Negligent Retention
Negligent Retention: Hidden Costs That Could Bankrupt Your Business
Did you know negligent retention could result in a $7 billion lawsuit against your business? When Charter Communications failed to conduct proper background checks and retain problematic employees, they faced exactly this devastating financial consequence. Negligent retention occurs when employers fail to terminate employees who pose danger to others despite knowing about their misconduct.
The negligent retention definition encompasses situations where businesses “knew or should have known” an employee was likely to cause harm through harassment, violence, theft, or fraud. Unlike negligent hiring and retention, which involves the initial employment decision, negligent retention specifically focuses on keeping problematic employees after issues arise. Consequently, a negligent retention lawsuit can force business owners to pay for damages including medical bills, psychological harm, or stolen property. Additionally, the hidden costs extend beyond courtrooms to decreased productivity, damaged morale, increased turnover, and higher insurance premiums.
In this article, we’ll explore how negligent retention threatens your business financially, examine real-world cases, and provide practical strategies to protect your company from these potentially bankrupting liabilities.
Negligent Retention Definition and Legal Basis
“Negligent retention is a legal concept under employment law that refers to an employer’s failure to terminate or address the issue of an employee who poses a risk to others.” — LegalMatch Editorial Staff, Legal information and attorney matching service
The legal concept of negligent retention holds employers accountable for keeping employees who demonstrate dangerous or harmful tendencies. Understanding this liability is essential for protecting your business from potential lawsuits that could result in substantial financial damages.
What is negligent retention in employment law?
Negligent retention occurs when an employer fails to terminate or take appropriate action against an employee who they knew—or should have known—posed a danger to others. Essentially, this legal concept establishes liability when businesses continue employing individuals despite evidence of their unsuitability or dangerous propensities.
The legal basis for negligent retention claims requires several key elements:
- An established employer-employee relationship
- Evidence of employee unfitness or harmful behavior
- Employer knowledge (actual or constructive) of the employee’s misconduct
- Failure to take appropriate action (discipline, termination, etc.)
- Harm caused to others as a result
- Direct connection between employer inaction and the harm
Courts examine specific factors when determining negligent retention liability, including the employee’s overall work record, prior complaints against the employee, whether improper behavior was job-related, and if managers witnessed any misconduct.
How negligent retention differs from negligent hiring
While both negligent hiring and negligent retention involve employer liability for employee misconduct, they differ primarily in timing. Negligent hiring focuses on an employer’s failure to conduct proper background checks before employment begins, whereas negligent retention concerns an employer’s actions after learning about an employee’s dangerous tendencies.
Furthermore, negligent hiring claims examine pre-employment screening practices, questioning whether appropriate steps were taken to ensure candidate suitability. In contrast, negligent retention claims investigate whether employers monitored misconduct appropriately and took reasonable measures after problems became apparent.
For instance, an employer might be liable for negligent retention even after conducting thorough pre-employment screening if they later ignored reports of misconduct, failed to address performance issues, or dismissed complaints about an employee’s behavior.
Negligent supervision and retention: overlapping risks
Negligent supervision and negligent retention often overlap in employment law. Both involve an employer’s failure to properly manage problematic employees, though with subtle differences in focus.
Negligent supervision claims stem from an employer’s failure to reasonably control or monitor employee actions. These claims frequently arise in sexual harassment contexts, where inadequate oversight allows harassing conduct to continue. Similarly, negligent supervision can create liability when employees cause injuries to non-employees while using company property or during work hours.
The success of negligent supervision claims typically depends on whether:
- The victim reported misconduct to the employer
- The employer knew or should have known about the misconduct
- The employer failed to take prompt action to prevent further harm
In some jurisdictions, an employer’s duty extends beyond company premises. For example, in the Anicich v. Home Depot case, the court held Home Depot potentially liable when a manager with a known history of harassment murdered an employee during an out-of-state trip. The court reasoned that the manager’s prior harassing behavior made the violence foreseeable, despite the employer’s argument that the murder represented a “radical break” from previous conduct.
