Employers Beware: Liability for Employee Misconduct
The High Court’s decision in Top Strata Management Sdn Bhd v Perbadanan Pengurusan Bukit Desa Kondominium highlights when employers can be held responsible for their employees’ wrongful acts. This article breaks down the key points and lessons for business owners.
The Case at a Glance
The management corporation (MC) of Bukit Desa Condominium hired Top Strata Management Sdn Bhd (Company) to handle its property management. The Company’s building manager (Employee) was tasked with managing the MC’s finances. Over two years, the Employee misappropriated RM314,542.97. The MC sued both the Company and the Employee, and the Court held that the Company was liable for its Employee’s actions.
Why Was the Company Held Liable?
The Court applied a legal test to decide if it was vicariously liable. It asked:
- Was the wrongful act related to the Employee’s job?
- Did the Employee’s role give him the opportunity to commit fraud?
Since the Employee’s access to financial documents was part of his job, the Court ruled that the Company’s business created the risk and therefore it was liable.
Can the Company (Employer) Blame Others?
The Company argued that it was the MC’s negligence that led to its own loss. The Court however found that the Company cannot avoid liability by blaming others for not catching the fraud earlier. Vicarious liability is a strict liability which means the Company is liable for the fraud committed by its Employee, even if the Company did nothing wrong.
What This Means for Employers
Employers should:
- Implement strict financial controls.
- Regularly audit financial activities.
- Carefully vet employees handling sensitive tasks.
Conclusion
This case is a reminder that employers are accountable for risks tied to their operations. Proactive measures can help reduce liabilities and protect against employee misconduct. By addressing these risks, businesses can foster trust and safeguard their reputation.
