Exemplary Damages from Employers Based on Agent's Action

In Kolstad v. American Dental Association, 527 U.S. 526, 119 S. Ct. 2118, 2124, 144 L. Ed. 2d 494 (1999), the court held that employers in Title VII cases may be entitled to an affirmative defense against a claim for exemplary damages. See Kolstad, 119 S. Ct. at 2125. In its decision, the court addressed the common law of agency concerning the recovery of exemplary damages from an employer based on an agent's action in Title VII cases. The court held that "an employer may not be vicariously liable for the discriminatory employment decisions of managerial agents where these decisions are contrary to the employer's 'good-faith efforts to comply with Title VII.'" Kolstad, 119 S. Ct. at 2129. Under the common law of agency, exemplary damages may properly be awarded against an employer because of an agent's act if (a) the employer authorized the doing of the act; or (b) the agent was unfit and the principal was reckless in employing him; or (c) the agent was employed in a managerial capacity and acting in the scope of employment; or (d) the employer or a managerial agent of the employer ratified or approved the act. See Restatement (Second) of Agency 217C (1957). The same rules are set out in the Restatement (Second) of Torts section 909 (1939). The Supreme Court of Texas adopted section 909 of the Restatement (Second) of Torts in King v. McGuff, 149 Tex. 432, 234 S.W.2d 403, 405 (Tex. 1950). See Hammerly Oaks, 958 S.W.2d at 391.