Both negligent retention and supervision claims underscore the importance of taking swift, appropriate action when employee misconduct becomes apparent, regardless of where it occurs.
Key Legal Elements That Establish Employer Liability
“Negligent hiring and retention suggest that the employer hired and retained an employee that showed clear signs of a pattern of behaviors that would create liability for the employer.” — FoxHire Editorial Team, Employer of Record and HR compliance experts
To succeed in a negligent retention lawsuit, plaintiffs must establish several critical legal elements. Understanding these components helps businesses recognize their legal exposure and take preventive measures against potentially devastating liability claims.
Duty of care and breach of duty
Under employment law, businesses have a fundamental legal obligation to use reasonable care when retaining employees. This duty extends beyond initial hiring decisions to ongoing employment relationships.
The duty of care requires employers to:
- Ensure they don’t retain employees who pose foreseeable risks to others
- Take appropriate action when employee misconduct becomes apparent
- Protect coworkers, customers, and the public from potentially dangerous employees
A breach occurs when an employer fails to uphold this standard of care. Courts typically evaluate breaches by asking: Would a person of ordinary prudence have taken different actions given the nature of employment and potential consequences of retaining an incompetent or dangerous individual?
The standard varies based on the employee’s role and responsibilities. Positions with greater potential to cause harm—such as security personnel, drivers, or healthcare workers—generally require heightened vigilance from employers.
Causation and harm: proving the link
Causation represents perhaps the most challenging element in negligent retention claims. Plaintiffs must demonstrate a direct connection between the employer’s breach of duty and the resulting harm.
This requires proving two key aspects:
First, the plaintiff must establish that both parties (the plaintiff and the problematic employee) were in locations where each had a right to be when the wrongful act occurred, or that their meeting resulted directly from the employment relationship.
Second, plaintiffs must demonstrate that the employer’s negligence was a “substantial factor” in causing the harm. Importantly, courts examine whether the injury would have occurred regardless of the employer’s actions or inactions.
The harm element requires showing actual damages—physical injury, emotional distress, financial loss, or property damage. Some jurisdictions, like Virginia, require allegations of “serious and significant physical injury” to maintain negligent retention claims, while others recognize emotional harm as sufficient.
Employer knowledge and failure to act
The cornerstone of negligent retention liability revolves around what employers knew—or should have known—about an employee’s dangerous tendencies or incompetence.
Courts examine several factors to determine employer knowledge:
- The employee’s overall work record
- Prior complaints about the employee
- Whether previous misconduct was job-related
- If supervisors witnessed inappropriate behavior
- Any disciplinary actions taken or neglected
The “should have known” standard creates liability even when employers claim ignorance. This legal concept, known as constructive knowledge, means employers can’t shield themselves by deliberately avoiding awareness of problematic employees.
Once knowledge is established, plaintiffs must prove the employer failed to take appropriate remedial action. This might include:
- Conducting thorough investigations of reported incidents
- Implementing progressive discipline
- Reassigning employees to minimize risk
- Providing additional supervision or training
- Termination when warranted by the circumstances
Ultimately, courts assess whether the employer’s response was reasonable given the nature and severity of the known issues. The reasonableness standard requires employers to balance employee rights against their duty to maintain a safe environment for others.
Real-World Negligent Retention Cases and Outcomes
Examining real-world negligent retention cases reveals the devastating financial and reputational consequences businesses face when they fail to properly manage problematic employees.
Charter Communications $7B lawsuit overview
The most striking negligent retention case in recent history involved Charter Communications (Spectrum) when their technician murdered 83-year-old Betty Thomas in her Texas home in 2019. After completing a service call, the technician returned the following day in a company van and fatally stabbed Thomas, subsequently stealing her credit cards.
A Dallas County jury found Charter Communications 90% responsible for Thomas’s death due to:
- Failing to verify the technician’s employment history, which would have revealed dishonesty in his application
- Ignoring the technician’s written pleas about serious financial and personal problems
- Disregarding “red flags” noted by supervisors
- Abandoning a more robust employee screening program that existed before Charter acquired Spectrum in 2016
Moreover, the jury discovered that Charter attorneys had forged documents attempting to force the lawsuit into closed-door arbitration where damages would have been limited to the amount of Thomas’s final bill. This misconduct resulted in an unprecedented verdict: $28.4 million in compensatory damages and $590.66 billion in punitive damages. Although a judge later reduced the overall damages to $97.04 billion, this case remains a sobering reminder of negligent retention consequences.
