Network: November 1992

Network questions and answers.

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Just How Liable Are We?

Your article on the company that was held responsible for an accident caused by a drunken salesman (In the Office, August 1992, [Article link]) got me wondering: When people drink a few beers in the parking lot after work, is the company liable? And if an employee worked overtime and fell asleep while driving home, could a company be held liable if that person causes an accident?

Jeff Donahue

President

Management Training

Consultants

Joplin, Mo.

"Wherever a company could have controlled alcohol consumption, the company may be liable," according to Janet Albers, a lawyer with Rosemary Macedonio & Associates, in Cleveland. That includes employees' drinking in the company's parking lot, even when the company did not serve the drinks. Ronald Beitman, a Falmouth, Mass., lawyer, agrees: "More courts have been willing to extend liability to employers than to homeowners or other social hosts," because of the master-servant relationship between employer and employee.

No case is cut-and-dried. Laws vary by state, and circumstances of individual cases figure heavily in their outcomes. In Bruce v. Charles Roberts Air Conditioning (Arizona, 1990) the company was not held liable for an employee who caused an accident after drinking on company premises, because, the court stated, drunken driving was not the type of conduct for which he was employed. Yet in Otis Engineering Corp. v. Clark (Texas, 1983) the company was held liable because the employer had escorted an intoxicated employee to his car and allowed him to drive away.

Albers and Beitman advise companies to take immediate action if they discover employees are drinking on company property. Post a notice and send a copy to all employees stating that anyone who drinks alcoholic beverages on the premises will be disciplined or dismissed. Smart companies will do that before such drinking becomes a problem. Also, if you ever have parties with alcohol on-site, you might reconsider your policies.

In the case of an employee working overtime and falling asleep on the way home, the company could indeed be held liable. Last year an Oregon jury decided such a case in Faverty v. McDonald's. An employee at a Portland McDonald's restaurant volunteered to work overnight and into the next day. At 8:21 a.m. he decided he was too tired to continue, and his supervisor let him go. On the way home, the employee had a car accident and was killed. The jury determined that McDonald's had been negligent in letting the employee work such long hours and awarded his family $400,000 in damages. The mother of the employee filed a $10-million wrongful-death suit; McDonald's is appealing the decision. (See The American Lawyer, September 1991.)

Federal labor law suggests standards for reasonable lengths of overtime, but state law may be more stringent. Consult your state labor department for information about state overtime laws.

Apples and Oranges

Our company pays commissions based on salespeople's meeting or exceeding past sales levels. We just acquired a small company with a complementary product, an account base, and repeat sales. The former owners did not, however, keep track of their true sales. We're combining the two products and the two sales forces. How can we set up a commission structure that will be fair and consistent with our current policy until we get better numbers for the new products?

Joseph Francis

National Sales Manager

ALK Laboratories

Milford, Conn.

There's no simple way to establish a compensation plan without true sales figures. With estimated figures, you run the risk of over- or under-compensating salespeople. Warren Culpepper, president of Culpepper & Associates, an Atlanta sales-and-marketing-consulting firm (see "Commissions That Smooth Out Sales," Sales and Marketing, July 1991, [Article link]), suggests zero-basing commissions -- that is, paying only salary for now and waiting to get a clearer picture of salespeople's performance. "It sounds as if the sales force of the acquired company was salaried, so delaying the move to commission-based compensation for a little while shouldn't be a problem." That does not mean delaying a new compensation plan for an entire year. Depending on the sales cycle, it may take just a few months.

After you establish a sales-compensation plan, the key is to make it adaptable, so you don't have to rework it every year. Jim Leavy, president of Snap Software Group, a $50-million sales-automation-software company in Manchester, N.H., recommends you base commissions on profits rather than sales -- especially since you now carry several products with different profit margins. You want salespeople working hardest on what earns you the most. Base the plan on a percentage so that revising a salesperson's compensation requires only changing the sales goals.

If you think the sales force will balk at zero basing, you could estimate. "Talk to the people who are closest to the action," Leavy advises. By involving them, you avoid the resentment that a system imposed from above might breed. Salespeople should have a pretty good idea of what their true sales numbers were. It wouldn't hurt to ask the secretary of the sales department, too, for a less biased opinion.

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