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When your employees’ statements can be held against you in court

Business owners may not realize that statements by their employees could be used as evidence against the business in litigation. An adversary seeking to introduce evidence of an employees’ statements does not even have to subpoena the employee to testify in court. Instead, the employees’ statements may be admissible hearsay under the rules of evidence. Although this is currently only allowed in limited circumstances, New York State is considering making the rule broader, which could have a significant impact on businesses.

The concept of hearsay is well-known even to nonlawyers. Hearsay is a statement made outside of court or a deposition, which is offered into evidence to prove that the content of the statement is true. Hearsay is generally not admissible because it is considered unreliable. The unreliability of hearsay is assumed, as the common phrase “he said, she said” would suggest.

An exception to the hearsay rule applies when the statement is uttered by the adversary in the case (referred to as a “party admission” or statement of a “party opponent”). For example, if the defendant allegedly made the statement, the statement is admissible against the defendant. The reasoning behind this exception relates to the reliability of the hearsay: you wouldn’t make a statement that could potentially be construed against you unless it was true!

However, the application of this exception to non-individual parties can raise an issue. Since corporations and LLCs don’t “speak,” who speaks for them? New York Courts have fashioned a rule of admissions by an agent. A statement made by an agent or representative of a party may also qualify under the “party opponent” exception. For businesses that could have many potential “agents” (anyone from the CEO to an employee), the impact during litigation can be serious.

Agent admissions can be crucial to a case, and are relevant in a wide array of civil and commercial cases. For example, Plaintiff trips on a carpet divider in a restaurant, gets hurt, and sues the restaurant. At trial, Plaintiff seeks to admit a statement from Waitress at the restaurant that the Plaintiff was the third person that week to trip on the carpet divider. The Plaintiff wants the statement in evidence as proof that that restaurant knew of the hazard and failed to fix it.

In a New York State case, agent admissions are only admissible if the agent had authority to speak on behalf of the principal (e.g., a spokesperson, public relations employee, CEO, a lawyer, project manager/field supervisor). The statement of Waitress (who likely does not have authority to speak for the restaurant with respect to accidents), although a highly relevant and reliable statement, would not be admissible as a party admission under the New York rule.

Unfortunately for business owners, New York is currently considering changing its rule to align with the federal rule. Under federal law, the statement of Waitress could be admitted as evidence against the employer because of the federal courts’ broad interpretation of who constitutes an agent. An employee could be considered an agent even if he/she does not have authority to speak on behalf of the employer regarding the subject matter of the statement. The federal rules only require that the employee must have made the statement within the scope of his/her employment and that it related to the scope of his/her employment.

The proposed New York rule is in a Senate Committee and may be considered during this legislative session. The proposed statute will create a new rule that sets forth the hearsay exception of admissions by a party opponent and will not require that an agent have “speaking authority” in order for their statement to be covered under the exception.

What does this mean for business owners? Under the existing New York rules, make sure you clearly restrict the authority of employees to communicate on the entity’s behalf (i.e. limit their “speaking authority”) and consult with a lawyer on ways to do so. If New York does adopt the proposed rule, then additional action and training can be helpful. Contact an attorney to discuss your situation.

Read more about our commercial litigation practice.


This post does not constitute legal advice or establish an attorney-client relationship.

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