Vicarious Liability: The Liability of an Employer

An individual who employs other individuals in the course of business is subject to various duties in relation to their employees and other third parties during the course of that employment. In certain cases the employer will in fact held to be liable where their employee has committed an act which has harmed a third party.

Full Liability – Authorised Act

If an employee has committed a wrongful act which was authorised by the employer and subsequently has harmed a third party then the employer will be said to have full liability to the injured party. However, when it is not clear whether the act committed by the employee was authorised the details of the case need to be examined in more detail.

Vicarious Liability

What is Vicarious Liability?

Vicarious liability is governed by the law of tort meaning that it is dealt with in a civil court and is concerned with a claim between individual parties as opposed to the state bringing a claim against an individual party.

It is made up of the following scenario:

If an employee commits a wrongful act against a third party while undertaking his employment the employer will be said to be vicariously liable for the act committed by his employee. The employer will then be treated as if he had also committed the act. This means that in the case of vicarious liability the third party is able to bring the claim against both the employer and the employee.

Employee

How do we define an employee? 

An employee is someone who undertakes to do work for another person under a contract of service.

Contract of Service

In order to establish whether there is a contract of Service in place there are various different kinds of test which can be undertaken.

  • The Control Test

This is said to be where the employer has decided how the work should be carried out rather than simply telling the employee just what has to be done. In this case the actual method has been stipulated.

  • The Integration Test

If the employee’s work is considered to be integral to the operation of the business then the person who committed the act while doing the integral work will be considered to be an employee.

  • Economic Reality Test

If the person who committed the harmful act does not assume any economic incentive or economic risk in committing the act then that individual will be held to be an employee.

Employer

How do we define an employer? 

It is much easier to define an employer than an employee as it is simply that person that the employee is working for, i.e. that person who pays him and instructs him in the course of his actions.

Once we have established the employer employee relationship how do we establish vicarious liability?

It is one thing to establish that someone was an employee but it is another to establish that when they have committed an act which has harmed another that their employer should also be liable. The test to establish this has been developed through case law with a new test being established to replace the existing one.

The Course of Employment Test – Original Test

This is the old test established by case law and stipulates that the employer should be liable for the harmful act committed by the employee if that act was done during the course of his employment.

The issue under this test to examine was whether the employee had gone outside the express and implied duties and the authority of the job. If it was held to be the case that the employee had gone outside his normal duties then the employer would not be held vicariously liable.

The Close and Direct Connection Test – The newly established test

This is the new test which has been established by case law for nearly ten years and states that there must be a sufficiently close and direct connection between what the employee was employed to do and the harmful act which has been committed by the employee.

Criminal Acts

What if my employee commits a criminal act?

Certain criminal acts such as assault and fraud are also torts but if the above principals are applied the criminal nature of the act would normally take this outside of the usual scope of employment as there would be no close and direct connection between the individual’s employment and a criminal act of assault or fraud.

Independent Contractors

Employers are not vicariously liable for harmful acts committed by independent contractors as independent contractors operate under a contract for services.

Contract for Services

This means that an independent contractor will be in business on their own contracting with various parties to provide services to those parties and therefore will have the responsibility and the means to satisfy or ensure against harmful acts committed during their work.

How do we know if an individual is an independent contractor and not an employee?

The same tests used to establish whether someone is an employee will again be used with the following factors also being taken into account:

  • Whether they supply their own equipment – an independent contractor usually would!

  • Whether they bear the risk or realising loss on the job

  • The ability of that individual to contract similar services to a variety of different people or clients 

  • Whether the individual hires other people to help him complete the services

  • An independent contractor is usually contracted on the basis of completing individual jobs whereas an employee is employed on a continual basis

  • If the employer has incurred expenses that are consistent with those incurred on an employee

  • If the individual was a former employee and they were in fact carrying out similar duties to those when they were employed.