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South Floridians 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 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 a period of inactivity, they 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 the company, 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 as such 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, reinforcing that apparent authority did apply because Vandernoth had all the trappings of authority that included but were not limited to his employment by Island Aire, company uniform, company vehicle, company cell phone, and contracts created by Island Aire. 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 his actions were unauthorized, Vandernoth actions 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. Furthermore, employers must reinforce these limitations in periodic training sessions for all employees.
Employee problems in the workplace are one of the most common business crises that entrepreneurs and executives face regularly. Private Corporate Counsel can work with you to help prevent and manage conflicts that arise in connection with your business. Learn how to tackle a crisis or request a free 30-minute consultation to get started now.