Legal

Are firms always responsible for employees’ actions?

5 Dec 2018 By Nick Tsatsas

Two recent Court of Appeal judgments emphasise the extent of employers’ vicarious liability for the actions of their employees. Nick Tsatsas reports

The facts 

In Bellman v Northampton Recruitment Limited, M was the managing director of Northampton Recruitment (NR). In 2011, following NR’s Christmas party, M and another employee, B, went to a hotel where some of the staff were staying. The group’s conversation turned to work matters, during which M lost his temper. He lectured the employees present on how he owned the company and made all the decisions relating to it. B and M argued, and M punched B twice. The second punch knocked B to the floor, fracturing his skull and rendering him unconscious. B suffered severe brain damage and is unlikely to work again. He brought a claim for more than £1 million worth of damages against NR, on the basis that it was vicariously liable for M’s conduct. 

In Various v Wm Morrisons Supermarket PLC, S was employed by Morrisons, the supermarket chain, as a senior IT internal auditor. He had access to sensitive and confidential employee data. In July 2013, S faced disciplinary action from Morrisons and, in an act of malicious revenge, he posted the personal details of almost 100,000 Morrisons employees on a file-sharing website. These actions led to S being arrested and charged with fraud, and other offences. In July 2015, he was convicted and sentenced to eight years in prison. The co-workers whose data had been disclosed made a group civil claim against Morrisons for compensation arguing that Morrisons was vicariously liable for S’s actions.

The law

Vicarious liability is a common law principle of strict liability for wrongs committed by another person. In employment cases, the rationale for the imposition of vicarious liability is that an employer is more likely to have the means to compensate the victim than the employee. In addition, the employer, by employing the employee to carry on the activity, will have created the risk of the tort committed by the employee.

The employment relationship can give rise to vicarious liability and in these cases, the focus is on whether there is a ‘sufficiently close connection’ between the employee’s role and wrongdoing, such that it can be regarded as ‘in the course of employment’, and thus it is fair to hold the employer vicariously liable. 

In Bellman, the Court of Appeal held that M was the directing mind and will of a small company, whose authority, remit and ‘field of activities’ were wide. M was wearing his ‘metaphorical managing director’s hat’ when lecturing his subordinates after the Christmas party. In the court’s view, the attack arose out of a misuse of the position entrusted to M as managing director. Accordingly, the court held that there was sufficient connection between M’s job and the assault for his actions to be considered as ‘in the course of employment’, and thus to render NR vicariously liable for those actions.

Likewise, in Morrisons, the Court of Appeal ruled that when S received the staff data, he was acting as an employee and the fact he chose to disclose the data in an unauthorised way was still closely related to what he had been tasked to do – and, again, ‘in the course of employment’.  

Conclusion

While decisions in vicarious liability cases tend to be fact-sensitive, Bellman and Morrisons continue the recent trend of cases where employers have been found to be vicariously liable for what may seem like the outrageous actions of employees. 

Consistent judicial rulings that an employee’s ‘field of activities’ is to be considered widely have brought many acts and/or omissions within ‘the course of employment’.  Cases in which the necessary ‘close connection’ has been found all involved the employee having used or misused the position entrusted to him in a way which injured the claimant.

What should concern employers is that the ‘no fault’ nature of the vicarious liability doctrine makes it difficult for them to proactively limit their potential liability for the actions of their employees. For example, it is doubtful whether an express instruction by an employer to its staff to behave appropriately at the staff Christmas party will help protect that employer from being liable for any misbehaviour that does occur. 

Employers will also be alarmed that the Court of Appeal in the Morrisons case was unmoved by the fact that a finding of vicarious liability, in a case where there were 100,000 potential claimants, could place an enormous financial burden on the supermarket (and other employers in future cases). The court said the solution was for employers to insure against data breaches caused by system failures and/or against losses caused by dishonest, negligent and malicious employees. Of course, the cost of such insurance could be considerable, and there is every chance that insurers may introduce policy limits given the increased exposure resulting from cases such as these. 

Nick Tsatsas is consultant solicitor at Keystone Law

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