Vicarious Liability Lecture

In most scenarios in tort, the defendant will be the party who has actually done the relevant misdeed (or else faltered in their fulfilment of a duty.) There exists one important exception to this pattern, however - the concept of vicarious liability. In essence, vicarious liability deals with situations in which an individual has committed a tortious act whilst acting on behalf of another. The primary situation in which the concept will arise is one in which someone is acting on behalf of an employer. This makes vicarious liability a useful tool. Firstly, it provides a sensible way to deal with situations in which an individual has not truly acted of their own volition, but instead has simply been doing as they have been told by their employer. It would be unjust to hold an employee wholly responsible in law for the plans and orders of their higher ups, and so vicarious liability allows liability to be attributed to those who were truly in control of a given situation. Secondly, since attributing vicarious liability tends to involve the targeting of employers and business owners, it means that liability can be attributed to those who can best bear the costs of litigation - it is far more likely, for example, that an employer will have comprehensive insurance in place than an employee. One explanation for this phenomenon can be seen in Dubai Aluminium Co Ltd v Salaam [2002] 3 WLR 1913. The case concerned a solicitor’s firm vicarious liability for the acts of one of its partners. The facts are unimportant - but of interest is the obiter of Lord Nicholls:

“The underlying legal policy is based on the recognition that carrying on a business enterprise necessarily involves risk to others. It involves the risk that others will be harmed by wrongful acts committed by the agents through whom the business is carried on. When those risks ripen into loss, it is just that the business should be responsible for compensating the person who has been wronged.”
- Lord Nicholls, at 21

What Lord Nicholls is essentially pointing out is that just as an employer gladly reaps the benefits of their employees’ actions, they must also be prepared to bear the costs of those employees’ misdeeds. With the theoretical basis for vicarious liability laid out, we can now examine its mechanics.

Vicarious liability is not a separate tort in and of itself (like negligence, or nuisance); instead, it is a way in which any of the other torts can be attributed to a particular defendant, even if that defendant was not directly involved in the tort. This makes vicarious liability a somewhat controversial mechanism, since it can involve imposing liability on a party who in reality was nowhere near the place where the tort occurred.

Establishing vicarious liability requires three primary criteria to be met. There must be a relationship of control, a tortious act, and that act must be in the course of employment.

Exam Consideration: It’s worth paying extra attention to who the claimants, defendants and other parties are in vicarious liability cases so that you don’t make mistakes when recounting them. Since they often involve several different actors, a lot of the time you won’t be able to simply look at the case name for help.

Relationships of Control

Since it would be unjust for a tortfeasor to be able to hand off liability to any third party, the courts will first look for a sufficiently close relationship between tortfeasor and third party before it allows vicarious liability to be imparted. Since most people will at some point have an employer, this tends to be the most frequently encountered situation. However, certain other relationships give rise to vicarious liability - such as between a principal (someone who employs an agent) and their agent, between business partner and business partner, and between vehicle owners and an appointed driver.

Exam Consideration: It is important to have a practical knowledge of how the above relationships function in an everyday setting. This is because a particular devious defendant might give themselves an alternative title to help muddy the waters, in order to avoid vicarious liability from being attributed. For example, business partners might call themselves ‘joint-corporate leaders’, or some other obfuscating term. What is important to the courts is not the title of the third-party, but the nature of the relationship. So if it looks like a principal, or partner, or employer, and acts like a principal, partner or employer in all but name, then it is likely to be considered in law a principal, partner or employer!

Since the most commonly encountered relationship is employer-employee, it is important to know the features which define such a relationship. This is key, since independent contractors act a lot like employees, but are rarely able to hand-off liability to those who engage their services. Before continuing onto the law, it is worth briefly putting in place a rough idea of what an employee is versus what an independent contractor is. Employees tend to work in one place, on a formal basis. They can often be easily identified because they will have contracts with their employers formalising their working arrangements (pay, hours etc.). In contrast, independent contractors often have multiple employers, and often have less formalised working arrangements, often being paid per job, rather than per hour. Prime examples include gardeners, electricians and private tutors.