Negligent retention lawsuit trends in U.S. courts
Indeed, negligent retention lawsuits have forced many companies into bankruptcy. Case law in every state now recognizes negligent hiring and retention liability, with courts increasingly holding employers accountable for:
- Misconduct by current employees
- Actions of former employees who misused information obtained during employment
- Failing to investigate or report patterns of employee misconduct
Notably, juries are delivering increasingly substantial verdicts. Another example is the $84.38 billion verdict against Crime Prevention Agency when their unlicensed security guard sexually assaulted a 14-year-old girl.
Common industries affected by negligent retention cases
Particularly vulnerable industries include:
- Security services – Companies providing security personnel face heightened scrutiny due to the authorized use of force and access to sensitive locations
- Cable/telecommunications – Field technicians entering customers’ homes create significant liability exposure
- Financial services – Employees with access to customer financial information present risks if they have histories of identity theft or fraud
In fact, any business accepting credit cards or storing customer information faces potential liability if employees misappropriate this data. Ultimately, social media has amplified these risks – a company’s brand can be “severely or fatally damaged” even without a lawsuit being filed.
Hidden Costs of Negligent Retention for Businesses
Beyond the courtroom battles and legal definitions, negligent retention carries substantial hidden costs that can financially cripple businesses of all sizes. These costs extend far beyond initial settlements, creating lasting financial burdens that many companies fail to anticipate.
Legal fees and settlement payouts
The financial toll of negligent retention starts with compensatory damages covering medical expenses, lost wages, and pain and suffering resulting from employee misconduct. Legal expenses accumulate rapidly—employers typically pay both their own attorney fees and the plaintiff’s legal costs when found liable. Courts may impose punitive damages specifically designed to punish employers, especially in cases showing deliberate indifference to employee misconduct. Even before reaching trial, businesses face substantial expenses investigating claims and attempting settlements.
Reputational damage and customer trust loss
Even a single incident of negligent retention can severely damage a company’s reputation. According to research, businesses experience substantial loss of customer trust after negligent retention cases become public. This reputational harm translates directly into lost business opportunities and decreased revenue streams. Henceforth, companies must invest heavily in reputation management and rebuilding brand trust—costs rarely factored into initial risk assessments.
Employee morale and turnover impact
Internally, workplace morale suffers significantly when employers fail to address problematic employees. Staff members often feel unsafe or undervalued when misconduct goes unaddressed. Productivity declines as employees focus on workplace issues rather than core responsibilities. Subsequently, businesses experience higher turnover rates, with associated replacement and training costs. These internal disruptions create a cascade of financial impacts often overlooked when calculating negligent retention risks.
Insurance premiums and EPLI implications
Following negligent retention claims, companies typically face increased insurance premiums as providers reassess their liability risk. Employment Practices Liability Insurance (EPLI) rates climb substantially after successful claims. Accordingly, some businesses become effectively uninsurable at reasonable rates after multiple incidents. This ongoing premium burden represents a lasting financial penalty extending years beyond the original incident.
HR Strategies to Prevent Negligent Retention
Proactive HR practices form the first line of defense against costly negligent retention lawsuits. Implementing systematic approaches to employee management helps businesses identify problematic behaviors before they escalate into legal liabilities.
Implementing performance management systems
Performance management systems provide structured frameworks for tracking employee behavior and identifying potential issues. These systems enable employers to monitor progress regularly, set clear performance objectives, and deliver timely feedback. With this approach, managers can spot concerning patterns early and address them appropriately. In essence, effective performance management creates documentation trails that demonstrate an employer’s diligence in addressing problematic behaviors, thereby reducing negligent retention risks.
