Employers and the vicious landscape of vicarious liability

The duty of care owed by employers to employees is generally stringently imposed by courts in Australia. However, the landscape of employer’s and host employer’s vicarious liability for the actions or inactions of workers continues to transform and evolve.

​​​​​​The recent Court of Appeal decision of De Martin & Gasparini Pty Ltd v Bartlett[1] reminds us of the intricacies of vicarious liability and the difficulties insurers face in evaluating the risk of an employer.

The basic principles of vicarious liability require the existence of an employment relationship and the negligent act of the employee to have occurred during the course of their employment. Of course, an employment relationship and an employee’s actions are not linear, which has resulted in the Courts having to approach vicarious liability in different ways.

Employment Relationships

In Barlett, the employee was an unidentified worker at a construction site whose negligent act was causative of Mr Barlett’s injury. The unidentified worker was either an employee of De Martin & Gasparini Pty Ltd (DMG) or a labour hire worker. Whilst there was no evidence to confirm which entity he was an employee of, the Court of Appeal drew inferences from slim circumstantial facts, such as descriptions provided in day sheets, to conclude that he was an employee of DMG and thus, DMG were vicariously liable.

There is no formula that distinguishes an employee from an independent contractor and it can often be dependent upon the context. For example, food delivery drivers are not generally considered employees but rather, independent contractors due to the terms of the agreement in place.[2]

Whilst the High Court has determined an employment relationship by the terms of the contract in place[3], a multi-facet test has also been applied, and consideration has been given to the system, work practices and entirety of the relationship[4].

Despite this, a priest, who is often appointed, and receives a stipend and holiday leave, is not considered an employee of the Church. As a consequence, and as discussed in our article on the decision of Bird v DP[5], the High Court held the Church was not vicariously liable for the abuse perpetrated by Father Coffey to the claimant in that matter.

Although the ‘control test’ is also a factor considered in determining the employment relationship, this is also problematic in modern employment relationships where control can shift to a host employer. In Mt Owens v Parkes[6], Mt Owen was held vicariously liable for a labour hire employee as its supervisor’s direction of him demonstrated a transfer of control.

Mt Owens also upheld the concept that dual vicarious liability is not recognised and thus, two entities cannot be held vicariously liable. This was also reaffirmed in Barlett.

In the Course of Employment

Coupled with the issues that arise in determining an employment relationship are those which arise in determining whether the negligent act of an employee occurred during the course of their employment.

Consideration to the circumstances of each case must be given when determining this and in making such determinations, various tests have been applied by the Australian Courts.

The ‘Salmond’ test determines whether a tortious act occurred in the course of employment if it is authorised by the employer’s act, or the employee performed an act so closely connected with an authorised act, albeit in an unauthorised way.

However, the problem with this is clarifying when an employee’s act is conducted in the course of employment without authority, versus an unauthorised, intentional and dishonest act of an employee committed in the course of their employment.

The High Court considered this issue in the case of Prince Alfred[7] which arose from abuse committed against a claimant by a boarding school’s headmaster and placed emphasis on whether the nature and terms of the employment afforded the employee not just an opportunity, but an occasion to commit the wrongful act.  

A distinction was drawn in Schokman[8] between tortious acts which have afforded the occasion to occur by the employment, and those which are remote from the employment. The High Court held that an act of an employee urinating on the plaintiff’s face when returning home drunk to their shared accommodation (which was part of their employment), was not performed in the course of their employment.

Conclusion

These varying employment relationships, and the Court’s approach to vicarious liability, attaches risks to employers which are unpredictable and wide ranging, placing insurers under a cloud when assessing the risk of its policyholders.

The recent decision of Barlett, reaffirms the requirement to analyse each employment situation on its own facts and circumstances.