Vicarious Liability in Employment

It is a rule which means that an employer could be liable for the legal wrongs committed by its employee or worker, where the relevant legal tests are met. It doesn’t matter if the employer itself is innocent of the wrongdoing.

Policy reasons for vicarious liability

To employers, vicarious liability may seem unfair. Why should the employer be punished for something that it has not done? The answer is embedded in fairness:

• All forms of economic activity carry a risk of harm to others. Fairness dictates that those responsible for such activities should be liable to anyone who suffers loss as a result. Employers have deeper pockets than their employees.
• Financial loss arising from the wrongs can be spread more widely, by liability insurance and higher prices.
• Imposing strict (no-fault) liability on employers encourages them to maintain standards of good practice. The health and safety arena is a great example of this.

The laws on vicarious liability can be set out in legislation, or can come from case law. It is a continually evolving area of the law, but there are some basic principles that employers should be aware of, to help stay on the right side of the law.

What is the test for vicarious liability?

This depends on whether you are looking at general common law (case law) or specific legislation which have tests for vicarious liability built into them, such as the Equality Act 2010. I will look at the general common law first, as it is important to understand as a starting point. It provides the fall-back in situations where a specific test under legislation does not apply.

Firstly, there has to be a primary wrongdoer who is in breach of a relevant duty, for vicarious liability. So, an employer cannot be vicariously liable for the acts of an employee where the employee is not in breach of the obligation, as it is only imposed on the employer. An example of this would be the unlawful detriment provisions in the Employment Rights Act 1996. In that situation, the employee’s acts would be attributed to the employer, which is a different thing.

To decide whether vicarious liability applies, the court or tribunal will apply a two-stage test once a legal wrong has been established:

1. Is there a relationship between the ‘primary wrongdoer’ and the person or entity alleged to be liable, which is capable of giving rise to vicarious liability?

If the wrongdoer is an employee, the first part of the test will be met automatically. That seems simple, but some tricky issues can arise, even at this early stage.

Liability can transfer to a new employer under TUPE. This will only occur if the relevant employee was employed at the date of the transfer and assigned to the transferring undertaking. (You can’t get around this by dismissing before the transfer either.)

If the wrongdoer is an employee on secondment or an agency worker, vicarious liability can transfer, or be shared with the seconded employer or end user, in some situations. There are different views on how this should be judged and the law on this is not completely settled yet. A court might look at who has the right to control how the individual carries out the work, or how integrated that person is into the host’s business, during the contract.

It is also worth noting that there doesn’t need to be a traditional employment relationship for vicarious liability to apply. The test is, broadly speaking, whether the relationship is so close in character to one of employer and employee that it is just and fair to hold the employer vicariously liable.

For example, the Court of Appeal held in 2012 that the Trustees of Portsmouth Roman Catholic Diocesan Trust (on behalf of the Bishop of Portsmouth) were found to be vicariously liable for the sexual assault by a Catholic priest of a resident of a children’s home. The Court decided that the relationship between the bishop and priest was sufficiently similar to an employment relationship, for it to be just and reasonable to impose liability. This was the case, even although there was no contractual relationship between them.

The tests to be applied include:

• The extent of control the organisation had over the individual;
• The extent to which the individual’s activity was central to the function of the organisation;
• Whether the individual was integrated into the organisation; and
• Whether the individual was more like an independent contractor than an employee. (There is no vicarious liability for the wrongdoing of a true independent contractor, although the law can apply similar ‘non-delegable duties’ in certain situations, such as in relation to health and safety).

This is really interesting against the background of the worker status cases that are coming through the courts at the moment. Very recently a court even held that Barclays Bank was vicariously liable for sexual assaults committed by a doctor engaged by it to carry out medical examinations for prospective applicants.

These tests mean that there are various atypical worker relationships which may give rise to vicarious liability, where there is not an employment relationship. This is a highly technical area of the law and if you find yourself in this situation, I recommend you take early legal advice.

Once the court or tribunal has established that there is a relationship which could give rise to vicarious liability, it will go on to look at the second main part of the test.

2. Is there a sufficient connection between the wrongs and that person’s employment (or other relationship) so that it would be just and reasonable to hold the employer vicariously liable?

This will depend on the facts of the case and will require a value judgement to be made, but the courts have given some guidance, which includes:

• Start by analysing what the employee was employed to do. Then focus on the connection between this and the wrong committed.
• Take a broad view of the nature of the employee’s duties, including an assessment of the time, place and causation. Did the wrong occur outside of working hours? Was it on work premises? Was it caused by a work-related matter?
• The employment doesn’t necessarily need to provide the opportunity for the wrongdoing, but it must materially increase the risk of harm. (This could be as innocuous as providing the employee with a uniform, which is worn during the act of wrongdoing.)
• Where an employer has been entrusted with the safekeeping of something or someone and the employee does something to interfere with that care, there is likely to be a sufficient connection. For example, vicarious liability was established in cases involving sexual abuse by a warden in a boarding house, and the theft of a coat given to an employer for cleaning.

What kind of acts could an employer be liable for?

There is a wide range of acts for which an employer could be vicariously liable. The obvious one is if an employee is negligent while carrying out their employment duties and commits a wrong (known in law as ‘tort’ in England and ‘delict’ in Scotland). For example, a chef accidentally adding nuts into the meal of someone with an allergy in a restaurant.

