Employer vicarious liability rules

By law, employers can be held vicariously liable for certain acts of their employees. This means even where the employer has itself technically done no wrong, it can still be found responsible for employees’ actions and made to financially compensate the victim of the wrongdoing.

The rationale behind the employer vicarious liability rules is to provide victims of wrongdoing with an adequate remedy, since the employer is more likely to have the means to adequately compensate the victim, provided there is sufficient connection between the wrong committed and the employment relationship in question.

For employers then, vicarious liability presents a considerable area of risk requiring proactive measures and management. In this guide, we examine the law on employers’ vicarious liability and the steps to take to minimise legal risk.

What is employer vicarious liability?

Based on the common law doctrine of agency, vicarious liability is a phrase used to explain the legal responsibility that one party may hold for the harmful actions of another, even if they’re not the party that directly caused the harm. One of the most common scenarios in which vicarious liability comes into play is in the context of the employer-employee relationship.

‘Employer vicarious liability’ is essentially where an employer is held liable for the wrongful acts or unlawful conduct of an employee, or by someone whose role is akin to that of an employee, even where the employer has done no wrong itself. This is because anything done by another person in the ordinary course of their employment can be treated as also done by the employer, or where there is a sufficient connection between the wrong committed and the employee’s job role such as to make it fair to hold the employer vicariously liable.

An employer may therefore be liable for the negligence or breach of statutory duty of its employees, workers or even contractors where harm is caused to a third party. The third party can then pursue a claim against the employer for the loss suffered. The employer can also be liable for, amongst other things, breach of copyright, or breach of trust and confidentiality.

What is the difference between full and vicarious liability?

While the definitions of full and vicarious liability bear some similarities and even overlap, they constitute two distinct forms of liability.

Full liability refers to any instance of liability in which an employer is directly responsible for its own wrongful acts, or for any wrongful act of an employee expressly authorised by the employer, that causes harm and loss to a third party.

Examples of full liability often involve employer neglect, or situations in which employees or members of the public sustain injury due to issues such as lack of suitable risk assessments or safety procedures in the workplace. Other types of full liability include incidents of unlawful discrimination, harassment or victimisation at work, where a job applicant or employee is treated unfairly because of a protected characteristic, such as age, disability, sex or race.

In contrast, where it is not clear whether the wrongful action or unlawful conduct by the employee was authorised by the employer, the latter may still be vicariously liable because of the connection between the employment and the wrongdoing. Common examples of when wrongdoing in the workplace could give rise to employer vicarious liability include:

• Where an employee negligently operates machinery, injuring a customer or co-worker.
• Where an employee infringes the terms of a software licence used in the workplace.
• Where an employee is sexually harassed at work by another member of staff.

Legal tests to establish vicarious liability

Before an employer can be found to be vicariously liable for the wrongdoing of those that it employs in the course of its business, there are two legal tests that must be satisfied:

• The relationship test: a relationship must exist between the employer and the wrongdoer which makes it proper for the law to make the employer pay for the fault of the other.
• The close connection test: a connection must be established between the employment and the wrongdoing, where the wrongful act must be sufficiently related to the conduct authorised by the employer to justify imposing vicarious liability.

Vicarious liability is not strictly limited to the relationship between employer and employee, where employers can be responsible for the acts of anyone whose role is akin to that of an employee. Vicarious liability is also not limited to any wrongdoing committed in the course or within the scope of the individual’s employment, but can include any wrongful acts that are closely connected with what the employee is authorised by the employer to do.

 

Vicarious liability & different types of wrongdoing

Employers can be liable for an employee’s wrongdoing, but only where there is a sufficiently close connection between the employee’s role and the events which take place that give rise to liability. This includes any acts which an employee is expressly authorised to do by their employer in the course or scope of their employment, such that the wrongful conduct may fairly and properly be regarded as done by the employer.

Vicarious liability can also arise in relation to acts which are closely connected to the role and responsibilities which a person is employed to do. This means that vicarious liability doesn’t depend upon an employee being given the authority to do a specific act, where it’s enough that they’re authorised to do acts of the sort that have given rise to the harm.

There are essentially two factors which define the operation of the close connection test:

• The nature of the employee’s role: this includes the nature of the functions or field of activities that the employee has been entrusted with. The answer to the question defines the scope of responsibility of the employee to ascertain how close the connection is.
• Sufficient connection: this refers to the connection between the role or position in which the wrongdoer is employed and the wrongful conduct, where the connection needs to be sufficient for the employer to be held liable.