Since these definitions are general at best, the law has developed a number of tests to distinguish between these two camps. None are perfect on their own, but combined they form a framework which distinguishes between employees and contractors.

The Control Test

The first is the ‘control test’. This involves asking who, exactly, is in control of the individual’s work. Employees tend to have the nature of their task dictated specifically by their employer, whilst independent contractors tend to have more personal control. Imagine an independent electrician - you’d hire them to wire your house, but you wouldn’t tell them which wire to put where!

The source of the control test can be found in Yewen v Noakes [1880] 6 QBD 530. The defendant was attempting to benefit from a law which stated that a lesser amount of duty (read: tax) was payable on properties which were inhabited by an employee of the owner. The courts held that the occupier was not an employee, since he was not ‘a person who is subject to the command of his master as to the manner in which he shall do his work’.

This test works well in conventional employment situations - many employees are subject to the whims of their employers, and wouldn’t find it odd if they were ordered to carry out a particular task. However, there are many employment situations which don’t come under the Yewen definition, particularly where the employee is acting with a high level of skill. A hospital trust will employ many surgeons and doctors, but is hardly well placed to tell someone how to carry out brain surgery or deliver a baby.

The Organisation/Integration Test

The ‘organisation’ or ‘integration test’ distinguishes between people who sign contracts of service and those who contract to provide services. Employees tend to do work which is integral to the business’s operations, whilst independent contractors tend to do work which is ancillary to the main functions of the business. This principle can be seen at play in Stevenson, Jordan & Harrison Ltd v MacDonald & Evans.

Case in Focus: Stevenson, Jordan & Harrison Ltd v MacDonald & Evans [1952] 1 TLR 101

An accountant wrote a book based on the skills and knowledge he gained during his employment by a firm. He died before the book was published. The question then arose as to who was the owner of the copyright - the accountant’s estate or his former employer. Whilst authors are the primary owners of the copyright for things they write, if something is written under a contract of employment and the work is done in the course of employment, then copyright belongs to the employer. Lord Denning opted to draw a distinction between the content of the book which came directly from the firm’s employment of the accountant and that content which was merely associated with the accountant’s work. The former content belonged to the firm since it was essentially a product of the accountant’s employment, but the latter belonged to the accountant’s estate since it could be regarded as a mere accessory to the accountant’s work. This principle can also be applied to the employer versus contractor distinction - as per Lord Denning:

“One feature which seems to run through the instances is that, under a contract of service, a man is employed as part of the business; whereas under a contract for services, his work, although done for the business, is not integrated into it, but is only accessory to it.”
- Lord Denning, at 111.

The ‘accessory’ idea is better understood by reference to examples. Consider a sales company. The company will need sales people to operate, and will likely have a HR department to hire people, and a payroll team to pay them. All of these functions are key to the everyday workings of the organisation. That same organisation might employ a cleaner to hoover their offices at night, or a glazer to repair a broken window at their sales office. Whilst a sales office without a window, which hasn’t been hoovered in years will not operate as effectively as it ordinarily would, neither the cleaner nor the glazer carry out business-essential activities. The cleaner and glazer can call in sick, and the business will continue to operate. If the sales team were to not come into work however, the company would cease to function.

This test is itself flawed, however. One day the sale’s computers might all crash with an irreparable bug. The company could not operate without their computers, and would call in an IT consultant for the day to deal with the issue. Whilst the IT consultant is doing business-vital work, they are still not an employee, despite apparently passing the organisation test. This demonstrates the usefulness of the multi-test approach - it helps to avoid anomalies which arise when only one of the rules is applied.

