conducts investigations for attorneys, businesses, and individuals throughout the State of Oregon.

To learn more about security consultation and investigative services offered, please visit http://babnickandassociates.com

Disclaimer: Nothing in any article on this blog should be construed as legal advice. Persons seeking legal advice should seek the counsel of an attorney licensed in their state.