EMPLOYMENT LAW: Beyond Diaz v. Carcamo: The Diminishing Returns of Admitted Vicarious Liability

A California Appellate Court recently added clarity to one of two significant unresolved issues left open by the California Supreme Court decision Diaz v. Carcamo (2011) 51 Cal.4th 1148, (Diaz). Specifically, the Court of Appeal addressed the conflict between Civil Code section 3294, subdivision (b); which authorizes the use of previous acts of an employee in determining punitive damages against an employer, and the holding in Diaz, which precludes evidence of negligent training, hiring, or supervision at trial when an employer admits vicarious liability for the tortious acts of its employee. (CRST, Inc. v. Superior Court (2017) 11 Cal.App.5th 1255 (CRST).) In CRST, the Court of Appeal held that an employer’s voluntary admission of vicarious liability does not recovery of punitive damages against an employer upon a proper showing of misconduct.

Under California law, there are generally two types of theories under which an employer may be held liable for the negligent or tortious conduct of its employees. First, an employer may be vicariously liable for the tortious conduct of its employees under the doctrine of respondeat superior (Latin for “let the master answer”). Second, an employer may be directly liable for its own negligent hiring, training, supervision or retention of an employee who later engages in tortious conduct. Diaz seemingly abolished the latter theory when the employer admits that its employee was acting within the course and scope of his employment at the time he engaged in the alleged tortious conduct.

Diaz therefore provided a strong argument in support of claiming that discovery pertaining to an employer’s hiring, training, supervision or retention was now irrelevant in instances where the employer admitted vicarious liability. In the context of transportation cases, objectionable discovery might include a driver’s prior driving record, his or her personnel file held by the employer, and any written guidelines or an employment handbook setting forth safety protocol. In short, Diaz vitiated an entire liability theory that can be raised against an employer in a civil trial - and the type of evidence that can be admitted against the employer at trial - especially with regard to the employee’s and the employer’s prior conduct.

Significantly, Diaz failed to address two important issues. First, it failed to address whether an admission of vicarious liability precludes the recovery of punitive damages against the employer. Second, it did not address the scope of permissible discovery where there is an admission of vicarious liability by the employer. CRST addressed the former, and in doing so, has made the latter all the more complicated.

Under CRST, a plaintiff may now arguably seek discovery into matters not relevant to the negligence cause of action, but relevant to a claim for punitive damages. Considering the low pleading standard in California,, without further development in the case law, the scope of discovery ostensibly can now be an elected choice made by a plaintiffs’ counsel in their pleadings.