Why Employers Need to Beware of Vicarious Liability

Employers insure their own risks, covering themselves for actions they take that may lead to a claim for compensation. But what about the actions of their employees or third parties, where does an employer stand should a claim be made against them for something someone else has done?

Vicarious liability is the situation where employers could be liable to pay damages where someone who works for them, either employed or outsourced, causes losses or personal injury to another through actions taken during the course of their duties.

Because the extent of the liability can be far-reaching, vicarious liability puts employers in a very vulnerable position indeed.

Two cases in point

There was a case reported recently involved Barclays Bank, where various claimants put in a complaint about being sexually assaulted by a doctor engaged by the bank to undertake medical examinations on prospective employees. The employees won the case, finding Barclays liable. There was also a similar case last year involved Morrison Supermarkets plc. A customer of one of their petrol stations accused a worker of racial abuse and physical violence, and the supermarket was found liable for the worker's actions.

Of course, neither Barclays nor Morrisons had condoned or encouraged the behaviour, but because the courts ruled that the assaults were so closely related to the jobs of the assailants, the businesses had to be found liable.

Both cases clearly demonstrate how a business can be liable for the actions of its employees and third party contractors, despite the fact the business would have found it pretty much impossible to prevent the actions and also despite the fact that the actions fell outside the scope of the conduct that would have been reasonably expected.

How to reduce the risk of vicarious liability?

In vicarious liability cases involving discrimination, employers can attempt to avoid liability by demonstrating that it has taken all practicable steps to prevent the discrimination taking place.

However, in cases involving personal injury, this defence is not available. Employers should therefore place their focus on prevention rather than defence. But how to do this?

Firstly, start with your policies. Ensure they include very clear rules on conduct, equal opportunities, health and safety and grievance and disciplinary issues. Be sure to enforce the rules, and instigate training to ensure that they are fully understood.

You should give consideration to which of your policies should apply to third parties and contractors.

Individual roles should be closely defined and of course, adequate supervision and monitoring should be in place.

Of course, you will never be able to fully protect your business from the actions of another person, which is why you should put appropriate structures in place to enable you to deal with any liability and its financial implications. These structures could include, for example, extended insurance that covers vicarious liability, and indemnities within contractor and supplier contracts.

Vicarious liability isn't an incredibly widespread problem, however it does exist and carries with it potentially damaging financial and reputation related risks, so it is vital to be prepared.

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