By law, employers can be held vicariously liable for certain acts of their employees. This means that even where the employer itself has technically done no wrong, it can still be found responsible for employees’ actions and required to financially compensate the victim of the wrongdoing.
The rationale behind the rules of employer vicarious liability is to provide victims of wrongdoing with an adequate remedy, recognising that the employer is often better positioned to compensate the victim, provided there is sufficient connection between the wrong committed and the employment relationship in question.
For employers, vicarious liability presents a significant area of risk requiring proactive measures and management. This guide examines the law on employers’ vicarious liability and the steps to minimise legal risk.
What is employer vicarious liability?
Based on the common law doctrine of agency, vicarious liability is a phrase used to describe the legal responsibility that one party may hold for the harmful actions of another, even if they did not directly cause the harm. A typical scenario involves the employer-employee relationship.
‘Employer vicarious liability’ occurs when an employer is held liable for the wrongful acts or unlawful conduct of an employee, or by someone whose role is akin to that of an employee, even when the employer has done no wrong itself. This is because actions taken by someone in the ordinary course of their employment can be treated as actions of the employer if there is a sufficient connection between the wrong committed and the individual’s job role.
An employer may therefore be liable for the negligence or breach of statutory duty by its employees, workers, or even contractors, where harm is caused to a third party. The third party can then pursue a claim against the employer for the loss suffered. Liability can extend to breaches of copyright, trust, or confidentiality, as well as physical harm.
What is the difference between full and vicarious liability?
While the definitions of full and vicarious liability bear some similarities and even overlap, they constitute two distinct forms of liability.
Full liability arises when an employer is directly responsible for its own wrongful acts, or for any wrongful act of an employee that was expressly authorised by the employer. Examples include employer neglect or unsafe working conditions, where injuries or losses result from failures to provide adequate safety measures or risk assessments.
Vicarious liability, by contrast, applies when an employer may not have authorised or been aware of the wrongful conduct. Instead, liability arises due to the relationship between the employer and the wrongdoer and the connection between the wrongful act and the employment. Examples include negligence, breaches of software licences, or harassment in the workplace.
Examples of full liability could involve employer neglect, or situations in which employees or members of the public sustain injury due to issues such as lack of suitable risk assessments or safety procedures in the workplace. Other types of full liability include incidents of unlawful discrimination, harassment or victimisation at work, where a job applicant or employee is treated unfairly because of a protected characteristic, such as age, disability, sex or race.
In contrast, where it is not clear whether the wrongful action or unlawful conduct by the employee was authorised by the employer, the latter may still be vicariously liable because of the connection between the employment and the wrongdoing. Common examples of when wrongdoing in the workplace could give rise to employer vicarious liability include:
- Where an employee negligently operates machinery, injuring a customer or co-worker.
- Where an employee infringes the terms of a software licence used in the workplace.
- Where an employee is sexually harassed at work by another member of staff.
Legal tests to establish vicarious liability
To determine whether an employer can be held vicariously liable, two legal tests must be satisfied:
- The Relationship Test: There must be a relationship between the employer and the wrongdoer that makes it appropriate for the employer to bear responsibility for the other’s actions.
- The Close Connection Test: The wrongful act must be sufficiently connected to the authorised conduct of the employee to make it fair to impose liability on the employer.
These tests are not limited to employer-employee relationships. Employers can also be liable for the acts of individuals whose roles are deemed akin to employment. Similarly, liability can extend to acts closely connected to employment, even if they fall outside the scope of strictly authorised duties.
Case law
An important case on vicarious liability, WM Morrison Supermarkets plc v Various Claimants [2020] UKSC 12. This case addressed the limits of vicarious liability. An employee deliberately leaked payroll data to harm the employer. While the lower courts found a sufficient connection between the employment and the act, the Supreme Court overturned this, ruling the employee was acting independently for personal reasons, thus not creating liability for Morrisons.
In Chell v Tarmac Cement and Lime Ltd [2022] EWCA Civ 7, the court found that an employer was not vicariously liable when an employee’s practical joke caused injury to a colleague. The act was deemed outside the scope of employment, reaffirming that vicarious liability depends on whether the conduct was closely connected to the individual’s job role.
Vicarious liability & different types of wrongdoing
Employers can be liable for an employee’s wrongdoing, but only where there is a sufficiently close connection between the employee’s role and the events which take place that give rise to liability. This includes any acts which an employee is expressly authorised to do by their employer in the course or scope of their employment, such that the wrongful conduct may fairly and properly be regarded as done by the employer.
Vicarious liability can also arise in relation to acts which are closely connected to the role and responsibilities which a person is employed to do. This means that vicarious liability doesn’t depend upon an employee being given the authority to do a specific act, where it’s enough that they’re authorised to do acts of the sort that have given rise to the harm.
There are essentially two factors which define the operation of the close connection test:
- The nature of the employee’s role: this includes the nature of the functions or field of activities that the employee has been entrusted with. The answer to the question defines the scope of responsibility of the employee to ascertain how close the connection is.
- Sufficient connection: this refers to the connection between the role or position in which the wrongdoer is employed and the wrongful conduct, where the connection needs to be sufficient for the employer to be held liable.
The application of the close connection test was illustrated in the case of WM Morrison Supermarkets plc v Various Claimants [2020] UKSC 12. In the lower courts, Morrisons was found to be vicariously liable because there was a sufficiently close connection between what the employee was tasked to do and the unauthorised disclosures. In rejecting these findings, the Supreme Court held that even though the employee could not have disclosed the data if he’d not been given the task of compiling it, that wasn’t enough to establish vicarious liability. His conduct wasn’t so closely connected with the acts that he was authorised to do while acting in the ordinary course of employment, but rather he’d been engaged on “a frolic of his own”, namely a personal vendetta. Still, this case serves as a stark reminder of the potential for an employer’s liability for rogue employees undertaking activities in connection with their job role.
