Vicarious liability arises when a principal is answerable for the act of an agent in the course of its business.
It most often comes up in an employment context. The employer is vicariously liable for the employee, by the operation of tort law. The employer responsible for acts of the employee. The acts of the employee must be unlawful - and establish a cause of action - but not necessarily be reckless.
However, it applies in all situations where an agent acts on behalf of a principal.
Vicarious Liability Meaning
Vicarious liability means that:
- a principal, such as an employer
- is liable for the acts of
- an agent, such as an employee.
From a practical perspective, the employer is usually seen as a better target defendant to sue, due its turnover and availability of insurance, whether the risk is covered by specific vicarious liability insurance or not.
There is no test for a “duty of care” in the law of vicarious liability:
- the employee/agent may have been negligent (which involves an assessment of a duty of care)
- whether or not the employer is liable for an employee’s negligence is a matter of assessing and applying the legal test to establish vicarious liability.
So, vicarious liability is a separate legal method to establish liability of a principal for its agent to other methods, such as common design and apparent authority of an agent for tortious wrongdoing.
They’re all separate heads of liability.
We come on to potential vicarious liability of independent contractors further down.
Vicarious Responsibility Explained
Employers and others are vicariously liable – responsible - when there is a sufficiently close connection between the role of the agent/employee and the events which take place that give rise to liability.
That close connection is partly based on the authority of the employee:
The wrongful conduct of the agent must be so closely connected with acts the partner or employee was authorised to do that, for the purpose of the liability of the firm or the employer to third parties, the wrongful conduct may fairly and properly be regarded as done by the partner while acting in the ordinary course of the firm's business or the employee's employment.
In the employee/employer context, the wrong must be so connected with the employment that it “can be said” or “fairly be regarded” that the principal/employer has introduced the risk of the wrong to a set of circumstances.
The role of every employee will have their own role and responsibilities. That in turn will give rise to risks, which are dependent upon the type of business of the employer. Contrast the differences between:
- a driver for an employer, who delivers packages local to the business, who is issued limited information (an address and a name, per delivery);
- a IT security expert or marketing professional who handles large lists of customer data (read: personal data) for their employer;
- a software developer handling source code owned by customers of the business.
The risks incidental to entrusting personal data the employment of the driver are fundamentally different to those entrusted with handling swathes of personal data, and source code for a customer.
From a legal perspective, the employer takes on all the risks of wrongdoing by the employee which are incidental to their role.
So:
- An employer might authorise the driver to drive lorry. The employer doesn’t authorise the employee to drive negligently.
- The Employer authorises the marketing agent to handle and disclose personal data to authorised persons. It doesn’t authorise them to publish it on the internet.
In both of these (overly) simple cases (there’s usually a lot more to it), vicarious liability arises.
The legal tests applied for assessment of vicarious liability follow.
Considerations giving rise to Vicarious Liability
There are two factors which define the operation of the close connection test:
- The nature of the Employee’s Role
Broadly speaking, what functions or “field of activities” was the employee responsible for?
The answer to the question defines the scope of responsibility of the employee to ascertain how close the connection is.
- Sufficient Connection
The connection between the role or position of the employee, and the wrongful conduct. The connection needs to be sufficient.
In modern jargon, it’s “a multi-factorial assessment”: a value judgment based on the circumstances of the case.
Liability arises when an employee uses or misuses their position in a way which harms a third party.
When the outcome is that employee misuses their position which harms another person, the employer is vicariously liable.
When an employer selects an employee for a position and role, it is the employer that should be held responsible for the wrongdoing of the employee.
Value Judgment
In one of the leading cases it is said:
[…] the test is imprecise, but that is inevitable given the infinite range of circumstances where the issue of vicarious liability arises. The court, he said, has to make an evaluative judgment in each case, having regard to all the circumstances and to the assistance provided by previous court decisions on the facts of other cases.
The value judgment requires a court to assess whether the employer can:
- 'may fairly and properly be regarded',
- 'can be said', and
- 'but for the acts or omissions of the employee',
be said to be liable.
Courts deliberately avoid giving precise guidance on the type or degree or closeness of connection required. It is highly fact specific, and in the end a value judgment.
Because vicarious liability doesn’t depend upon an employee's authority to a specific act, it’s enough that the employee is authorised to do acts of the sort they have done to give rise to liability..
Whether or not liability arises is a question of law. It’s a conclusion of law based on the facts of the case.