The Economic Reality Test

The ‘economic reality test’ is sometimes referred to as the ‘multiple test’ or the ‘pragmatic test’. It involves examining the characteristics of the subject’s work arrangements against a checklist of signs of conventional employment. The test appears in Ready Mixed Concrete Ltd v Minister of Pensions.

Case in Focus: Ready Mixed Concrete Ltd v Minister of Pensions [1968] 2 QB 497

The claimant hired a number of drivers to deliver concrete, paying the drivers a fixed rate per mile. These drivers were named in their contracts as independent contractors. The drivers used vehicles which they had purchased from the claimant in order to do this. The vehicles had to be painted in the claimant’s company colours, had to bear the company’s logo, and was obliged to present their accounts in a special manner dictated by the claimant.  The drivers also had to wear the company’s uniform.

The drivers were responsible for maintaining the vehicles and had flexible working arrangements - they could even, if they so wished, employ a competent driver themselves to carry out the work on their behalf.

The question arose as to whether the drivers were employees of the claimant or not. If so, the claimant would have to pay National Insurance contributions on their behalf (hence, ‘Minister of Pensions’ as the other party). If not so, then the claimant did not have to make the payments. The court ruled that the drivers were not employees, and identified three criteria which had to be met before employee status was granted:

Firstly, the individual must provide work or skill for the employer in return for payment or other remuneration.

Secondly, the individual must have agreed (either expressly or impliedly) that they will work under the control of the employer.

Thirdly, the other circumstances of the individual’s working arrangements must be consistent with those of an employee.

The court also mentioned risk as a method of determining employment status. (Read ‘servant’ as ‘employee’.):

“He who owns the assets and bears the risk is unlikely to be acting as an agent or a servant. If the man performing the service must provide the means of performance at his own expense and accept payment by results, he will own the assets, bear the risk, and be to that extent unlike a servant.”
- MacKenna J at 521.

The first two of these criteria are relatively simple - work which is paid for by the employer, and which is controlled by that employer.  The third however, is far more open-ended. Particular characteristics to look out for include:

  • Working Hours: Employees tend to have fixed hours (or else a set amount of hours which they can structure flexibly). Independent contractors tend to have far more open arrangements, and are often employed to complete a certain task, with that task taking as long or as short an amount of time as it takes to finish the work.
  • Payment: Employees tend to have set weekly or monthly salaries, which they receive on a regular basis. Contractors tend to be paid per job, and thus do not tend to have guaranteed income.
  • Tax: Employees tend to be taxed at the source of their payments (so their employer will pay tax on their behalf, taking it from their wages as necessary). Independent contractors tend to be personally responsible for paying tax.
  • Equipment: Employees tend to have their working environment and equipment provided for them by their employer (office, computer etc.). Independent contractors will usually have their own premises (if any at all) and their own equipment, which they will be responsible for purchasing and maintaining.
  • Independence: Employees tend to be relatively restricted in the duties they carry out, and are rarely able to refuse work (at least in the sense of ‘I won’t do that’, as opposed to ‘I can’t do that’). Independent contractors on the other hand have far more control. They can refuse jobs, change the terms of their working agreement, and often have the capacity to work for multiple employers within the same period of time.

Exam Consideration: As you might have already noticed, the economic reality test is more practically-minded than the other two. For this reason, it tends to be the test applied in modern settings. Nonetheless, you can demonstrate your knowledge of the development of the tests either directly by discussing them in essay questions, or indirectly, by applying all three of the tests to a problem question.

It should be noted that even as the most comprehensive of the tests, the economic reality test is by no means exhaustive. Indeed, the one certain principle is the non-exhaustive nature of the tests, as per Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173. The claimant - a market research company - employed a number of individuals to carry out surveys on their behalf on a part-time basis. These part-time employees worked on a job-by-job basis, could work for other firms, received neither sick pay nor holiday, and both parties signed contracts for services (as opposed to ‘service’). As in Ready Mixed Concrete, a question arose as to who was responsible for the part-timers’ National Insurance contributions. In a somewhat eccentric result, the High Court ruled that the part-timers were employees, on the basis that the part-time employees could not be considered as working on their own account, but rather were carrying out the functions of the claimant company. Whilst this result shouldn’t be considered authoritative in terms of the process for determining employee status, of interest is the statement by Cooke J:

“No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases.”

