A brief guide to vicarious liability for employers

YOU MIGHT think your business is protected from legal claims when an employee acts outside the scope of their duties. But what if their actions lead to harm to a third party or an accident at work? 

The legal concept of vicarious liability holds you (the employer) accountable in certain situations, even when you’re not directly involved in the wrongdoing. Understanding this concept is crucial to minimising risks and avoiding potential financial and reputational damage.

What is vicarious liability?

Vicarious liability means that, as an employer, you could be held legally responsible for the actions of your employees. This doesn’t mean you’re liable for everything an employee does. But if their actions are connected to their job, you may find yourself on the hook for damages or compensation claims.

This is a form of strict liability, meaning the victim does not have to prove that you, the employer, were personally at fault. For example, if an employee causes an accident at work that injures a colleague or member of the public, you might be liable if it can be shown that the injury happened while the employee was carrying out their tasks.

When does vicarious liability apply?

In the UK, establishing vicarious liability requires a two-stage test:

1. The Relationship Test: There must be an employer-employee relationship, or a relationship that is determined by the court to be “akin to employment”.
2. The Close Connection Test: The employee must have committed the wrongful act while acting within their general duties, or in a way that is “closely connected” to the tasks or activities they were employed to do.

The crucial factor is not whether you authorised the specific wrongdoing, but whether the employee’s act was sufficiently connected to their employment duties to make it fair and just to hold the business liable.

If an employee is considered to be on a “frolic of their own” (i.e., acting entirely for personal reasons with no real connection to their job), an employer is unlikely to be liable.

The risks for employers

The risks of vicarious liability can be significant. Not only could you face direct financial consequences, but your business’s reputation could suffer, especially if the claim involves serious harm or misconduct.

Even if an employee’s actions were reckless or intentional, you might still be liable, depending on the circumstances and if a “close connection” can be established between the actions and the job role.

How to manage and reduce risk

Preventing situations where vicarious liability could apply is crucial. Start by setting clear expectations for employee behaviour. Train your staff on the correct procedures, safety protocols and ethical standards for their roles. A consistent and well-documented training programme can serve as evidence that you’ve taken reasonable steps to mitigate risks.

Also, make sure your staff are properly supervised and supported, particularly when performing high-risk tasks. Regular reviews of workplace safety and a clear process for addressing potential misconduct or accidents will also reduce your exposure.

Having robust insurance cover is essential. Speak with an expert about liability insurance policies that specifically address vicarious liability. This can provide an additional layer of protection should a claim arise.

Ultimately, vicarious liability is always a possible risk for your business, but you can do things to mitigate it. Protect your business from the financial and reputational damage of an unexpected claim.