Vicarious liability rules for different types of workers
- Roles Akin to Employment: Courts assess whether a contractor’s role is akin to employment by examining factors such as the degree of control the employer has over the worker, whether the worker performs a core business function, and whether the employer has created the risk of the wrongdoing. For example, in Barclays Bank plc v Various Claimants [2020] UKSC 13, the Supreme Court ruled that an independent doctor conducting medical assessments for Barclays was not akin to an employee due to his ability to operate independently and refuse work.
- Independent Contractors: The general rule is that employers are not vicariously liable for acts of independent contractors. However, exceptions exist where the contractor’s role is central to the employer’s business or where the employer has retained significant control over the contractor’s work. Factors such as financial dependence, exclusivity, and the integration of the contractor’s role into the business can shift liability.
- Quasi-Employees: For individuals who are not formal employees but perform duties similar to employees, courts will apply a multi-factorial test. This test considers the nature of the relationship, the level of supervision, and the degree of integration into the organisation’s operations to determine liability.
The evolving nature of work arrangements, such as gig workers or freelancers operating under company platforms, has further blurred the lines between employee and contractor. Employers should evaluate these relationships carefully to understand potential risks.
How to manage employers’ vicarious liability risks
The potential financial and reputational risks that exist means that employers should be reviewing their business risk profile on a regular basis.
There are various steps that an employer can take to minimise and manage the risks of vicarious liability, although given the scope of potential wrongdoing by anyone employed or engaged by the employer in the course of their business, a broad approach should be adopted.
First, they should develop and implement clear policies on acceptable behaviour, data protection, and health and safety standards. These policies should be accompanied by regular training sessions to ensure that all employees understand the rules and the potential consequences of breaching them.
Second, employers should conduct regular audits and risk assessments of workplace practices. This is especially important in high-risk areas, such as health and safety, data handling, and remote working, to identify and address potential vulnerabilities.
Third, mitigating risks associated with remote working is increasingly important in the modern workplace. Employers should reinforce existing IT and data security policies to safeguard sensitive information. They should also provide employees with equipment that meets health and safety standards and train them on confidentiality and proper data-handling procedures. Regular supervision through virtual meetings and maintaining open communication channels are also vital to ensure employees remain accountable and supported.
Employers should also review their liability insurance policies to ensure adequate coverage for potential claims that may arise from employee actions. Increasing the level of coverage may be necessary if risks remain high despite implementing other mitigation measures.
Finally, proactive incident management is essential. Employers must act swiftly to investigate and address any allegations of wrongdoing.
Need assistance?
DavidsonMorris’ employment lawyers support employers with all aspects of workforce legal risk management, including issues of vicarious liability. For specialist advice, contact us.
Employer vicarious liability FAQs
What is employer vicarious liability?
Employer vicarious liability is a legal principle where an employer is held responsible for the wrongful acts or omissions of their employees, provided these occur during the course of their employment.
Can employers be liable for acts outside the workplace?
Employers may be held liable for actions that occur outside the workplace if they are sufficiently connected to employment duties, such as incidents at work-related events or social gatherings.
Does vicarious liability apply to contractors?
Generally, employers are not liable for independent contractors. However, if a contractor is effectively under the control of the employer or performing tasks integral to the business, liability may still arise.
How can employers reduce the risk of vicarious liability?
Employers should implement robust policies, provide regular training, and establish clear procedures for reporting and addressing misconduct. Effective oversight and a positive workplace culture can also minimise risks.
Are employers liable for intentional acts by employees?
Employers may be liable for intentional acts, such as harassment or assault, if they are closely connected to the employee’s role or duties.
What are the consequences of vicarious liability?
Consequences may include financial compensation, reputational damage, and legal costs. Addressing risks proactively is essential to avoid these outcomes.
Glossary
| Term | Definition |
|---|---|
| Vicarious Liability | A legal principle where employers are held responsible for the wrongful acts or omissions of employees. |
| Course of Employment | Actions carried out by an employee as part of their job duties, potentially linking liability to the employer. |
| Wrongful Acts | Actions or behaviours deemed unlawful or inappropriate, such as negligence, harassment, or assault. |
| Independent Contractor | A person hired to perform services but not considered an employee, usually outside the scope of vicarious liability. |
| Negligence | Failure to exercise reasonable care, resulting in harm or damage to another person or property. |
| Harassment | Unwanted behaviour that creates an intimidating, hostile, or offensive environment, potentially leading to employer liability. |
| Employer’s Duty of Care | The legal obligation to ensure the health, safety, and welfare of employees and others affected by workplace activities. |
| Reputational Damage | Harm to a company’s public image or standing, often as a result of legal cases or employee misconduct. |
| Preventative Measures | Steps taken by employers to minimise the risk of vicarious liability, such as training and clear policies. |
| Liability | Legal responsibility for one’s actions or the actions of others, in this case, employees. |
Author
Founder and Managing Director Anne Morris is a fully qualified solicitor and trusted adviser to large corporates through to SMEs, providing strategic immigration and global mobility advice to support employers with UK operations to meet their workforce needs through corporate immigration.
She is a recognised by Legal 500 and Chambers as a legal expert and delivers Board-level advice on business migration and compliance risk management as well as overseeing the firm’s development of new client propositions and delivery of cost and time efficient processing of applications.
Anne is an active public speaker, immigration commentator, and immigration policy contributor and regularly hosts training sessions for employers and HR professionals
