Loss Prevention Alerts

ALERT 34:  Extension of the Law of Vicarious Liability

A recent decision of the Court of Appeal means that AGS members need to consider carefully the relationships they have with suppliers' employees, secondees and freelancers working to their instructions to avoid unwittingly assuming liability for the negligence of such individuals in the workplace.

Vicarious liability is the legal principle whereby employers assume liability for the negligent acts or omissions of their employees. As a result of Regulation 21 of the Management of Health and Safety at Work Regulations 1999, a principle akin to vicarious liability also operates in a health and safety context so that employers are now vicariously (and criminally) liable under the Health and Safety at Work Act for the acts of their employees.

However, the concept of vicarious liability does not apply to acts committed by an undertaking's contractors' employees. It can therefore be crucial to assess who is and is not an organisation's employee.

Facts

In Viasystems (Tyneside) Limited v. (1) Thermal Transfer (Northern) Limited (2) S&P Darwell Limited (3) T Hoare and C Day t/a C&T Metalwork Services (10 October 2005) the Court of Appeal overturned two centuries of legal precedent by stating that it was possible in law for an employee to have two employers.

Viasystems had engaged the services of Thermal Transfer (D1) to install air conditioning in their factory. D1 subcontracted the ducting work to S & P Darwell (D2) who then further subcontracted, on a labour only basis, to C&T Metalwork Services (D3) for the provision of fitters and fitters' mates to carry out the work. D3 provided a fitter (named Megson) and a fitter's mate (Strang). These men were installing the duct work under the instruction and supervision of a fitter (a Mr Horsley) who was working for D2. All three men were working in the roof space of a factory which was accessed by crawling boards on the horizontal roof purlin. Strang negligently attempted to crawl through the sections of ducting that had already been put in place. The ducting moved and as it came into contact with the fire protection system the sprinklers fractured and the factory was flooded causing extensive damage.

The court looked at who was entitled, and in theory obliged, to control Strang's actions so as to prevent the accident from happening. Megson was the fitter in charge of Strang, and Horlsey was the foreman on the spot. As such, they were both entitled and obliged to control Strang's work, including his negligent acts. Accordingly, the court held that both D2 and D3 were liable. On the matter of contribution, the court held that if the relationship between the parties yields dual control then as a logical necessity dual vicarious liability is split 50:50.

Commentary

Different precautions will be required when entering into contracts involving secondees, suppliers' employees and freelancers; each group is considered separately.

Seconded Employees: In the construction industry, particularly on major projects, it is increasingly common to see employees seconded from one organisation to another for particular tasks or phases of work. The parties may intend that the secondee should be regarded as the employee of one company but not the other although rarely is this provided for in the secondment agreement, assuming such an agreement exists! If both companies (the 'usual employer' and the one to whom the employee is seconded, who we term the 'temporary employer') give the secondee instructions and clearly regard themselves as having a degree of control of his/her work then they may be regarded as joint employers having joint vicarious liability.

Note that the case was determined in part on the basis that both companies had reserved the right to control the employee. Control over a seconded employee can be provided for easily by a clause in a secondment agreement that the temporary employer has the right and obligation to instruct and control the employee and the usual employer has no such right or obligation until the determination of the secondment.

Suppliers' Employees: AGS members should consider carefully whether it would be appropriate for them to have control of a supplier's employees. In most, if not all, cases it is likely to be prudent to avoid taking on any control. All orders and instructions should therefore be passed through 'official' channels rather than be given casually to the individuals concerned.

In addition, members must be clear about the circumstances where clauses in a secondment agreement are used to impose employer obligations on them. For example, commonly under construction plant hire terms, where plant is supplied with an operator, the operator is deemed to be the hirer's employee. If such terms are accepted then the hirer will need to ensure that the operative enjoys the same level of monitoring, instruction and on site training as his other employees.

Freelancers: The contractual relationships with freelancers (sole traders and the self employed) should define clearly whether the freelancer is operating under instructions from his/her client or whether he/she is sufficiently knowledgeable to be able to work autonomously. The latter situation is only likely to apply to experts in their discipline who do not require any specific health and safety instructions to undertake their role.

Safety of Employees on Site: If the worker is seconded to a 'temporary employer', one negative effect of the Viasystems case might be that members in the position of 'temporary employer' will decline giving instructions or even orders to a worker on site that they do not regard as their employee for fear of creating or re establishing an employer employee relationship by their assumption of control. In this circumstance, instructions should be given only if necessary and appropriate, to avoid accidents and unsafe circumstances. The AGS member in such a situation could assert that he had no right to control the worker, he merely gave instructions, anticipating they would be followed, so as to prevent an unsafe situation arising. In order to establish this restricted role in a contract members could consider a clause as follows:

"[employee] shall be seconded from the Consultant to the Client for the duration of the contract and shall in all respects be regarded as an employee of the Client and subject to the Client's sole control save that nothing in this clause shall be taken to constrain the Consultant's ability when operating its undertaking to give instructions so as to prevent unsafe circumstances arising or continuing."

Or alternatively, as appropriate to the circumstances:

"The Consultant [or Employer] reserves to the right when operating its undertaking to give such instructions to the Supplier's employees as may be necessary to prevent unsafe circumstances arising or continuing, save that nothing in this clause shall be taken to create employer-employee relationships between the Consultant [or Employer] and the Supplier's employees."

This loss prevention alert has been produced by the Loss Prevention Working Group (LPWG) of the AGS. It highlights issues that the LPWG considers may be of relevance to members. It is not intended to provide a definitive response to any issues and before taking action members should consider carefully whether they need to seek independent legal advice.

Prepared for the Members of the AGS by Steven Francis, Eversheds

Date of Issue: 19 December 2005