The question of apparent authority stayed on the mind of a South Florida business owner when he was found liable for a faulty contract entered in by a rogue employee.
Peggy and William Post sought relief from the Florida heat and decided to install two new AC units on their properties. Acting on a recommendation from an acquaintance, they contacted Island Aire and met with Island Aire employee Sam Vandernoth to arrange for purchase and installation. Once an agreement was reached, the Posts signed an agreement provided by Vandernoth and wrote two checks totaling $3,000, both payable to Vandernoth.
After weeks passed and no work was done, the Posts contacted Vandernoth to complain and were refunded $1,000. More time passed and the Posts reached out again to demand a full refund. After silence from Vandernoth, the couple contacted Island Aire’s main office hoping for a resolution that would prove difficult to attain. They were told that Vandernoth had been fired.
Island Aire states that it was unaware of the agreement and payments that had occurred between the Posts and Vandernoth, and were unwilling to issue a refund. According to Island Aire, there had been no valid agreement nor funds received, leaving them free of responsibility. The Posts, upset over their lack of refund, took Island Aire to court and won $2,000, effectively gaining all of the money that had been stolen by Vandernoth.
Island Aire fought the ruling, asserting that Vandernoth’s actions were his own and not condoned nor encouraged by Island Aire, who ostensibly had no idea what he was doing. Island Aire rejected the Court’s decision based on apparent authority, arguing that Island Aire had never explicitly nor implicitly condoned the behavior of Vandernoth nor communicated to the Posts that Vandernoth had the authority to act as he did. Island Aire claimed the Posts were at fault for assuming Vandernoth had the authority to act on behalf of Island Aire. Of note was that the Posts made the checks payable to Vandernoth instead of to Island Aire.
The courts rejected this argument, reiterating that apparent authority did apply because Vandernoth had all the trappings of authority that included his employment by Island Aire, company uniform, company vehicle, company cell phone, and possession of blank Island Aire contracts. Furthermore, the court asserted, Island Aire had given Vandernoth the authority to enter into contractual agreements on its behalf as part of his duties.
The Posts were only right to assume Vandernoth had the authority to act as he did, and were entitled to their $2,000. Even though Vandernoth’s actions were unauthorized, they were of such a nature that third parties were entitled to rely upon them as being within his apparent authority.
Employee theft is a real problem for employers. Employers must take precautions to ensure that their employees’ do not abuse their express and apparent authority. This can be done by having employees sign agreements in which they acknowledge their authority, understand the civil and criminal penalties for exceeding their authority, and agree to reimburse the Employer for losses resulting from them exceeding their authority. In addition, employers must reinforce these limitations in periodic training sessions for all employees.
Do you have more questions about how you can protect your business? Contact Attorney Tee Persad at firstname.lastname@example.org or 407-647-7887 and visit https://www.cplsbusinesslaw.com/ to see all the services we provide.