2023 Connecticut General Statutes › Title 42a - Uniform Commercial Code › Article 3 - Negotiable Instruments › Section 42a-3-405. - Employer's responsibility for fraudulent endorsement by employee.

(a) In this section:
(1) “Employee” includes an independent contractor and employee of an independent contractor retained by the employer.
(2) “Fraudulent endorsement” means (i) in the case of an instrument payable to the employer, a forged endorsement purporting to be that of the employer, or (ii) in the case of an instrument with respect to which the employer is the issuer, a forged endorsement purporting to be that of the person identified as payee.
(3) “Responsibility” with respect to instruments means authority (i) to sign or endorse instruments on behalf of the employer, (ii) to process instruments received by the employer for bookkeeping purposes, for deposit to an account, or for other disposition, (iii) to prepare or process instruments for issue in the name of the employer, (iv) to supply information determining the names or addresses of payees of instruments to be issued in the name of the employer, (v) to control the disposition of instruments to be issued in the name of the employer, or (vi) to act otherwise with respect to instruments in a responsible capacity. “Responsibility” does not include authority that merely allows an employee to have access to instruments or blank or incomplete instrument forms that are being stored or transported or are part of incoming or outgoing mail, or similar access.
(b) For the purpose of determining the rights and liabilities of a person who, in good faith, pays an instrument or takes it for value or for collection, if an employer entrusted an employee with responsibility with respect to the instrument and the employee or a person acting in concert with the employee makes a fraudulent endorsement of the instrument, the endorsement is effective as the endorsement of the person to whom the instrument is payable if it is made in the name of that person. If the person paying the instrument or taking it for value or for collection fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss resulting from the fraud, the person bearing the loss may recover from the person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss.
(c) Under subsection (b), an endorsement is made in the name of the person to whom an instrument is payable if (i) it is made in a name substantially similar to the name of that person or (ii) the instrument, whether or not endorsed, is deposited in a depositary bank to an account in a name substantially similar to the name of that person.
(1959, P.A. 133, S. 3-405; P.A. 91-304, S. 42.)
History: P.A. 91-304 entirely replaced former provisions re impostors and payees having no interest in the instrument with provisions re responsibility of an employer for a fraudulent endorsement by an employee, including the revision of former Subsec. (1)(c) re endorsements made in the name of payees of instruments issued by the employer.
See Sec. 42a-3-403(c) for successor provisions to Sec. 42a-3-405(2), revised to 1991, re liability of unauthorized endorser.
See Sec. 42a-3-404(a) and (b)(i) for successor provisions to Sec. 42a-3-405(1)(a) and (b), revised to 1991, re impostors and payees with no interest in the instrument.
Drawer is not harmed if drawee's action on check carries out drawer's purpose. 170 C. 691.