In today’s increasingly mobile construction industry, contractors are frequently involved in projects away from their home office. It is not uncommon for a construction company to send employees to another area and provide for their living expenses, transportation or housing, among other things, during a project. Whether you are a national builder working on jobs all over the country, or a local contractor reaching out to cities like Yuma or Flagstaff to supplement your business in a down economy, you need to be aware of your potential liability for the conduct of your out-of-town employees.

Until recently, if Arizona law applied, it was possible that merely sending an employee out of town for work and providing various support for their expenses could result in the contractor/employer being responsible for any actions done by its employees while out of town—regardless of whether they were performing work at the job site at the time.

In June of this year, the Arizona Supreme Court settled a disagreement between the Arizona Court of Appeals, providing a clearer standard limiting the extent to which a contractor/employer may be liable for an after-work accident caused by an employee who was on an extended away-from-home project.

The Recently Decided Case of Engler v. Gulf Interstate by the Arizona Supreme Court

In Engler v. Gulf Interstate Eng’g, Inc., the victim of an auto accident sued the employer of the driver who hit him, Gulf Interstate Engineering, alleging that Gulf was vicariously liable for the action of its out-of-town employees.

The driver/employee, Ian Gray, worked for Gulf, a Texas-based energy consulting company. He lived in Houston, but traveled each week to Yuma, Arizona. He stayed in a hotel in Yuma and commuted in a rental car to a worksite in Mexico, where he worked on the design and construction of a natural gas compressor. Gulf reimbursed Gray’s business expenses, including the cost of the hotel, rental car and meals. Gulf also paid Gray for his travel to and from the job site. Gulf considered Gray’s work day to begin when he left the hotel in Yuma and end when he returned to the hotel. Gulf did not supervise Gray after his work hours or control his activities.

On the day of the accident, Gray first returned to his hotel after a day of work. Shortly thereafter, he went to a restaurant with a coworker. Leaving the restaurant in his rental car, Gray hit Engler, who sustained serious injuries.

The Arizona Supreme Court found that Gulf was not vicariously liable because Gray was not subject to the control of Gulf at the time of the accident and therefore was not “acting within the scope of his employment.”

The Current Law of Vicarious Liability in Arizona

The Arizona Supreme Court held that a contractor/employer can be forced to pay for the wrongful actions of its employees if the employer is found to be “vicariously liable” for those actions. A contractor/employer is vicariously liable for the negligent work-related actions of its employees if the employee is acting “within the scope of employment” when the accident occurs. And, an employee is “within the scope of employment,” if he was subject to the employer’s control at the time of the action. In determining whether the employee was subject to the employer’s control at the time of the action, courts consider, among other factors, whether the act (a) was the kind the employee was hired to perform, (b) was commonly done by the employee, (c) occurred within the employee’s working hours, and (d) furthered the employer’s purposes.

Applying these factors, the Arizona Supreme Court held that an employee who maintains the right to choose where, when, and how to travel, and by what route, is not held to be subject to contractor/employer control. Mere reimbursement of travel expenses or payment of a travel allowance alone cannot create employer liability. Id.

The Prior Arizona Court of Appeals Split

At the trial court level, Engler’s case was dismissed on the basis that there was no vicarious liability for an out-of-town employee’s actions while traveling from a restaurant for a regular meal. The Arizona appeals court affirmed the dismissal. Shortly after the Court of Appeals affirmed the dismissal of Engler’s case, another Arizona Court of Appeals case found that “an employee on out-of-town travel status is within the course and scope of his employment and subjects his employer to vicarious liability while traveling to and from a restaurant for a regular meal.” McCloud v. Kimbro (McCloud II). Because the McCloud decision was seemingly contradictory to the decision in his case, Engler appealed. The Arizona Supreme Court granted review of the Engler case to resolve the conflict between the two Arizona Courts of Appeals.

The Arizona Supreme Court rejected the analysis in McCloud and upheld the Court of Appeals’ decision limiting the liability of the employer for activities unrelated to work while an employee is out of town. Providing that an employee’s negligent conduct falls outside the scope of employment when the employee engages in an independent course of action that does not further the employer’s purposes and is not within the control or right of control of the employer, the Court found that Gulf did not exercise any control over Gray at the time of the accident because: Gray was not serving Gulf’s interests in traveling to and from the restaurant during his off hours; Gulf did not control where, when or even if Gray chose to eat dinner; and, once Gray returned to his hotel at the end of the work day, he was free to do as he wished.

Contrary to Engler’s contention, the Court found that worker’s compensation principles, which apply to compensate an injured employee regardless of whether a party is at fault, should not be extended to vicarious liability cases. The Court also rejected Engler’s contention that all of Gray’s activities while in Yuma furthered Gulf’s business purposes, instead finding that “[n]ot every activity of an employee on a work assignment is under the employer’s control, even if the employer understands that such activity is necessary or might occur.”

The Arizona Supreme Court’s decision in Engler is encouraging for contractors/employers who send employees out of town on projects because it limits the scope of potential liability for the actions of their employees when the contractors/employers have no ability to control those employees. The analysis of liability is still based largely on the facts. Thus, there is no guarantee or hard line rule to determine when an employer may be subject to liability.