Exam Consideration: The advantage of the principle in Market Investigations is that it leaves a lot of leeway for you to argue a party’s employment status either way (although this doesn’t mean the tests should be ignored, merely that they can be built upon).

Establishing a Tortious Act

Once a sufficiently close relationship has been established, it must be shown that the employer (or agent, business partner etc.) had committed a tortious act. This is because no secondary liability can be imposed on a third party before someone acting on their behalf has attracted primary liability.

This means that whether vicarious liability is possible depends on whether liability exists for the relevant tort. So if it is asserted that an employee has acted negligently in the course of his work, liability for the tort of negligence must be established before that liability can be handed up to their employer. Thus, your ability to deal properly with vicarious liability will depend on your ability to deal properly with the relevant tort.

One technicality should be noted. If the employee (etc.) enjoys immunity from lawsuits by merit of their personal status, their employer will not receive the same protection. This principle is best understood by reference to the case of Broom v Morgan [1953] 1 QB 597. The claimant was employed alongside her husband to run a pub. She was injured in an act of negligence by her husband. At the time, husbands and wives could not sue each other in tort and so the defendant denied vicarious liability (since the husband could not be sued by his wife, primary liability did not exist, and so the employer argued secondary liability could not exist). The courts rejected this argument, holding that the spousal immunity was from being sued, rather than being held responsible for a tort. Since the husband was not the one being sued, the immunity did not apply.

This particular phenomenon can best be understood through an examination of how vicarious liability operates - both the original tortfeasor and their employer are still considered separate legal entities, with their separate legal immunities (if any exist at all). Instead, it is just the actions of the tortfeasor which are attributed in law to the employer.

Tortious Acts Must be in the Course of Employment

An employer is not responsible for all of the acts one of their employees carries out. It would be absurd if an employer was held liable for a car crash one of their employees caused on their day off. Instead, for vicarious liability to be possible, the tortious act must occur in the course of employment. If the relevant relationship is not employer-employee, then the same principle applies but in a modified form - so an agent must be acting as an agent before vicarious liability can be attributed to their principal, and a business partner must be acting in their business capacity before their counterpart can be held jointly responsible for their actions. There are several categories of employment scenarios which can arise with regard to this element of vicarious liability.

Authorised Acts

It will sometimes be simple to see when a tortious act is done in the course of employment - most notably when an employee is directly following their employer’s express orders and in doing so, commits a tort. So a waste disposal company which orders an employee to dump toxic waste in a public waterway will have committed a tort. Indeed, liability in such situations is so clear-cut that it can be considered a matter of primary liability - the employer is directly acting though their employees.

However, express authorisation is not an ever-present feature of many employment situations (particularly where an employer knows they are doing wrong - they are unlikely to put such orders in writing). The key thing to ascertain is then whether an employee has been given implied authority to act due to the scope of their employment.

Implied authority can be seen in Poland v Parr & Sons [1927] 1 KB 236. The defendant’s employee believed that some children were stealing the defendant company’s property. He struck one of the children, seriously injuring him. It was held that although this was an unreasonable act, it was still done under his employer’s implied authority. The court noted that in general employees have an implied authority, in an emergency, to protect their employer’s property (although the bench also noted that there was a limit if, for example, the employee had shot at the boy, this would be beyond implied authority). The claim, therefore, succeeded.

