Vicarious liability is a concept that small business owners must be well-versed in to ensure they operate within the framework of UK employment laws. While it may sound complex, understanding vicarious liability is important for entrepreneurs, startups and small to medium-sized businesses.
So, let's break it down in simple terms – what is vicarious liability in law, how does it work and what are the potential implications for businesses?
What is vicarious liability in law?
Vicarious liability, in essence, is a legal doctrine that holds one party responsible for the actions of another. The idea behind vicarious liability is to ensure that individuals or entities with greater assets can be held accountable when the people they are responsible for cause harm, rather than leaving the injured party without recourse. This principle provides a safety net for those who might otherwise struggle to seek compensation for harm or losses.
What does vicarious liability for employers mean?
In the context of employment law, it means that an employer can be held liable for the actions of their employees that occur during their employment. This comes from the employer-employee relationship, wherein the employer takes on the responsibility for the actions of their employees while they are fulfilling their job duties.
The principle of vicarious liability
Vicarious liability is founded on the belief that if someone is acting on behalf of another party, the latter should also bear the consequences of their actions. The principles of vicarious liability are as follows:
- Employer-employee relationship – to trigger vicarious liability, there must be a valid employer-employee relationship (this means that the individual causing harm must be an employee of the defendant)
- The course of employment – the harmful act must occur during the employee's employment (in other words, it should be related to the tasks or duties they were employed to perform - actions taken outside the scope of their employment may not lead to vicarious liability)
- Sufficient connection – there must be a sufficient connection between the wrongful act and the employee's role (if an employee engages in an act that is completely unrelated to their job, it may not give rise to vicarious liability)
When does vicarious liability apply?
Vicarious liability holds employers accountable for the actions of their employees when those actions occur within the course of employment even where the employer has not done anything wrong. Here are a few examples to illustrate when vicarious liability applies:
- Work-related accidents – if an employee, while carrying out their job, causes an accident that results in injury or damage to a third party, the employer can be held vicariously liable
- Employment events – actions taken by employees during work-related events or functions, such as conferences, team-building exercises, or company parties, can also lead to vicarious liability if harm is caused
- In-office incidents – incidents that occur in the workplace, such as harassment or discrimination by one employee towards another, can give rise to vicarious liability if the employee was acting in the course of their employment
When does vicarious liability not apply?
While vicarious liability is a robust legal principle, there are circumstances in which it doesn’t apply. You need to recognise these exceptions to avoid misunderstandings and unnecessary legal disputes:
- Independent contractors – you might be wondering “does vicarious liability apply to independent contractors?” and the answer is that typically, it doesn’t (if a business hires an independent contractor to perform a specific task, the business is usually not vicariously liable for the contractor's actions)
- Acts outside employment – if an employee commits an act that is entirely unrelated to their job duties or is on a "frolic of their own," it may not trigger vicarious liability
- Criminal acts – in some cases, if an employee commits a criminal act that isn’t connected to their employment, the employer may not be held vicariously liable for their actions
Vicarious liability vs. strict liability
You need to be able to differentiate between vicarious liability and strict liability, as they’re distinct legal concepts. Vicarious liability holds an employer responsible for the actions of an employee. Strict liability imposes liability on an individual or entity without the need to prove fault or negligence.
For example, if a business manufactures an inherently dangerous product and it then causes harm to a consumer, the business may be held strictly liable, irrespective of any fault on the part of the employees involved. Vicarious liability, on the other hand, requires a connection between the employee's actions and their employment.
Is delegated liability the same as vicarious?
Delegated liability and vicarious liability are not the same. Delegated liability refers to situations in which an employer delegates certain responsibilities or tasks to an employee or a third party, such as a manager.
In cases of delegated liability, the employer is still liable for the negligence of the employee to whom they delegated the responsibility. Vicarious liability, on the other hand, pertains to the actions of employees acting within the course of their employment.
What are the potential implications of vicarious liability?
Vicarious liability has various implications for businesses and being aware of them can help you avoid legal issues. Here are some potential consequences and considerations:
- Financial consequences – if an employee's actions lead to harm, the employer may be required to compensate the injured party, which can result in financial losses for the business
- Reputation damage – being held vicariously liable for the actions of an employee can harm your business's reputation, which may affect customer trust and brand loyalty
- Legal costs – defending against vicarious liability claims can be costly in terms of legal fees and court expenses
- Risk management – to mitigate the potential risks associated with vicarious liability, businesses should invest in robust employee training, establish clear policies and procedures, and promote a culture of responsible behaviour
Can an employer contractually exclude vicarious liability?
In some cases, employers may attempt to exclude vicarious liability through contractual agreements, but this isn’t always straightforward. Courts may scrutinise such clauses to ensure they are fair and reasonable.
Additionally, the exclusion of vicarious liability isn’t always permitted, especially in situations where it would undermine the purpose of the principle itself. It’s advisable to seek legal advice when considering such clauses in employment contracts to ensure compliance with the law.
Vicarious liability example
An example of vicarious liability and its complexities involves Morrisons and an employee in its internal audit department. The employee unlawfully disseminated data relating to its employees, in a deliberate attempt to frame a work colleague. A group of those employees brought an action against Morrisons on the basis that Morrisons was vicariously liable for the unlawful dissemination of their data. In the lower courts, Morrisons had been held vicariously liable.
However, the Supreme Court considered that the dissemination wasn’t an act that was allowed and that the mere fact that his employment allowed him to do the wrongful act didn’t mean that Morrisons should be held liable.
Most importantly, the Supreme Court held that the employee's wrongful act wasn’t sufficiently close to his authorised work to be considered as being done by him in the ordinary course of his employment. Accordingly, they allowed the employer’s appeal.
This case highlights that vicarious liability may not always apply, especially when the employee's actions are outside the scope of their employment.
Get legal assistance from LawBite
Understanding vicarious liability is important for small business owners. It’s a legal principle that ensures accountability for the actions of employees while they are fulfilling their job responsibilities.
To navigate the complex legal landscape, it's advisable to seek legal advice, implement clear policies and procedures and promote a culture of responsible behaviour within your company. By doing so, you can protect your business and position it for success, while also ensuring compliance with the law.
At LawBite, we’re here to help and guide you through these legal intricacies, ensuring that you have the knowledge and support needed to make informed decisions and run your business with confidence.
To speak to one of our expert employment lawyers about vicarious liability or other forms of employer liability, book a free 15 minute consultation or call us on 020 3808 8314.
Additional resources
- Misconduct at work – what employers need to know
- How to draft a Settlement Agreement
- Employment disputes - a guide for employers
- Employee exit policy and procedure
- Health and safety in the workplace
