Inapplicability to Nonprofit Organizations
Key point 10-02.04. The fundamental policy supporting the doctrine of respondeat superior is "risk allocation." That is, an employer can allocate or shift the risk of injuries caused by the operation of its business to the consumers of its products and services by increasing the cost of those products and services to reflect the cost of personal injury claims. This policy has no application to churches and other charities that are incapable of exacting higher "contributions" from their members to cover personal injury claims. Some courts have recognized the impropriety of applying the respondeat superior doctrine to religious organizations.
The policy considerations supporting vicarious liability rest upon the fundamental principle of risk allocation. That is, an employer has the unique ability to allocate the risks of inevitable injuries suffered by the consumers of its products and services through price adjustments. See note 27, supra, and accompanying text. By increasing its prices, the employer allocates the risk of injuries to the consumers of its products and services. As reasonable as this policy may be in the context of "for-profit" employers, it has no application to most nonprofit employers who have no ability to allocate risk to consumers through price increases. Certainly this is true of religious organizations, which would find it difficult if not impossible to compel members to donate larger amounts to "allocate risks" to the "consumers" of its services. For this reason, the rule of vicarious liability should be used sparingly, if at all, in the context of nonprofit employers. Some courts have recognized that the concept of vicarious liability has little if any relevance in the context of nonprofit religious organizations.
To illustrate, the California Supreme Court ruled that a public school district was not legally responsible, on the basis of respondeat superior, for the injuries suffered by a 15-year-old boy who was sexually assaulted by his high school math teacher. John R. v. Oakland Unified School District, 256 Cal. Rptr. 766 (Cal. 1989). This case is significant for a couple of reasons. First, the court rejected the application of the respondeat superior doctrine not on the basis of the facts of the case, but rather on the basis of the doctrine's own theoretical justifications. The court observed that
although the facts of this case can be made to fit a version of the respondeat superior doctrine, we are unpersuaded that they should be or that the doctrine is appropriately invoked here. We draw our decision not from the various factual scenarios in which vicarious liability has or has not been imposed on employers for the torts of their employees, but instead from the underlying rationale for the respondeat superior doctrine. Id. at 773 (emphasis added).
The court stated the rationale for the respondeat superior doctrine as follows:
Three reasons have been suggested for imposing liability on an enterprise for the risks incident to the enterprise: (1) [I]t tends to provide a spur toward accident prevention; (2) it tends to provide greater assurance of compensation for accident victims; and (3) at the same time it tends to provide reasonable assurance that, like other costs, accident losses will be broadly and equitably distributed among the beneficiaries of the enterprises that entail them. Id. at 773-74, quoting the California Supreme Court's decision in Perez v. Van Groningen & Sons, Inc., 227 Cal. Rptr. 106, 108 (Cal. 1986), which was quoting 5 HARPER, JAMES & GRAY, THE LAW OF TORTS (2nd ed. 1986) § 26.5 n. 21 (citations omitted).
The court rejected all three reasons as a basis for imposing liability on the school district in this case. The court observed:
The first of these three considerations just noted plays little role in the allocation of responsibility for the sexual misconduct of employees generally, and with respect to the unique situation of teachers, indicates that untoward consequences could flow from imposing vicarious liability on school districts. Although it is unquestionably important to encourage both the careful selection of these employees and the close monitoring of their conduct, such concerns are, we think, better addressed by holding school districts to the exercise of due care in such matters and subjecting them to liability only for their own direct negligence in that regard. Applying the doctrine of respondeat superior to impose, in effect, strict liability in this context would be far too likely to deter districts from encouraging, or even authorizing, extracurricular and/or one-on-one contacts between teachers and students or to induce districts to impose such rigorous controls on activities of this nature that the educational process would be negatively affected. …
Nor is the second consideration —the assurance of compensation for accident victims —appropriately invoked here. The acts here differ from the normal range of risks for which costs can be spread and insurance sought. The imposition of vicarious liability on school districts for the sexual torts of their employees would tend to make insurance, already a scarce resource, even harder to obtain, and could lead to the diversion of needed funds from the classroom to cover claims.
The only element of the analysis that might point in favor of vicarious liability here is the propriety of spreading the risk of loss among the beneficiaries of the enterprise. School districts and the community at large benefit from the authority placed in teachers to carry out the educational mission, and it can be argued that the consequences of an abuse of that authority should be shared on an equally broad basis. But the connection between the authority conferred on teachers to carry out their instructional duties and the abuse of that authority to indulge in personal, sexual misconduct is simply too attenuated to deem a sexual assault as falling within the range of risks allocable to a teacher's employer. It is not a cost this particular enterprise should bear, and the consequences of imposing liability are unacceptable. Id. at 774.