Nothing magnifies the impact of the Foreign Corrupt Practices Act on corporations more than respondeat superior. Latin for “let the master answer,” it’s the legal doctrine holding companies vicariously liable for crimes committed by employees acting within the scope of their employment. Once an employee — even a low-level worker acting against the company’s orders — admits to an offense or is found guilty, the company is automatically guilty too. Case closed.
The [Ionia] courts’ views of the respondeat superior doctrine in the context of corporate criminal liability stands in stark contrast with the same liability in other contexts. For example, in discrimination suits under Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e, et seq., the U.S. Supreme Court has limited respondeat superior liability to actions taken by supervisors. See, e.g., Burlington Indus., Inc. v. Ellerth, 524 U.S. 742, 762 (1998).
More recently, the U.S. Supreme Court reiterated its precedent that “government officials may not be held liable for the unconstitutional conduct of their subordinates under a theory of respondeat superior.” Ashcroft v. Iqbal, No. 07-1015, 77 U.S.L.W. 4387, slip op. at 11-12 (U.S. May 18, 2009) (an action brought pursuant to Bivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388 (1971)). In fact, as the dissent in Iqbal noted, the majority’s opinion even “does away with supervisory liability under Bivens.” Id. slip op. at 1 (Souter, J., dissenting).
With such an exacting limit to respondeat superior liability in the Title VII and Bivens contexts, perhaps the same standard should apply to a corporation for the criminal acts of its employees.
That’s nice research and first-class argument.
Our view: What’s controversial here? To give organizations the best possible reason to have an effective compliance program, give them a defense based on their efforts to comply. Isn’t that what everyone, including the Justice Department, should want?