Farm Cooperative Not Liable for Negligent Hiring of Independent Contractor’s Employee

October 21, 2020 | Kitt Tovar

On October 7, 2020, the Iowa Court of Appeals reversed a district court order which had denied a farming cooperative summary judgment on a claim of negligent hiring. The claim arose in a wrongful death lawsuit brought by the estate and family members of a farmer killed when an employee of a trucking company drove into the back of the farmer’s tractor with a grain truck The court ruled that the cooperative could not be liable for the negligent hiring of its independent contractor’s employee.

Background

A farming cooperative hired a trucking company to haul grain. The parties signed an “Independent Contractor Agreement,” which stated that the cooperative would not be liable for any negligence or misconduct by the trucking company. It also stated that the Independent Contractor would not be required to follow or establish a regular or daily schedule. The owner of the trucking company employed his son as a truck driver to haul grain for the company.

During one delivery, the driver crashed into the back of tractor, and the farmer driving the tractor died from injuries sustained during the collision. At the scene of the accident, police found evidence of drug use by the driver, who denied using drugs or drinking before driving. The police conducted a drug test and the driver’s lab results were positive for morphine and an anti-psychotic medication.

The farmer’s estate and family brought a wrongful death lawsuit against the driver, the trucking company owner, two of his businesses, and the cooperative. Among other claims, the estate alleged the cooperative was vicariously liable for the driver’s negligence and directly liable for negligently hiring the driver. The estate’s pleadings did not include a claim against the cooperative for the negligent hiring of the trucking company.  

The cooperative filed a motion for summary judgment on each of the two claims, and the district court denied both motions.  With respect to the vicarious liability claim, the district court found that there was an issue of material fact as to whether the cooperative exercised control over the trucking company. This order was not on review. On the negligent hiring claim, the district court ruled that even though the driver was a subcontractor of the trucking company, the cooperative had a duty to investigate the driver because it knew he had a history of drug use. The cooperative appealed the denial of summary judgment on the negligent hiring claim.

Direct Liability for Negligent Hiring

An employer may be liable for negligently hiring an employee if 1) the employer knew or should have known of the employee’s lack of qualifications at the time of hiring; 2) because of the negligent hiring the employee’s inadequacy caused injuries to a third party; and 3) the tortfeasor employee and the employer had an agency or employment relationship. An employer may also be liable for negligent retention and supervision for failing to use ordinary care in supervising the employee to prevent foreseeable harm to others.

The cooperative claimed that a company engaging an independent contractor does not have a duty to vet and drug-screen every employee of that independent contractor. It claimed it had only a duty of reasonable care when hiring the independent contractor, not the employees of the contractor. In its analysis of the duty of care imposed on an employer, the court considered both the Restatement (Second) of Torts section 409 (Section 409) and Restatement (Third) of Torts: Liability for Physical and Emotional Harm section 55 (Section 55).

Section 409 provides that, generally, a party is not liable for harm caused by an independent contractor it hires. However, this rule is subject to many exceptions, including an exception that the party may be liable for harm sustained by a third party when it fails to exercise reasonable care to employ a competent and careful contractor.[i]

To determine whether a party has direct liability for the harm caused by an independent contractor’s employee to others, the court turned to Section 55. In contrast to Section 409, Section 55 imposes liability and a general duty of care on a party for the contractor’s negligence, but then creates limitations. Therefore, the cooperative owed a duty of reasonable care to third parties in hiring the owner and his trucking company as independent contractors and may be liable for damage caused by a breach of that duty. This is likewise established by section 411 of the Restatement (Second) (Section 411), which imposes liability for harm to third persons caused by a party’s “failure to exercise reasonable care to employ a competent and careful contractor.” However, the estate only claimed that the cooperative was negligent in hiring the driver, not the trucking company.  

Holding

The court determined the Sections 55, 409, and 411 did not impose a duty on a party to evaluate the qualifications an independent contractor’s employee. It was undisputed that the cooperative did not contract with or hire the driver. Rather, only the trucking company and owner were the parties to the Independent Contractor Agreement. The cooperative and the driver did not have an agency relationship. Therefore, the court reversed the lower court’s ruling and granted summary judgment to the cooperative on the negligent hiring claim against the cooperative.

 

[i] In Jones v. Schneider National, Inc., the court found that the phrase “third party” does not include an employee of an independent contractor and therefore an employee cannot recover against the employer who hired the independent contractor. 797 N.W.2d 611, 615 (Iowa Ct. App. 2011).