However, an employer could also be liable for acts of discrimination, criminal offences, harassment, defamation or breach of trust or duty.

The circumstances of the case will always dictate the result here and can often be finely balanced. Taking the extreme and unusual example of violent assault, the two cases below, illustrate the differing decisions on vicarious liability which can be reached.

In the 2016 case of Bellman v Northampton Recruitment Ltd the High Court held that an employer was not vicariously liable for an assault on an employee by the managing director. The assault occurred at a drinking session straight after the employer’s Christmas party. The drinks were not planned and were held at a separate location. There were employees there and other guests who were not employees. The conversations being held were largely not about work. However, the company was expected to pay for the drinks and the assault occurred following a work-related discussion, when the managing director felt that his authority was being challenged. Despite these connections to the employer, the assault was found not to be within the course of his employment, but against the background of “entirely voluntary and personal choices” by the protagonists to engage in heavy drinking.

In contrast, Morrison Supermarkets were not so lucky. The Supreme Court held last year that they were vicariously liable for their employee’s violent assault on a customer, Mr Mohamud. The employee, Mr Khan was working in the kiosk of the petrol station supermarket. Mr Mohamud, who was of Somali descent, asked him if it was possible to print off some documents which were stored on a computer memory stick. Mr Khan responded in an abusive way using racist language. Mr Mohamud left the kiosk and walked to his vehicle. Mr Khan shouted violent abuse at Mr Mohamud and told him to get out of his car. Mr Khan then punched and kicked him and told him never to come back to the premises again. The Supreme Court held that it was Mr Khan’s job to attend to customers and respond to their inquiries. He had not ‘metaphorically taken off his uniform’ when he came out from behind the kiosk counter and followed Mr Mohamud onto the forecourt. What happened was an unbroken sequence of events. Morrisons were liable for the appalling conduct of Mr Khan.

Vicarious liability for discrimination

As I mentioned earlier, there are various statutes which apply strict vicarious liability on an employer in certain situations. Leaving aside health and safety law, one of the areas that an employer will be most likely to come across is in discrimination law.

The Equality Act 2010 provides that anything done in the course of a person’s employment must be treated as also being done by the employer, even if it was done without the employer’s knowledge or approval. Employment includes apprenticeship and a contract personally to do work. The rule also applies to anything done by agency workers acting with authority.

Again, whether the act was done in the course of a person’s employment will depend on the facts and this can lead to cases with differing results. A good example of this is the office party or gathering.

In the case of Livesey v Parker Merchanting, the employer was vicariously liable for sexual harassment by an employee in a car after a work Christmas party. The EAT felt that there was no distinction between what happened at the party and in the car straight after the party. It was a continuation of the same course of conduct, which was done within the course of employment.

However, in the case of Sidhu v Aerospace Composite Technology Ltd the employer was not liable for violence and racial insults towards its employee, by another employee, during a family day out organised by the employer. The day out was outside working hours, was at a public theme park and most of those who participated in the incident were not employees.

An employer has a defence if it can show that it took all reasonable steps to prevent the employee from committing the act of discrimination. The Equality and Human Rights Commission Code of Practice from 2010 suggests that reasonable steps might include:

• Implementing an equality policy;
• Ensuring workers are aware of the policy;
• Providing equal opportunities training;
• Reviewing the policy; and
• Dealing effectively with employee complaints.

The Code contains lots of useful information on implementing an equality policy and is worth a read.

Personal liability

Where there are discriminatory acts which the employer is liable for, the employee is also personally liable, unless he or she relied on a statement by the employer that the relevant act would not breach the Equality Act and it was reasonable to rely on that statement.

Where employers face claims for discrimination and there are multiple respondents who are their employees or workers, employers may find themselves asked to guarantee legal fees when employees are facing claims themselves. This can be tricky in a situation which is not clear-cut and when you want to (at least initially) stand by your existing employees. If you do wish to assist, then it’s a good idea to try and negotiate an indemnity from those employees or workers, covering compensation and legal fees, if they are later found to have committed the discriminatory acts. This can be a bit of a minefield with existing employees.

You should always consider running the statutory defence I mentioned, even as a secondary argument to the defence that the claimant was not treated less favourably etc. Conflicts of interest can arise quickly in these situations and it can often be necessary for the individual respondents to be separately represented. If you find your organisation in this position, I suggest you take early legal advice, or use your ‘999’ call to me before making any promises.

If a current employee is found to have committed a discriminatory act, then of course you should commence disciplinary proceedings in the usual way. Likewise, where you as employer suffer loss as a result of their actions, you may bring a claim against the employee to recover those losses, although this has to be framed carefully and cannot be made in the employment tribunal, but needs to be taken in the courts. Usually, it is not worth the financial cost of doing so, unless the individual has a lot of money. Any settlement agreement should carefully record that all parties to the case are covered by the settlement if that is the intention.

What can you do as an employer?

There are some acts of madness which you can never plan for – just ask Morrisons. But cultivating a respectful workplace culture where discrimination is not tolerated, is a good starting point. Make sure you have an equality policy, it is kept up to date and your managers are trained to understand their obligations. Keep a record of diversity training. Act with common sense, particularly when it comes to Christmas party season. Look at indemnities in your contracts with secondment hosts and with agencies too.  Check your insurance policies too. If the worst does happen and you face a claim, seek early legal advice and don’t forget that you can seek indemnities before paying for legal advice and ultimately take action against the employee or worker as well, if you suffer loss.