Vicarious Liability Lecture Three PDF

VICARIOUS LIABILITY By: E. Baboa Opoku Central University Law Faculty LECTURE THREE OUTLINE  Introduction – Nature and Basis/ Scope of Vicarious Liability  Status for Liability – Employee or Independent Contractor?  Tests for Employee Status – Integration/Organizat...

VICARIOUS LIABILITY By: E. Baboa Opoku Central University Law Faculty LECTURE THREE OUTLINE  Introduction – Nature and Basis/ Scope of Vicarious Liability  Status for Liability – Employee or Independent Contractor?  Tests for Employee Status – Integration/Organization Test Entrepreneurial Test Control Test  The Course of Employment  Tests of Liability: Authorized Acts or Frolics? – Effects of Express Prohibition – Protecting the Master’s Property  The Indemnity Principle  NATURE AND BASIS / SCOPE OF VICARIOUS LIABILITY  Vicarious liability is a strict liability tort which makes a person liable for torts committed by another party.  For vicarious liability, a fundamental relationship exists between the tortfeasor and the person who becomes vicariously liable which justifies attributing the latter responsibility for the acts of the former.  It is not necessary that the person who becomes vicariously liable should have participated in any way in the commission of the tort nor should he owe a duty of care to the victims of the tort. What is required is the fundamental relationship between the tortfeasor and the person who becomes vicariously liable.  It may be described as an off-shoot of employer’s liability or an additional liability that an employer may incur in the sense that the tort usually involves an employer-employee relationship and so cases are usually work related. NATURE AND BASIS / SCOPE OF VICARIOUS LIABILITY (CONT’D) The rationale behind the tort is that a person in authority; for instance an employer; exerts some degree of control over the actions of his subordinate and so may answer for the mistakes of the latter which cause harm to his victims. The above rationale is thought fair because the employer controls the employee in most cases and further benefits from the employee’s conduct.  The tort in which the employer is held vicariously liable must occur during the course and scope of the employment and is distinguished from the negligent liability of employers which arises in situations where employers carelessly select, train and supervise their employees. Such liability is based on fault while vicarious liability is a species of strict liability. To determine vicarious liability, the courts usually address two fundamental questions: whether the tort was committed by an employee of the defendant and whether the tort was committed in the course of the employee’s employment.  STATUS FOR LIABILITY – EMPLOYEE OR INDEPENDENT CONTRACTOR? Being a tort of strict liability, it is fundamental to recognize the status of persons whose actions could give rise to an action under vicarious liability. The general rule is that an employee’s actions will occasion an action under vicarious liability while an independent contractor’s actions will not. (See the strict liability rule as elicited in the decision of Rylands v. Fletcher). There are a few exceptions however where an employer may be liable for the actions of an independent contractor and these would be looked at subsequently. It must be noted however that the intention of the parties is NOT necessarily conclusive of the status of the tortfeasor, i.e. whether there was an intention that the hireling was an employee or was an independent contractor. Compare and contrast for instance the decisions in Ferguson v. Dawson Partners 3 All ER 817 and Massey v. Crown Life Insurance 2 All ER 576. In the first decision, a building worker who at the time of hiring was expressed to be a “labour only subcontractor” was held to be an employee rather than an independent contractor because he had been treated in all other respects as an employee and the statement or phrase in the contract was treated in evidence as having been made merely for tax and insurance purposes rather than as evidence of an intention to be held out as an independent contractor. In the latter decision however, evidence of intention as to the status of parties’ prevailed as per the details of a written contract.  STATUS FOR LIABILITY – EMPLOYEE OR INDEPENDENT CONTRACTOR? (CONT’D) As earlier mentioned, there are exceptions to which an employer is liable for the acts of an independent contractor and these exceptions arise under negligence rather than vicarious liability. One of such exceptions is with duties that are considered non-delegable. It is not always clear what non-delegable duties are except where they are expressly provided for by statute and so suffice it to say that whether a duty is delegable or not is ALWAYS a question of law. A non-delegable duty is said to exist where the employer owes a duty of care to the claimant such that a failure to exercise the same duty of care on the part of the independent contractor makes the employer jointly liable for the actions of the former. What this means is that while the work which is to be done may be delegated to a competent independent contractor, the liability for doing it properly CANNOT be delegated. For instance, a water authority may have duty to repair a burst main. Where the authority arranges for a private firm to carry out the repairs rather than its own employees, the firm will be the former’s independent contractors and should the firm be negligent such that several homes become flooded, the authority is jointly liable for the actions of the firm because they have a non-delegable duty to ensure that the work is done properly.  