The Supreme Court & Vicarious Liability: The Importance of Worker Status

03 Mar 2021

Since April of last year, HR Professionals have primarily been concerned with Covid-19 and its impact on their businesses, but there have been other significant developments in employment law. For example, in the Morrisons and Barclays Bank cases, the Supreme Court has substantially altered the law on vicarious liability as it was previously understood.  

Before we look at the Supreme Court’s decisions in these two cases, it is worth setting out briefly the principles of vicarious liability. The decisions have particular authority because different Judges of the Supreme Court were involved in the two cases and both were decided unanimously.  

Vicarious liability is the liability an employer has for the acts of its employees where:

(i)    The employee carries out an act authorised by the employer;

(ii)    The employee carries out a wrongful act authorised by the employer; or

(iii)    The employee carries out a wrongful act which has not been authorised by the employer but is considered by the law to be connected with acts authorised by the employer. 

In this article, we are concerned with (iii) only. 

The law on vicarious liability has been developed by the courts in two ways:

1. “Vertically” by extending the definition of the person for whom the “employer” is liable. Employers have in the past been held  liable not only for the acts of their employees, but also workers and even independent contractors.

2. “Horizontally” by widening the type of conduct which is “connected to acts authorised” by the “employer”.

This development causes particular difficulties where the employee/worker/contractor has committed a criminal act. On the one hand, how far should an “employer” be liable for the criminal acts for those carrying out work for it but which, arguably, are not authorised by the “employer” at all. On the other hand, if no protection is given to the victims of these acts by making the “employer” vicariously liable, the victim may have no effective remedy at all, not least because the employee/worker/contractor may well be penniless, in prison, or both.  

The Barclays Bank Case 

The Barclays Bank case was about a “vertical” extension of vicarious liability: the type of person for whom an employer may be liable. In this case, Barclays hired a doctor to carry out medical examinations of candidates for employment. The doctor had a contract of services with Barclays and also with a number of other organisations. Barclays had hired him as a contractor because it was not in the business of doing medical examinations itself.  

Unfortunately, the doctor in question used the cover of his medical examinations to sexually assault a number of women. Many of those women made claims for damages against the doctor (who died in 2009) and against Barclays. The claims against Barclays Bank were on the basis that it was vicariously liable for the acts of its contractor, the doctor. The doctor’s estate on his death was very small and offered no reasonable means of paying the doctor’s victims damages. By contrast, Barclay is, of course, a very substantial company. 

The Supreme Court decided that Barclays Bank simply could not be vicariously liable for the acts of a genuine contractor. The Court therefore reduced in scope the type of person for whom an employer can be vicariously liable. 

The Morrisons Case 

The Morrisons case was about the “horizontal” question: what acts of an employee could lead to the vicarious liability of the employer? In this case, there was no doubt that an employee of Morrisons carried out the acts for which it was claimed Morrisons was vicariously liable. The question was whether Morrisons should be vicariously liable for those particular acts as the employer.  

The employee had a grudge against Morrisons because it had disciplined him. When he was given the task of transmitting the workforce payroll data to external auditors, he also made and kept a personal copy of that data. Later, and from his home, he released the payroll data onto a public file sharing website, as well as sending it to three newspapers claiming to be a concerned member of the public – concerned that the information he had leaked was in the public domain. One newspaper contacted Morrisons who took immediate action to have the data removed from the internet and informed the police. The employee also attempted to frame a fellow employee for leaking the data. The employee was arrested and later convicted of a criminal offence and given a sentence of 8 years. A large number of his fellow workers made a claim against him and against Morrisons for data breaches. 

The Supreme Court decided that the fact Morrisons had given its employee the opportunity to commit wrongful acts by giving him the data, was not sufficient to impose vicarious liability. The employee was not engaged in furthering the employer’s business, but instead, was pursuing a personal vendetta and seeking vengeance against his employer. His acts could not be connected with acts that were authorised by Morrisons, and so Morrisons was not therefore liable for his actions. 

The changing landscape of vicarious liability 

There has been a rapid expansion in the scope of employers’ vicarious liability in the last 25 years,  both “vertically” and “horizontally”. This has been halted by the Supreme Court and, arguably, reversed. It may be that several judgments of the last 25 years imposing vicarious liability would now be decided differently.  

This is a tricky and fact sensitive area of law and one that is not dissimilar to the question of who is an employer, worker or contractor. Thanks to the Judgment of the Supreme Court in Barclays in particular, the status of a business’s workforce may well have a decisive impact on whether that  business is liable for the acts of its workforce when they’re carrying out its commercial activities. As a result, the decision of the Supreme Court in the Uber case last month on the question of status is also relevant to the question of vicarious liability.  

DMH Stallard’s Employment Group is able to assist you resolve such questions. Please contact Stephen ten Hove at Stephen.tenHove@dmhstallard.com or on 020 7822 1518.
 

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