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ANALYSING EMPLOYER – EMPLOYEE RELATIONSHIPS: WHY WE SHOULD SEVERELY LIMIT THE SCOPE OF VICARIOUS LIABILITY

Torts Scope of Vicarious Liability - Siddhaant Verma

OVERVIEW

This article essentially offers a critical analysis of vicarious liability, with specific emphasis on employer-employee relationships. It traces the history of the concept and how it has expanded since the 18th century. This paper discusses why the several justifications are given for vicarious liability over several cases, such as ‘deep pockets, do not satisfactorily explain the tort. This paper will attempt to argue in favour of severely limiting the scope of vicarious liability.

ANALYSIS

Liability in tort law is based on an elementary, coherent moral principle- that he who causes harm through his fault must compensate for that harm. As common law developed, we have slowly drifted away from this, by introducing concepts such as strict liability[1]. Vicarious liability, closely related to strict liability, does not operate within the scope of the aforementioned principle. It imposes liability upon a party without direct fault. Intuitively, this concept seems untenable. We will, however, see how courts have attempted to rationalize it.

The purview of vicarious liability was not always as vast as it is today. Before the 18th century, employers were only liable for acts that they expressly commanded their servants and employers to do[2]. Traditionally, the Salmond test is used to determine whether vicarious liability should apply. It essentially states that employees can only be held liable for acts done by their employers within the ‘course of employment. It contains two elements- 1) The act must be authorized by the employer, 2) Acts that are inextricably connected to those authorized by the employer. [3]

However, in our contemporary understanding of tort law, employers have been held liable for acts done by their employees which arguably went beyond their ‘course of employment. To illustrate this, in Limpus v London General Omnibus Company, it was established that the employer might be held liable for actions done by his employee despite explicit instructions given against the commission of that act[4]. The supposed justification for this was that since the employer was in a more financially viable position to compensate for the damages, then he ought to do so. This is known as the ‘deep pocket’ theory. This theory is problematic because it does not explain why the remuneration should come from the employer specifically, and not any other random entity with ‘deep pockets, like the government. This is not only morally abhorrent but also economically disadvantageous for society in general. Because of this, companies must insure against this liability which adds to their cost of doing business, a cost which is ultimately passed onto consumers. The entire concept is predicated on convenience rather than cogent legal and moral reasoning. This further gave rise to ‘enterprise risk theory’. In judgements such as Bazley v Curry[5], it was established that the employer could be held vicariously liable because it is the establishment of their enterprise that creates the necessary conditions of risk and damage. This theory has a strong foundation in tort law, particularly in cases of negligence. The establishment of an enterprise implicitly places a ‘duty of care on it, and any breach in that duty ought to be penalized.

The issue with this principle seems to be that it arbitrarily ascribes the fault of risk creation on the enterprise. It assumes, for instance, that if an employee of enterprise Y committed a tort, X would not have happened if the enterprise wasn’t established in the first place. However, we can apply this logic to any action that is tangentially related to X. For instance, if Y did not get out of bed in the morning, X would not have happened. Another justification is the control test[6]. The control test essentially states that the employer and employee are in a relationship of control; that is, the employer has considerable influence over the actions of his employees. This can also be used to explain why employers are not held liable for the actions of independent contractors.

This definition, however, is inadequate to justify the contemporary form of vicarious liability. For instance, teachers cannot be held liable for the torts of their students, when one can argue that a relationship of control exists between them. Yet another rationale given for this tort is that of deterrence[7]. Much like the ‘deep pockets’ doctrine, this states that since employers are in a more financially viable position to insure against accidents, then they ought to be held liable. This explanation implies that the employer is held liable for its failure to supervise and take adequate measures to prevent an accident. However, if this is true, then the liability cannot be ‘vicarious’, it is instead a specific application of tort law wherein there is an identifiable wrong done by the employer.

CONCLUSION

This tort needs serious reform. There are two ways in which this can be achieved- A proper rationale must be contrived that explains our contemporary understanding of vicarious liability, or the scope of the tort itself must be reduced. Possibly the only way we can justify vicarious liability is if we assume that in all employment contracts, there exists an implied agreement of indemnity[8]. This means that the moment an employment contract is conceived, the employee agrees to indemnify the employer. In this instance, the liability is truly vicarious in nature. When damages are successfully won in a tort case, the defendant certainly has the option to pay out those damages by liquidating their assets.

For an employee, this may mean that the implied promise of indemnity is an ‘asset’ that they can utilize. However, it may not always be fair for the employer to indemnify all acts of the employee. In the Bazley case, for instance, the employer cannot be expected to ensure against an act that is done with gross mala fide intent and has a tenuous connection to the scope of employment.

Therefore, it appears that the only fair application of vicarious liability would be in cases wherein the employer explicitly commands the employee to commit a tortious act. Even if the tort occurs within the ‘course of employment, the liability should fall exclusively upon the employee, provided that the task wasn’t inherently dangerous and that the employer took all necessary precautions to prevent damages.

We now arrive at a difficult crossroads. While it has been adequately argued that the contemporary application of vicarious liability is unfair, it is also true that defendants deserve to be made whole on the losses they suffer. If the tortfeasor has the ability to pay damages, then they must do so. However, very often, they do not possess that ability. Our obligation to fair legal principles must always supersede the desire to achieve an equitable outcome. If, ultimately, the defendant is unable to recover their losses that is a necessary evil we must accept so that we do not impose an unfair burden on a faultless party.

Author Name: Siddhaant Verma (Jindal Global Law School, Sonipat)

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Reference(s):

[1] Rylands v Fletcher, (1868) LR 3 HL 330, [1861-73] All ER Rep 1, 19 LT 220.

[2] Percy henry Winfield & john Anthony jolowicz, Winfield and Jolowicz on Tort 1477-78 (2014)

[3] R. F. V. Heuston, Salmond and heuston on the law of torts 443 (1969).

[4] Limpus v London General Omnibus Company, (1862) 158 ER 993

[5] Bazley v Curry, [1999] 2 SCR 534, [1999] 2 RCS 534, [1999] SCJ No 35, [1999] ACS no 35

[6] Yewens v Noakes, (1880) 6 QBD 530, 1 TC 260, 44 LT 128

[7] Supra Note 5

[8] JW Meyers, A Theory Of Vicarious Liability, 43 Alberta Law REVIEW, 301-303 (2005)

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