can you sue your employee?

Can You Sue Your Employee?

Terry pranged the company car. Again.

Julie’s work on the designs was so sloppy that you had to pay a contractor to redo them.

Donald insulted a client at a sales meeting. Now the client has gone to your competitor.

In each of those situations, if Terry, Julie, or Donald were your employees, you might suffer financial loss.

Can you sue those employees to recover what you’ve lost?


The first thing you must acknowledge, is that you and your staff are in a special kind of relationship.

Your employees are your hands and feet. They are an extension of you and your business. Whatever they do, your business is regarded as doing.

That is the concept known as vicarious liability. You are responsible for the actions your employees perform in your name.

The upshot is that in most cases it is difficult to sue your staff. If what they have done was in fact done in your name, it makes as much sense to sue them as it does to sue yourself.

But there are exceptions to this.


If an employee acts outside the bounds of what you have authorised them to do, they may be at risk.

That’s because you are only liable for what your employees do in the normal course of their duties.

If they do something that you did not tell them to do, or something that was negligent, they are no longer acting as your hands and feet. They are acting in their own right and expose themselves to risk.

What sort of risk?


One consequence is that they cause you loss that you can sue them to recover.

It is that cost to you, resulting from the employee’s act, that you may be able to pursue them for.

In one example, an employee was ordered to pay their employer $12,000 for sloppy architectural designs that had to be redone. The work was of such poor quality that the Court considered the employee breached the contract.

In another case, the Employment Court cast some doubt on whether this kind of loss is recoverable if the employee is merely negligent.

But as the law stands today, it may still be possible to sue your employee for loss you suffer when they step outside the bounds of what you agreed.


There is another possible consequence to an employee’s breach.

Under the Employment Relations Act 2000, you can seek a penalty for any breach of an employment agreement.

For individuals, that means a fine of up to $10,000.

The penalty by default gets paid to the Crown. But the Employment Relations Authority has a discretion to order that it get paid to the person seeking the penalty.

So if you can show that the employee breached their employment agreement, they may be penalised. And you may get some of the proceeds.


It is possible to sue your employee, provided they have stepped outside the bounds of your contract with them. If they are no longer acting as your hands and feet, they leave themselves at risk. Damages for your loss and even a penalty are possible.

The onus is on you to clearly articulate what you expect of your staff. That way they will know exactly what you have authorised.

Time to look at your employment agreements? Or your company policies?

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