In the business world, companies are often held responsible for the actions of their employees, especially when those actions result in harm or damage to third parties. One of the most significant legal provisions that addresses this issue is Article 313 Federal Law No. 5/1985 on the Civil Transactions Law of the United Arab Emirates. This article highlights situations where companies, or individuals in managerial positions, may be held liable for the actions of their employees or those under their supervision.
Article 313 of the Civil Transactions Law outlines situations where a party may be required to pay damages due to the wrongful acts of another person. Specifically, it addresses cases where the tort (wrongful act) is committed by someone under the supervision or authority of another.
A company (as the entity responsible for the supervision of its employees) may be held liable if an employee causes damage while performing their duties. This includes situations where the employee's wrongful actions are a direct result of their job responsibilities or occur while executing those responsibilities.
Under this provision, companies must understand that they have an obligation to ensure their employees are performing their duties with proper oversight and within legal boundaries. If an employee's action leads to harm, and it can be proven that the company failed to properly supervise or control that employee, the company could be held accountable for the damage caused. Even if the company had no direct involvement in the wrongful act, it may be required to settle the damages, unless it was proven that adequate supervision and control was exercised over the employee.
This creates significant risks for businesses that could be held liable for damages caused by their employees, even if the company was not directly involved in the wrongful act.
To mitigate the risk of liability, companies must establish strong systems for training, supervising, and monitoring their employees. It is essential to have clear guidelines on the expected conduct of employees and to ensure these guidelines are communicated and enforced throughout the organization. Additionally, companies should have mechanisms in place to monitor employee performance and intervene when necessary.
One crucial aspect of Article 313 is that the company, which may have been ordered to pay damages, has the right to seek reimbursement from the employee who committed the wrongful act. If a company is required to pay damages due to the actions of an employee, the company can attempt to recover the funds from the individual responsible for the wrongdoing. However, this legal right to reimbursement does not absolve the company of its initial responsibility to pay the damages if the employee cannot repay them.
It is important to note that the courts have absolute discretion to assess each case individually and determine whether liability applies. No two cases are identical, and courts will carefully consider the specific circumstances of each situation before reaching a verdict. The burden of proof lies with the party seeking compensation, and companies must be prepared to argue before the court that they acted with due diligence in supervising their employees.
Recent legal precedents have demonstrated this principle, with courts ruling in favor of a third party when the company failed to meet its supervisory obligations. In one such case, a company was held liable when an employee forged documents using the company's letterhead and email, altering a bank account number on an invoice to divert payments to his personal account. Despite the company's claim of lack of direct involvement, the court found that the company was responsible for failing to implement sufficient controls to prevent such fraud.
Businesses must recognize their duty to supervise and manage their employees effectively. Failing to do so could result in substantial legal and financial liabilities reinforcing the importance of maintaining a high standard of care in all business operations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