Authorised Acts in an Unauthorised Manner

Situations will often arise in which an employee is undertaking an authorised act, but does so in an unauthorised manner. An example of this can be seen in Century Insurance v NI Road Transport Board [1942] AC 509. A driver was employed by the defendant company to deliver petrol. Part of this task involved transferring the petrol from his lorry to a storage tank at the destination. Whilst doing this, the employee lit a cigarette, threw the match to the ground, and caused an explosion. The defendant was held vicariously liable for this conduct. Although the employee’s conduct was clearly careless, he was nonetheless in the process of carrying out an authorised act - delivering petrol.

A distinction can be made between situations in which an employee acts within their employment responsibilities (as in Century Insurance), and when they act outside of them (albeit with the intention of aiding their employer). An example of this distinction can be found in Beard v London Omnibus Co [1900] 2 QB 530. A bus conductor (i.e. not a driver) was at the bus depot, and realised that a bus was urgently needed for its next journey. He could not find the driver, and so decided to drive the bus around to the front of the depot, so that it was ready to go. In doing so, he injured a mechanic working in the depot. A claim was made against the employer bus company. The courts rejected vicarious liability - the conductor was acting outside of the course of his employment.

Explicitly Prohibited Acts

As might be expected, the courts will usually deny vicarious liability when an employer has expressly prohibited an employee from taking a particular action. However, it is important to note that whilst a prohibition against taking a particular action will be sufficient to break the link between the employee’s conduct and the employer, the same cannot be said when an employer has merely prohibited an employee from taking an authorised action in an unauthorised way. This distinction is often referred to as the difference between scope of action and manner of action. Scope of action can be seen in Iqbal v London Transport Executive [1973] EWCA Civ 3 (another, but different bus conductor case!). A bus conductor was prohibited from driving - it was explicitly outside of the scope of his duties. Nonetheless, he decided to move a bus that was blocking a depot but crashed, injuring another employee. The court rejected vicarious liability on the basis that the conductor’s conduct was beyond his duties.

In contrast, prohibited manner of conduct can be seen in London County Council v Cattermoles (Garages) Ltd [1953] 1 WLR 997. The employee worked for a garage, which had petrol pumps outside. Part of the employee’s duty was to assist in the movement of vehicles around the garage, and this included either pushing them by hand, or guiding their drivers as they undertook tricky manoeuvres. He had been explicitly told not to drive, being threatened with dismissal on a previous occasion. One day, a van was parked at the pumps (blocking them) and two lorries were waiting for petrol. The employee jumped into the van in order to move it, and drove out into busy Pentonville Road in order to come back around into the garage. It was at this point that he hit the claimant’s vehicle. The defendant employer argued that they should not be held vicariously liable, since they had prohibited such behaviour. The courts rejected this argument - whilst they had prohibited the manner of his conduct, he was still engaged in his duty - moving vehicles around to ensure the smooth running of the garage. Vicarious liability was, thus, imposed.

It can, therefore, be seen that unless an entire category of action is prohibited by an employer, they remain potentially vicariously liable for the acts of their employees.

Unlawful Activity

Another category of cases exists in which employees take criminal actions during their employment. Whilst these will often fall outside of the scope of vicarious liability, this is not a given. The test is whether a sufficiently close connection exists between the criminal conduct and the employee’s usual conduct. This can be seen in the unfortunate case of Lister et al. v Hesley Hall Ltd [2002] 1 AC 215. The employee was a warden at a school for difficult children. It emerged that this warden was sexually abusing the children in his care. The claimants, thus, sought to hold the owners of the school vicariously liable for their harms. The court applied the test of ‘closeness of connection’ to the situation. It was held that the abuse occurred on the employer’s premises, whilst the employee was performing his duties of caring for the children, and thus vicarious liability was imposed. The courts also noted the obvious risk of abuse in such circumstances, and thus that the employer should have been alert to it.

This principle can be considered an extension of the prohibition principle discussed in the section above - whilst sexual abuse was obviously prohibited, it occurred during the course of the employee’s employment.