Conducting thorough background checks
First thing to remember, comprehensive pre-employment screening remains critical even after hiring. Verification of employment history, education credentials, and criminal records helps identify discrepancies that might signal future problems. Background checks should be appropriate to the position’s level of responsibility and potential for harm. Above all, businesses must document their investigative practices consistently to demonstrate they’ve used reliable information in retention decisions.
Documenting disciplinary actions consistently
Meticulous documentation serves as crucial evidence of an employer’s efforts to address performance issues. Detailed records of performance evaluations, written warnings, and disciplinary measures provide clear history of steps taken to manage employee behavior. This documentation becomes vital if an employee engages in wrongful acts or if negligent retention claims arise, demonstrating the employer took reasonable measures to address issues.
Training managers on misconduct response
Managers often represent the first line of defense in identifying workplace misconduct. Proper training helps them recognize warning signs like repeated inappropriate behavior or declining performance. Managers must understand their duty to report issues promptly and know appropriate investigation procedures. At the same time, they need skills to document incidents thoroughly and take appropriate remedial actions consistently.
Establishing zero-tolerance policies
For severe misconduct like physical violence, threats, or sexual harassment, zero-tolerance policies demonstrate organizational commitment to workplace safety. These policies must clearly outline prohibited behaviors, consequences for violations, and reporting procedures. To be effective, zero-tolerance policies require consistent enforcement across all levels regardless of an employee’s role or seniority.
Conclusion
Negligent retention poses a genuine existential threat to businesses of all sizes. Throughout this article, we’ve examined how keeping problematic employees despite knowledge of their misconduct can lead to catastrophic financial consequences. The Charter Communications case, resulting in billions in damages, certainly illustrates the devastating impact negligent retention can have on even large corporations.
The legal landscape surrounding this issue demands attention. Employers must recognize their duty of care extends beyond initial hiring decisions to the entire employment relationship. Consequently, failing to monitor, document, and address problematic behavior creates significant liability exposure that courts increasingly penalize with substantial verdicts.
Financial implications reach far beyond courtroom settlements. Hidden costs such as skyrocketing insurance premiums, damaged customer trust, and employee turnover compound the direct legal expenses. These combined factors explain why negligent retention claims force many businesses into bankruptcy annually.
Prevention remains the most effective defense against these risks. Robust performance management systems, thorough background checks, consistent documentation, manager training, and clear misconduct policies work together as essential protective measures. These strategies not only shield businesses legally but also foster healthier workplace environments.
The stakes could not be higher for modern businesses. We must view negligent retention not merely as a legal concept but as a critical business risk requiring proactive management. Companies that implement comprehensive preventive strategies will undoubtedly protect both their financial health and organizational reputation from potentially bankrupting claims.
FAQs
Q1. What is negligent retention and how does it differ from negligent hiring?
Negligent retention occurs when an employer fails to terminate or address an employee who poses a risk to others, despite being aware of their misconduct. Unlike negligent hiring, which focuses on pre-employment screening, negligent retention deals with an employer’s actions after learning about an employee’s dangerous tendencies.
Q2. What are the key elements that establish employer liability in negligent retention cases?
The key elements include the employer’s duty of care, breach of that duty, causation between the employer’s actions and the harm caused, and actual damages. Additionally, the employer’s knowledge (or what they should have known) about the employee’s misconduct and their failure to take appropriate action are crucial factors.
Q3. What are some hidden costs of negligent retention for businesses?
Hidden costs include legal fees and settlement payouts, reputational damage leading to loss of customer trust, decreased employee morale and increased turnover, and higher insurance premiums. These costs can have long-lasting financial impacts on a business beyond the initial legal consequences.
Q4. Can you provide an example of a significant negligent retention case?
One of the most notable cases involved Charter Communications, resulting in a multi-billion dollar lawsuit. The company was found 90% responsible for a murder committed by their technician due to failures in background checks, ignoring warning signs, and abandoning robust screening processes.
Q5. What strategies can HR implement to prevent negligent retention?
HR can implement several strategies, including robust performance management systems, conducting thorough background checks, consistently documenting disciplinary actions, training managers on how to respond to misconduct, and establishing clear zero-tolerance policies for severe infractions.