Motive of Agents & Employees
The motive of the agent or employee is not a factor when deciding whether the employer is vicariously liable.
It doesn’t matter whether the employee intended to cause financial, reputational damage to the employer, or physical injury to the person injured.
Although, intention may be relevant to whether the initial tort or wrongdoing by the employee gives rise to liability in the first place.
For these reasons, when vicarious liability established, the employer is strictly liable for the wrongful acts of the employee. The intention of the employer is not relevant to the assessment of vicarious liability, once the liability of the employee is established.
Which Torts?
Vicarious liability applies to all civil wrongs - torts - which may be committed by an employee during the course of their employment.
What matters is whether there is sufficient connection between the role of the employee and the conduct.
That being the case, an employer may be vicariously liable for:
- common design to infringement of intellectual property rights, where the employee participated to infringe IP rights of a third party
- failure to return goods of a bailor on demand, ie bailment
- converting goods to an employee's own purposes
- breaches of statutory duty, such as under the Equality Act for discrimination in respect of age, disability, marriage, race, religion or belief, or sexual orientation
- breach of contract
- conspiracy
- civil fraud
When Fraud Involved
When a third party suffers loss at the hands of an employee acting fraudulently, the principal is vicariously liable when the employee or agent was acting within their actual or ostensible (ie apparent) authority.
When the fraud was not authorised, the principal/employer is not legally responsible for the acts of the employee.
Difference between Vicarious Liability, Common Design, Apparent Authority
- Vicarious Liability is where the primary liability is automatically passed through to the employer: it is a form of secondary liability
- Common Design attracts is primary liability. It is a form of conspiracy, where the participant is liable for participating in the common design
- An employer is liable for the apparent authority given to an agent or employee when they say or imply that the agent is entitled to act on its behalf
- Contributory negligence, where the claimant is held partiality responsible for the tort. Contributory negligence is a defence which reduces the liability of the tortfeasor
Vicarious Liability in Contract Law
When two or more parties enter into a contract, it's the contracting parties that are liable in the event of a breach of its terms.
The law of contract operates differently to the law of tort. Vicarious liability is a form of tortious liability: the law of tort says when a company is vicariously liable for the acts of its agents – typically employees – for the employees’ acts.
So does vicarious liability operate in the context of contract law, and breaches of contract?
Not very often.
That’s because of the way contract law works.
A breach of contract is not a tort. It's a free-standing legal claim, independent of any tort. Breach of contract attracts strict liability: it doesn’t matter what the reason for the breach is.
While performance of a contract may be delegated under a contract, legal responsibility for performance of the obligation is not: that would require novation of the contract.
So, when a contract is breached, it's the contracting party who will be in breach, regardless of the person– individual or corporation – caused the breach.
Procuring a breach of contract however is a tort: that’s when a third party to the contract induces one of the contracting parties to breach the contract.
Vicarious Liability Example:
A software developer is employed to edit and enhance source code. The developer downloads open source software and doesn’t use it in accordance with the terms of the open source licence. Others in his team do the same thing:
The developer is primarily liable for copyright infringement.
The developer is jointly and severally liable with the others involved in the common design to infringe the copyright in the open source software.
The employer of the developer is vicariously liable for the acts of the developer. The developer was employed to develop source code. The employee did it in an unauthorised way.
The employer is also in breach of contract of the OSS licence.
Independent Contractors: Vicarious Liability
The general rule is that an "employer" engages an independent contractor to perform work, the employer is not liable for any tort committed by the independent contractor int he performance of the engagement.
Following on the example above, suppose that an independent contractor worked on the project and did the same sort of work as the employed developers.
In the first case, suppose the independent contractor is an individual, and not trading as a company.
The independent contractor (as an individual) may well be liable:
- for their own copyright infringement of the source code; and
- as part of the common design with the other employees of the company, and
therefore jointly and severally liable with the employer. The independent contractor isn’t vicariously liable, but they are still liable.
The result is the same if the "independent contractor" is a company. The company will be vicariously liable the individual developer's unlawful acts (ie copyright infringement), because it employed them.
Guide to Establishing Vicarious Liability
To assess the likelihood of vicarious liability:
- acts that an employee is authorised to do an employer
- unauthorised modes of doing authorised acts: improper modes of doing the authorised act; and then
- the connection between the authorised acts and the improper modes of doing them
How far of a departure was to the unauthorised act from the role and employment responsibilities of the employee?