This principle has been extended relatively far by the courts, as in Mohamud v WM Morrison Supermarkets plc [2016] UKSC 11. The claimant stopped at a petrol station owned by the defendants. He entered the kiosk and asked the employee manning it whether he could print off some documents from a USB stick. The employee refused the request, using an expletive. The claimant objected to the employee’s language, and the employee responded with a variety of threatening and racist language. When the claimant sought to leave, the employee followed him to his car, and the altercation escalated to the point of the employee physically attacking the claimant. The claimant, thus, sought to hold the petrol station’s owners vicariously liable for their employee’s actions. This claim was successful. Although the employee’s conduct was clearly beyond his employment, it was nonetheless held to have occurred during the course of it. The employee’s job was to man the kiosk, and respond to customer enquires - and it was during this conduct that the altercation began.

Distinguishing Between Employment and Personal Conduct

It will often be the case that the lines between employment conduct and personal conduct are blurred. Further complications can occur when personal conduct occurs within working hours and in the workplace (so between 9-5 and in the employee’s office, for example). The law, thus, makes a distinction between an employee’s conduct which is in the course of employment and conduct which can be considered ‘a frolic of his or her own’. This distinction can be traced back to Joel v Morison.

Case in Focus: Joel v Morison [1834] 172 ER 1338

The claimant was struck by a horse and cart which was under the control of a driver employed by the defendant. However, the accident occurred whilst the driver had detoured from his usual route to visit a friend. The defendant, therefore, argued that he was not liable for the claimant’s injuries, since they occurred outside of the course of employment. Nonetheless, since the driver was on the whole engaged in his master’s business, the claim succeeded.

As per Parke B at 5: “If the servants, being on their master's business, took a detour to call upon a friend, the master will be responsible […] but if he was going on a frolic of his own, […] the master will not be liable.”

This principle is not entirely intuitive - the driver in Joel had decided, of his own volition, to go off track to visit his friend, so it can easily be argued that this should not be considered as part of his course of employment. The distinction between employment conduct and a personal frolic becomes a little clearer when Storey v Ashton [1869] LR 4 QB 476 is examined. The defendant employer, a wine merchant, sent his carriage driver to deliver some wine. After he had finished the deliveries, the driver went to visit his brother-in-law. During this journey he knocked down the claimant and injured him. The courts rejected the claim against the driver’s employer - it was held that the driver was engaged in a new and absolutely unauthorised journey.

Thus, the distinction between Joel and Storey can be seen - in the former case, the driver was doing his job, and took a diversion in which he caused an accident. In the latter, the driver had finished his work when he took the ill-fated diversion.

Employers’ Indemnity

Since vicarious liability depends on the existence of primary liability, both employer and employee are joint tortfeasors. This means that it is often the case that employers can recover from their employee for their misdeed. There are two primary ways in which this can happen. Firstly, the Civil Liability (Contribution) Act 1978 provides a given defendant who has paid damage with the ability to recover a contribution to those damages from any other party who has contributed to the claimant’s harm. The split will be decided by the courts on the basis of what is ‘just and equitable’ as per s.2(1) of the Act.

Under the common law, it is possible for a defendant to recover an indemnity (a full recovery) for their loss from their employee if the employee has acted in breach of contract. This was the case in Lister v Romford Ice & Cold Storage Co Ltd [1957] AC 555. The defendant was held vicariously liable when one of their employees negligently backed over another employee in a lorry. The defendant’s insurance company then brought a case on behalf of the defendant against the employee. They were successful - the employee had not been acting with reasonable care and skill, and thus had breached an implied term of their contract.

However, the contract law means of acquiring an indemnity is only available to defendants when they have acted beyond reproach. If they are even partially to blame for their employee’s conduct, they will be restricted to the statutory course of action, as per Jones v Manchester Corporation [1952] 2 QB 852. The defendant hospital board sought to reclaim the damages it had paid out for a junior doctor’s mistake. However, the board was held to be partially at fault - it had failed to provide him with proper supervision. The claim for an indemnity for breach of contract, therefore, failed.

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