Can an employer be liable for the acts of third party contractors?

Can an employer be liable for the acts of third party contractors?

It has long been established that an employer can be liable for the wrongs committed by one of their employees. However, in relation to an independent contractor engaged by an employer, there has generally been a defence that the employer was not liable for their actions, broadly on the basis that the contractor was not under the control or direction of the employer.

In the case of Barclays Bank v Various Claimants, the Court of Appeal has reaffirmed that the “independent contractor defence” no longer exists, employers may potentially be liable for the acts of third party contractors.  It is important to remember that much will depend upon the individual facts of each case, which will be analysed in all of the circumstances and a decision made on a case by case basis.

In this case the claimants brought a group litigation action against Barclays Bank for alleged sexual assaults committed by a doctor who carried out medical examinations as part of the recruitment process. It was during these examinations that the assaults allegedly took place. Dr Bates was not an employee of the bank but rather an independent contractor.

The Court of Appeal rejected the bank’s defence. The employer could still be vicariously liable for the actions of someone even though they weren’t an employee.

The question involved a two-stage test:

  1. Is the relevant relationship one of employment or “akin to employment” and
  2. If so, was the wrongful act connected to the duties the contractor was hired to carry out?

Whilst of some benefit to the prospective employees, “it was clear beyond doubt that the principal benefit” of the medical examinations was to the Bank and the process was part of the Bank’s business activity. Most crucially of all, Dr Bates was to a greater or lesser degree under the control of the Bank.

Comment

Whilst it may be subject to further appeal, this decision means that employers could now find themselves potentially liable for the actions of independent contractors as well as direct employees.

This case reflects the increasing desire by courts to find vicarious liability in situations outside of the traditional employer/employee relationship. The traditional broad principal that there is no vicarious liability for an independent contractor can no longer be relied upon.  Employers will need to look carefully at the manner in which they engage independent contractors and the reality of how they work with them on a day to day basis.

This decision may result in an influx of cases in respect of historic injuries, in which claimants had previously been unable to identify a sufficiently wealthy individual defendant. However, there may still be arguments for employers regarding liability and limitation periods for bringing a claim. In the meantime, as a precaution, we would recommend that employers engaging contractors look carefully at their terms of engagement and in particular the insurance cover that is in place.