Organisations may be liable for the actions of contractors

WATCH OUT!

PUBLIC AND PRIVATE ORGANISATIONS MAY BE VICARIOUSLY LIABLE FOR THEIR CONTRACTORS

Vicarious liability is a common law principle whereby employers can be liable for the negligent acts or omissions of their employees that are committed in the course of employment. The recent decision of the Court of Appeal in Barclays marks the latest development of this principle extending it to independent contractors.

Historically, this did not apply to parties who engaged independent contractors as they were not in an employment relationship. The courts in the past have extended the principle from applying to traditional employer/employee relationships to those which are ‘akin to employment’. This extension has been applied to religious organisations, the prison service, banks, and foster carers.

The court of appeal decision given in Barclays Bank Plc v Various Claimants [2018] EWCA Civ 1670 indicates that this principles has evolved, potentially meaning that organisation might now be held liable for the actions of independent contractors.

Barclays Bank engaged a Doctor (an independent contractor) to conduct medical examinations on behalf of the Bank for employees and prospective employees. He was often referred to as “the Bank’s doctor”, and the examinations were compulsory requirement of employment by the Bank. The Doctor allegedly carried out sexual assaults during these examinations. In deciding whether Barclays Bank was vicariously liable, the Court of Appeal applied a two stage test:

1. Is the relevant relationship one of employment or "akin to employment"?

2. Was the tort sufficiently closely connected with that employment or quasi employment?

In considering the first test the Court had regard to the five criteria set out in Catholic Child Welfare Society v Various Claimants [2012] UKSC 56:

1. The employer is more likely to have a means to compensate the victim and can be expected to have insured against liability.

2. The tort will have been committed as a result of activity being taken by the employee on behalf of the employer.

3. The employee’s activity is likely to be part of the business activity of the employer.

4. The employer, by employing the employee to carry on the activity will have created the risk of the tort committed by the employee.

5. The employee will, to a greater or lesser degree, have been under the control of the employer.

For the second test, the Court of Appeal reiterated that the "medical examinations were sufficiently closely connected with the relationship between Dr Bates and the Appellants [Barclays]. They were the whole purpose of that relationship."

The Court of Appeal found the two stage test met and therefore found Barclays Bank to be vicariously liable for the acts of the independent contractor.

Evolving workforce models in many sectors and the need to carefully control finances means organisation are making  more use of external agents to carry out their functions. This is a concern as it is difficult for organisations to afford costly litigation as a result of the actions or omissions of their own employees yet they may now  need to worry about the acts and omissions of their  contractors.

What steps should organisations take?

The likely inclusion of independent contractors within the scope of an employers potential liability means employers should ensure they negotiate greater contractual protection, including:

• indemnification against vicarious liability

• ensuring  independent contractors have comprehensive insurance cover for their own liability

• ensuring independent contractors follows the commissioners’ policies which should be incorporated in the contract

• requesting evidence from the contractors of adequate staff training, suitable policies and procedures and robust process to adhere to all legal requirements

• including robust monitoring and performance review measures in the contract.

ELS can support employers with all of the above. If you wish to know more about vicarious liability and indeed any other legal aspects, do not hesitate to contact us.

Jennifer Mellani