STATUS FOR LIABILITY – EMPLOYEE OR INDEPENDENT CONTRACTOR? (CONT’D) The second exception under which an employer may be liable for the actions of an independent contractor is in the case of a delegable duty where an employer has failed to take reasonable steps to find competent persons to do the work. It is relevant to recall the decision in Rylands v. Fletcher where it was established that the defendant had taken reasonable steps to ensure the competence or suitability of the independent contractors who had built the reservoir on his land. Again it must be noted that the primary liability that arises here with respect to the employer is under negligence. Where there is a potential liability for something done by an independent contractor, the employer is only liable to the extent that the act was part of the work which the contractor was engaged to do. Acts which are precluded from the employment of the independent contractor will impose no liability on the employer whatsoever. See Padbury v. Holliday and Greenwood Ltd (1912).  STATUS FOR LIABILITY – EMPLOYEE OR INDEPENDENT CONTRACTOR? (CONT’D) Ascertaining the status of the worker, i.e. employee (servant) or independent contractor can therefore not be overemphasized as the fundamental rule remains that employee’s actions will occasion an action under vicarious liability while an independent contractor’s actions will not. A challenge arises with the definition of an employee in recent times because of the flexibility that employers would like to maintain with the hiring of casual, temporary or part-time workers who may perform some of the same functions or roles as persons working within their premises. There is also the category of self-employed persons in the media and computing industries for instance who end up catering to one or two companies in the same premises as company staff and under similar supervision conditions. Can this category be considered as employees at least for the period during which they are at the workplace?  STATUS FOR LIABILITY – EMPLOYEE OR INDEPENDENT CONTRACTOR? (CONT’D) For the most part, the distinction between an employee who is construed under the common law as a “servant” and an independent contractor remains clear. While a staff member of a factory who works full-time in helping to produce the goods of the company is considered an employee, a person who is called in from time to time to fix the lightning is most likely considered an independent contractor as far as the factory is concerned. In response to the challenge, the courts have had to develop suitable tests for determining who an employee is in order to establish liability under this tort. These tests cut across diverse areas of law including Tax and Employment Law (as the question of whether someone is an employee affects the way they are taxed and their rights at work) and are further employed collectively as the courts recognize that no single test can cover the variety of work situations. These tests are looked at closely in subsequent paragraphs. EMPLOYEE STATUS – INTEGRATION/ORGANIZATION TEST This test questions whether the work done by the employee forms an “integral part of the business” hence the alternative reference to the test by the same phrase. The test was propounded by Lord Denning in Stevenson, Jordan & Harrison Ltd v. MacDonald & Evans (1952) 1 TLR 101 where he drew a distinction between contracts of service and contracts for service. He stated that a person is employed as part of the business and his work is done as an integral part of the business under a contract of service. Under contracts for services however, a person’s work is not integrated into the business and is merely an accessory to it. He stated as follows: “It is often easy to recognize a contract of service when you see it, but difficult to say wherein the difference lies. A ship's master, a chauffeur, and a reporter on the staff of a newspaper are all employed under a contract of service; but a ship's pilot, a taxi-man, and a newspaper contributor are employed under a contract for services. 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.”  EMPLOYEE STATUS – INTEGRATION/ORGANIZATION TEST (CONT’D) This test may also be referred to as the “contract of service test” as the rule per the test is that vicarious liability can only arise from the actions of servants or employees under a contract of service rather than from the actions of an independent contractor under a contract for service. The indicia of a contract of service can therefore not be overlooked. Lord Thankerton in Short v. J & W Henderson Ltd (1946) 62 TLR 427 @ 429 listed the indices for a contract of service as follows:  The master’s power of selection of his servant;  The payment of wages or other remuneration; The master’s right to control the method of doing the work; The master's right of suspension and dismissal it is suggested that these indices do not carry the matter much further and merely indicate the existence of a contract rather than a type of contract, i.e. a contract of service as held in the case of Ready Mixed Concrete (South East) Ltd v. Minister of Pensions and National Insurance 2 Q.B. 497. See also Massey v. Crown Life Insurance 1 WLR 676. EMPLOYEE STATUS – ENTREPRENEURIAL TEST The entrepreneurial test sought to approach the definition of an employee from a “composite” stance which considered the various elements of the employer-employee relationship as a whole. The test is alternatively referred to as “Allocation of Financial Risk Test”, “Economic Reality Test”; and “Multiple Test”. The test questions the elements of entrepreneurship or of an entrepreneur i.e. a person who is in business for him/herself or ‘on his own account’ as expressed by the Court of Appeal in Hall v. Lorimer (1992). The Privy Council held in Market Investigations Ltd v. Minister of Social Security 2 QB 173 @ 185 as follows: “… Of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task.” EMPLOYEE STATUS – ENTREPRENEURIAL TEST (CONT’D) The indices of this test were outlined by Lord Wright in Montreal v. Montreal Locomotive Works 1 DLR 161 as involving (i) control; (ii) ownership of the tools; (iii) chance of profit; and (iv) risk of loss. Cooke J in commenting on these factors held that the fundamental test was to question if “the person who has engaged himself to perform these services [is] performing them as a person in business on his own account?” If the answer is yes, it is a contract for services; if no, it is a contract of service.  EMPLOYEE STATUS – ENTREPRENEURIAL TEST (CONT’D) These factors were also considered in Ready Mixed Concrete v Minister of Pensions where 'owner-drivers' who delivered concrete in vehicles purchased on HP from an associated company painted in company colours and which could not be used for private purposes or other haulage business, were employed under a contract of carriage than of service. Since the ownership of the assets (the vehicle), the chance of profit and the risk of loss were solely the drivers’ it was held that the factors were inconsistent with a master- servant relationship and the drivers could not be classified as employees under a contract of service. EMPLOYEE STATUS – CONTROL TEST The control test is about the oldest and more common among the tests for determining who an employee is under vicarious liability. This traditional test was established from the decision in Collins v. Hertfordshire CC ; 1 All ER 633 where the courts looked at the degree of control exercised over a person’s work by the supposed employer. It was thought that where an employer had control over the work and was in a position to lay down when and how tasks should be done, the person doing the work would be an employee. On the other hand, if the person who had been engaged to do some work was allowed some discretion and flexibility with the manner in which he did the work or the time frame within which the work was done, then that person would be considered an independent contractor. The test was articulated in the words of Hilbery J thus: “The distinction between a contract for services and a contract of service can be summarized in this way: In one case the master can order or require what is to be done, while in the other case he can not only order or require what is to be done, but how it shall be done.”  EMPLOYEE STATUS – CONTROL TEST (CONT’D) This test soon lost its relevance as many types of work involved a lot more skill and sophistication or specialty which replaced the “degree of detailed control” of the employer over the work of his employees as discussed in Performing Right Society Ltd v. Mitchell & Booker 1 KB 762 @ 767. The evolving dynamics of work situations meant that an employee could not merely refer to “anyone who was subject to the command of the master as to the manner in which he shall do his work” as held in Yewens v. Noakes 6 QBD 530 or anyone over whom the “alleged master [must] have power of controlling his acts and dismissing [him] for disobedience” as held in Kussasi v. Ghana Cargo Handling Co. 1 GLR 170.(Emphasis mine). In the computer industry for instance, managers would typically have no idea how their computer technicians should work as a result of the novelty and specialty of the subject and so would not be adequately equipped to give directions on work to be done. Yet, it would be obvious that in common-sense terms, this does not make a salaried computer technician an independent contractor. EMPLOYEE STATUS – CONTROL TEST (CONT’D) Thus Somervell LJ in Cassidy v. Ministry of Health 1 All ER 574, pointed out that there are many contracts of service where the master cannot control the manner in which the work is to be done, as in the case of a captain of a ship. He further stated that “one perhaps cannot get much beyond this: ‘was the contract a contract of service within the meaning which an ordinary person would give under the words?’ ”. Although the control test is still used, the courts accept that it can no longer be conclusive in the light of new developments. More importantly, the courts further recognize that no one test could cover entirely, the variety of work situations and resort to an appreciation of the entire circumstances of each particular case. THE COURSE OF EMPLOYMENT As can be earlier recalled, there are two fundamental elements crucial to establishing vicarious liability i.e. that the acts of the tortfeasor must be attributed to an employee and secondly that those acts must have been committed in the course of the defendant’s employment. The rule of law with respect to the employee’s course of employment is that an employer is only liable for torts committed by his/her employees in the course of their employment. The rule thus begs the questions ‘what constitutes the scope of employment?’ and also, ‘what wrongs fall within the scope of a servant’s employment?’ After all, no sane or law-abiding employer ever hires anyone to outrightly tell lies, or throw punches, or act carelessly. The traditional test for whether an act is committed in the course of employment is taken from the classic textbook on Tort, Salmond on Torts (first published in 1907). Salmond in response to the above questions stated that a wrongful act would be classified as done in the course of employment if it is either: (a). a wrongful act authorized by the master; or (b). a wrongful and an unauthorized mode of doing some act authorized by the master. THE COURSE OF EMPLOYMENT (CONT’D) Fundamentally, the rule expresses that the said act must be authorized either expressly or impliedly in order to impute liability. Secondly, it would seem that there is more emphasis in favour of the act the servant is doing when he commits the wrong rather than the wrong – in and of itself ordinarily. That is to say if the act authorized is inherently wrong, (e.g. trespass), the employer is liable because he has procured a wrong and there is no need to rely on vicarious liability. However, if the employee does an authorized act wrongly, then it may occasion an action under vicarious liability. The act will be within the scope of employment if it has been expressly or impliedly authorized by the employer or is sufficiently connected with the employment such that it can be regarded as an unauthorized manner of doing something which is authorized as held in Kirby v. NCB (1958) SC 514 @ 523. The underlying idea is that the injury done by the servant must involve a risk sufficiently inherent in or characteristic of the employer’s business that it is just to make him bear the loss as established in Lister & Ors v. Lesley Hall Ltd 2 All E.R 769 THE COURSE OF EMPLOYMENT – CRIMINAL ACTS A very valid question to ask is whether a wrongful mode of performing an authorized act could pierce the scope of criminal liability and what can be said for the employer’s liability status as far as vicarious liability is concerned. The general rule is that an employer is usually not vicariously liable for the criminal acts of employees. An employer may have joint criminal liability for the acts of an employee where a case of conspiracy or aiding and abetting with respect to the particular crime is established. In other words, an employer cannot be prosecuted for a crime instead of his employee – or be vicariously liable for the criminal acts of an employee.  THE COURSE OF EMPLOYMENT – CRIMINAL ACTS (CONT’D) However as earlier mentioned, an employer is usually not vicariously liable for the criminal acts of an employee where those acts are unauthorized or cannot be deemed as sufficiently inherent or characteristic of the employer’s business. In Keppel Bus Co v. Sa’ad bin Ahmad 2 All ER 700 for instance, the Privy Council held that an employer was not liable where his employee – a bus conductor – had assaulted a passenger who objected to his insulting treatment of another passenger. Lord Kilbrandon held that insults to passengers were precluded from the due performance (scope) of the conductor's duty. Also in ST v. N. Yorkshire CC IRLR 98, an employer was not liable for the conduct of sexual assault on a handicapped teenager by the deputy headmaster (employee) Butler-Sloss LJ held that the said conduct was NOT an unauthorized mode of carrying out a teacher's duties on behalf of his employer. Rather, it was a negation of the duty of the Council to look after children for whom it was responsible.  THE COURSE OF EMPLOYMENT – CRIMINAL ACTS (CONT’D) Having stated the general rule it is worth noting that there are instances where an employer is vicariously liable in tort for authorized acts performed by an employee in a criminal manner. For instance in Morris v. Martin Ltd 2 All ER 725 where a fur coat sent to cleaners was stolen by the employee whose job it was to clean the coat, the cleaners (employers) were vicariously liable for the theft. Also in Nahhas v. Pier House Management (1984) 270 EG 328 the employers were held liable for employing a “professional thief ” and breaching a duty to protect the plaintiff’s flat where an employee (porter) entrusted with the tenant’s keys entered her flat and stole her jewellery. See also the decision in Vasey v. Surrey Free Inns PIQR 373. The claimant was attacked by two doormen and a manager employed by the defendant after he had kicked a door thereby breaking glass (i.e. causing damage to the employer’s property. The CA held the defendants vicariously liable because the attack was a reaction to the damage to the door for the protection of the employer's property and was not a private quarrel unrelated to the employer's duties. TESTS OF LIABILITY – AUTHORIZED ACTS OR FROLICS? QUESTION: WHAT ACTS CONSTITUE WRONGS WITHIN THE SCOPE OF EMPLOYMENT FOR WHICH AN EMPLOYER WILL BE VICARIOUSLY LIABLE? ANSWER: AN EMPLOYER WILL USUALLY BE LIABLE FOR: (A). WRONGFUL ACTS WHICH ARE ACTUALLY AUTHORISED BY THE EMPLOYER; AND (B). ACTS WHICH ARE WRONGFUL WAYS OF