The application of the close connection test was recently illustrated in the case of WM Morrison Supermarkets plc v Various Claimants [2020] UKSC 12. In this case, an employee of Morrisons deliberately leaked the personal payroll data of thousands of employees on the internet in a bid to frame a colleague against whom he had a grudge. The employee had obtained this data in his job as a senior auditor. In a claim brought against Morrisons by a group of affected employees for the distress caused to them, it was alleged that Morrisons was vicariously liable for the employee’s wrongdoing, including data protection breaches.

In the lower courts, Morrisons was found to be vicariously liable because there was a sufficiently close connection between what the employee was tasked to do and the unauthorised disclosures. In rejecting these findings, the Supreme Court held that even though the employee could not have disclosed the data if he’d not been given the task of compiling it, that wasn’t enough to establish vicarious liability. His conduct wasn’t so closely connected with the acts that he was authorised to do while acting in the ordinary course of employment, but rather he’d been engaged on “a frolic of his own”, namely a personal vendetta. Still, this case serves as a stark reminder of the potential for an employer’s liability for rogue employees undertaking activities in connection with their job role.

Vicarious liability rules for different types of workers

An employer can be liable for the wrongful acts of employees or anyone whose role is akin to that of an employee. This includes workers who are employed in the course of the employer’s business under a contract of employment or contract of service. It can also include independent contractors, even though they are not employees or workers.

The general rule is that where an organisation engages an independent contractor to perform work for their business, they will not be liable for any wrongdoing committed in the performance of that engagement. This is because independent contractors operate under a contract for services, on their own account and at their own risk. However, when it comes to non-employees or quasi employees, there may be some circumstances in which this relationship can, for the purposes of vicarious liability, be treated as akin to employment.

In the recent decision of Barclays Bank plc v Various Claimants [2020] UKSC 13, the Supreme Court confirmed a number of policy factors in which it may be considered fair, just and reasonable to impose vicarious liability on employers for the wrongful acts of contractors.

These factors include:

• where the wrongdoing is committed as a result of activity taken on behalf of the employer
• where that activity is part of the employer’s business activity
• where, by employing the contractor to carry on the activity, the employer has created the risk of the wrongdoing committed by that person
• where the contractor was, to a greater or lesser degree, under the control of the employer.

On its facts, Barclays was found not to be vicariously liable for the sexual assaults against prospective employees who were referred to an independent medical practitioner for fitness for work assessments. This is because the doctor saw patients other than those referred by Barclays, he wasn’t paid a retainer and could choose to refuse a patient referral.

However, the court recognised that where there was any doubt as to whether the wrongdoer was carrying on their own independent business, a number of factors can be taken into account in deciding whether a relationship ‘akin to employment’ existed. The result of this multi-factorial approach is that a working relationship other than one of employment is, in principle, capable of giving rise to ‘employer vicarious liability’.

How to manage employers’ vicarious liability risks

The potential financial and reputational risks that exist means that employers should be reviewing their business risk profile on a regular basis.

There are various steps that an employer can take to minimise and manage the risks of vicarious liability, although given the scope of potential wrongdoing by anyone employed or engaged by the employer in the course of their business, a broad approach should be adopted.

The provision of suitable workplace policies and policy training can be an effective way of minimising key areas of risk, such as data protection, health and safety, or discrimination, harassment and victimisation. By ensuring that staff and management are aware of what constitutes negligence, breach of duty or unlawful conduct, this is likely to minimise the incidence of wrongdoing. Further, by taking all reasonable steps to prevent things like bullying and harassment, the employer may have a valid defence to any claim.

Additional consideration must also now be given to the potential risks arising from the increase in home-working following the COVID-19 pandemic, where lack of supervision or inadequate equipment may give rise to a much wider range of breaches of statutory duty. In particular, employers must take proactive steps to mitigate remote-working risks, including:

• reminding staff of pre-existing policies and procedures, such as those on acceptable IT use and scope of work
• providing additional training on duties of confidentiality and data-handling in the specific context of working from home
• conducting adequate risk assessments around home-working and providing additional equipment where necessary
• increasing liability insurance if, after carrying out appropriate mitigation measures, the risk is still perceived to be too high
• establishing regular contact with employees to check on their progress and properly supervise their day-to-day activities.

Employer vicarious liability FAQs

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Legal disclaimer

The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal advice, nor is it a complete or authoritative statement of the law, and should not be treated as such. Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.