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Vicarious Liability - When it is the employer's problem
"Vicarious" is one of those words that you would be delighted to spell in Scrabble. It's an odd word, that we most commonly associate with one of two others - namely, "enjoyment" or "liability".
The concept of vicarious enjoyment is easy to understand. Anyone who has a toddler who has mastered the art of riding a tricycle will know what it's all about. While you can't ride the bike yourself, you get a kick out of the fact that your child can.
If, on the other hand, your toddler manages to pilot his tricycle into the side of a parked car, you will probably come to terms with the concept of vicarious liability. You didn't cause $500 worth of panel damage - but it is certainly your problem to pay for it.
Under this concept it doesn't matter that you weren't directly responsible for causing damage - you can still be liable for compensating for that damage under what broadly might be described as a collective responsibility for the acts of others.
That concept, vicarious liability, forms an important part of employment law. As a general principle, the law approves of a general responsibility upon employers to make good damage caused by their employees.
In some situations, the application of this concept is intuitive.
For example, let's say that you run a dry cleaning business. If it turns out that a chemical you use damages your customer's clothes, you would probably accept that it is the responsibility of your business to make good the costs of any such damage - regardless of whether it was actually you, or one of your employees (acting at your direction), that used the blameworthy chemical.
Some other situations are, however, more difficult. Most notably, situations involving employees who cause damage through wilful acts are problematic.
Some of the issues in this area are well illustrated in the decision of the House of Lords in Lister & Ors v Hesley Hall Limited [2002] 1 AC 215.
This case concerned an institution called Axeholme House, a boarding annex of a secondary school in Doncaster. The school and boarding annex were owned and managed by Hesley Hall Limited as a commercial enterprise. In essence, the school was maintained for children with emotional and behavioural difficulties who were generally sent there by local authorities. The aim of the institution was to provide an environment for boys to adjust to normal living.
The boarding annex was maintained by a warden and his wife - who were responsible for the day to day running of the house and for the maintenance of discipline outside of school hours. On most days the warden and his wife were the only members of staff on the premises of the boarding house.
The respondents to the House of Lords case were the warden's employer. The employer accepted that, unbeknown to it, the warden had systematically sexually abused boys at Axeholme House over a number of years. The abuse took a variety of different forms, including sexual intercourse.
None of the boys made any complaint about the behaviour at the time. In the early 1990s, however, complaints were made and a police investigation was initiated. The outcome of that investigation was a criminal proceeding which resulted in the warden being sentenced to seven years in prison for multiple offences involving sexual abuse.
The case before the House of Lords concerned claims by the boys who were abused seeking damages for personal injury. The boys brought their claims for compensation not against the warden, but against the employer. The boys argued that the employer was vicariously liable for the acts of the warden.
This specific type of claim would, of course, not be possible in New Zealand - simply because claims for compensation for personal injury are barred by virtue of accident compensation legislation. The principles involved do, however, have a wider importance for claims at employment law in this country.
The House of Lords accepted that the concept of vicarious liability required a compromise between two conflicting policies. At one end, there is a social interest in providing an innocent victim with recourse against a financially solvent defendant (in other words, there was no practical way in which the boys could get compensation from the warden - but the warden's employer had comparatively "deep pockets"). At the other end, the courts had a hesitation to force an undue burden upon business enterprise.
From an outsider's perspective, it might seem extraordinary that this employer could be held liable for the warden's acts of sexual abuse. The warden was hardly employed to molest children - nor could it be said to be directed connected with the type of functions that he was to perform in his job: in fact, this type of conduct was completely contrary to what was expected of him. To add to the matter, the employer had no knowledge of the wrongdoing - and arguably, very little ability to prevent it.
In the event, however, these considerations did not sway the House of Lords. Their Lordships held that one of the underlying reasons for the wrongdoing was the close connection between the workplace and the abuse. In other words, the employer had entrusted the care of children to the warden - and the warden's sexual abuse of the boys was inextricably interwoven into the carrying out this duty. On this basis, the boys were able to claim against the employer.
As a matter of principle, this case has established that an employer may be liable for the unauthorised acts of an employee where those acts are "closely connected" with the nature of the wrongdoer's employment. The decision is of direct application to employers who are entrusted with the care of others - but may also extend to other employment situations.
Issues concerning vicarious liability are of importance to all employers. This decision of the House of Lords may be of direct application to many employment situations in New Zealand.