DOING SOMETHING AUTHORISED BY THE EMPLOYER, EVEN IF THE ACTS THEMSELVES WERE EXPRESSLY FORBIDDEN BY THE EMPLOYER TESTS OF LIABILITY – AUTHORIZED ACTS OR FROLICS? (CONT’D) ACCORDING TO Parke B in Joel v. Morison (1834) 6 C&P 501 at 503, A SERVANT MUST BE ENGAGED ON HIS MASTER'S BUSINESS - “NOT ON A FROLIC OF HIS OWN”. EXPRESS PROHIBITION This has to do with acts expressly prohibited by the employer from the scope of the employee’s duties, which acts are naturally or likely to be within or occur within the scope of the employee’s duties. The rule of law here is that where an employer expressly prohibits an act, he will not be liable if an employee commits same act. This notwithstanding, an employer may be liable if the prohibition can be regarded as applying to the way or manner in which the job is done rather than the scope of employment or job in itself. In other words, an employer may be liable for the expressly forbidden wrongful act or conduct of his employee where the act or conduct applies to the manner of the employment rather than the scope of employment. Thus in Limpus v. London General Omnibus Co (1862) 1 H&C 526 the employer was held vicariously liable for damages despite written instructions provided to bus drivers (employees), where a bus driver had collided with the claimant’s bus as a result of racing another bus. EXPRESS PROHIBITION (CONT’D) The following decisions also highlight instances where employers were held vicariously liable inspite of express prohibitions of conduct.  Bayley v. Manchester, Sheffield and Lincolnshire Railway Co (1873) LR 8 CP 148 – a porter, believing a passenger was on the wrong train, violently pulled him off, causing injury.  Century Insurance Co v. Northern Ireland Transport Board 1 All ER 491 – a petrol tanker driver, smoking a cigarette threw away a match, causing an explosion.  Rose v. Plenty 1 All ER 97 – a milkman, contrary to express instructions, employed a 13-year-old assistant, injured by the milkman's negligent driving. The act here was done for the employers’ business. EXPRESS PROHIBITION (CONT’D) In the following cases however, the employer was precluded from vicarious liability in the face of express prohibitions:  Beard v. London General Omnibus Co 2 QB 530 - a bus conductor drove a bus injuring a pedestrian.  Twine v. Bean's Express Ltd 1 All ER 202 - a hitchhiker had been given a lift contrary to express instructions and was fatally injured. Lord Greene, MR said that the servant was doing something totally outside the scope of his employment, namely, giving a lift to a person who had no right whatsoever to be there.  Hilton v. Thomas Burton (Rhodes) Ltd 1 All ER 74 - workmen drove seven or eight miles for tea, immediately after finishing their lunch in a pub. The van overturned and a passenger was killed. PROTECTING THE MASTER’S PROPERTY In addition, an employee or servant is duty bound to take reasonable steps in protecting his master or employer’s property. The question as to what extent or lengths the servant may go in order to protect the master’s property is however a matter of varying degrees. The general rule however is that, an employer is vicariously liable for the acts of his employee where those acts are sufficiently connected with the duty to protect the master’s property. See the decisions in:  Poland v. Parr (1927) 2 KB 336  Dyer v. Monday (1895) 1 QB 742  Packer v. Sekondi/Takoradi Municipal Council GLR 259  Warren v. Henley’s Ltd 2 All ER 935  Keppel Bus Co. v. Sa’ad Bin Ahmad 1 WLR 1082 THE INDEMNITY PRINCIPLE – EMPLOYER’S INDEMNITY As discussed, vicarious liability makes an employer and employee joint tortfeasors, each fully and independently liable to the to the claimant who suffers at the hand of the employee. An employer who is sued on the basis of vicarious liability is thus allowed or entitled to sue his employees in turn in an attempt to recover some or all of the damages paid for the employee’s tort. This is called an indemnity and became a popular clause implied in employment contracts at common law that an employee will exercise all reasonable care and skill during the course of employment. Further, the clause typically provides that an employee who is negligent is in breach of such a term and the employer who has been held vicariously liable for the tort may seek an indemnity from the employee to make good the loss. The principle may exist in relevant civil statutes and was formulated from the common law decision in Lister v Romford Ice 1 All ER 125. In this case, a father was knocked down by his son, who was employed by Romford Ice, while backing his lorry in a yard. The employers were vicariously liable for the son's negligence and their insurers met the father's claim. THE INDEMNITY PRINCIPLE – EMPLOYER’S INDEMNITY (CONT’D) The insurers sued the son in the company's name, exercising their right of subrogation under the contract of insurance. By a majority, the HOL held that the son was liable to indemnify the employer and consequently the insurers. This case leads to controversy about insurers forcing employers to sue employees, which would lead to poor industrial relations. Employers' liability insurers later entered into a gentleman's agreement not to pursue such claims unless there was evidence of collusion or wilful misconduct. See Further: Gardiner (1959) 22 MLR 552; Hepple & Matthews, Tort: Cases and Materials, 1991, pg. 881