Vicarious liability – what an employer needs to know

In the modern Nigerian business environment, there are countless issues arising in law from the relationship between the employer and the employee. One of such is the issue of vicarious liability. Many employers cringe at the thought of the rule as it is perceived as a rule that protects the interest of third parties to the disadvantage of the employer. In time past, it was unreasonable to make an employer vicariously liable for the wrongs of an employee. Now, the Nigerian Legal system has imbedded in itself this rule of law.

The term vicarious liability basically means that employers are liable for the torts of their employees, committed during the course of employment. A tort is a wrongful act or an infringement of a right (other than under contract) leading to legal liability. This settled rule demands that employers will be liable to third parties with whom they have had no prior or direct contact, in situations where the employer cannot be said to have any blame, or to have caused the tort committed by the employee. The rule has a pragmatic basis because in most cases employers as opposed to employees can best afford to bear the cost of compensating injured third parties in the event that a tortuous wrong is committed by the said employee.

It is the duty of the employer, for not only will it be beneficial but also necessary for him, to understand this rule so he can properly assess a situation and know the extent of his liability. For example, this rule only applies to tortuous actions and omissions committed by employees in the course of employment. An employer will only be liable if the plaintiff can first of all prove the commission of the tort by the employee. Lord Denning explained in the case of, YOUNG V BOX & CO LTD;

‘To make a master liable for the conduct of his servant the first question to ask is whether the servant is liable. If the answer is yes the second question is whether the employer must shoulder the servant’s liability.’

Hence, every employer has to realise that the two important questions to be asked by the court in determining liability are:

1) Who is an employee?

2) Was the employee acting in the course of his employment when the relevant tort was committed?

In earlier times the difficult test was that of answering the question “who is an employee?’’. By a plethora of cases that question has been answered.

In the most basic situations, an employee is a person whose mode and method of work is controlled by the employer, especially when and where the job is done. The degree of control exercised by an employer over the way and manner a person’s job is to be done in precise term usually determines the status of the person -employee/servant or independent contractor. It is good to note that in certain circumstances, control solely will not be the determining factor.

An independent contractor is one who exercises control over the way and manner he does his job. Thus, while an employer is liable for the torts of the former he is not liable for the torts of the latter.

Employers should also note that while an employee/servant is employed under a contract of service, the independent contractor is employed under a contract for service.

The test was explained by Lord Denning in the case of Stevenson, Jordan and Harrison V MacDonald and Evans Limited thus:

‘Under a contract of service a man is employed as part of a business and his work is done as an integral part of the business, whereas under a contract for services, his work, although done for the business, is not integrated into it but is only an accessory to it.’

In the Supreme Court case of SSCO LTD v AFROPAK NIG LTD, 2008 18 NWLR pg 94-97, the court held that in determining what kind of contract of employment that parties have entered into, the following has to be considered-

a) If payments are made by way of wage or salary, then it is an indication that it is a contract of service. If it is a contract for service the independent contractor receives his payment by way of fees.

b) Where the employer supplies the tools and other capital equipment, then there is a strong likelihood that the contract is one of service and not for service. An independent contractor has to invest and provide capital for the work in progress.

c) In a contract for service/employment, it is inconsistent for the employee to delegate his duties under the contract. Thus where the contract allows a person to delegate then it is a contract for service.

d) Where the hours of work are not fixed then it is a contract for service.

e) Where an office accommodation and a secretary are provided by the employer, it is a contract of service.

Employee In The Course Of The Employer’s Business

It has been settled by a plethora of cases that for an employer to be liable for the tort of his employee, the employee must be in the course of his employer’s business, even if the act was an unauthorised mode of doing what the employee was employed to do.

The time and place of the commission of the tort is also to be considered in determining if an employee was within the course of his employment when the tort was committed. The principle to be applied in such situations was laid down by Parke B in Joel v Morrison;

‘If he was going out of his way, against his masters implied commands when driving on his masters business, he will make his master liable; but if he was going on a ‘’frolic of his own’’ without being at all on his masters business; the master will not be liable’.

Time and place of commission of torts in determining liability is mostly applicable to vehicle owners and their casual agents such as drivers.

It should be noted also that even though an act is expressly prohibited by the employer, he will still be liable for the tort of his employee if it is committed in the course of his employment. This rule is applicable because an employer will only have to issue specific orders to the employee forbidding negligence in order to escape liability for the employee’s negligence.

Employers can now heave a sigh of relief as it has been established that express prohibition is a factor to be taken into account in any given case in determining liability. The courts will consider two scenarios, whether the prohibition limits the sphere of employment or whether the prohibition only limits conducts within the sphere of employment. Employers have to note that while they will not be liable in the former scenario, the employer’s liability is unaffected under the latter.

Where an employee improperly delegates his task to an unqualified third party the employer will not be liable for any negligence of that third party but will be liable for the negligence of the servant in allowing an unqualified third person to act. For the employer to be liable, it must be shown that the employee did delegate his duty to the unqualified third party.

Vicarious Liability For The Crimes Of An Employee

In earlier times under common law a company could not commit a crime. That is because it was believed that a company being an artificial person lacks the ability to exhibit Mens Rea (Mental element) and Actus Reus (Actionable element), the pillars on which criminal liability rests. Today an employer can be liable for the fraud, theft or crime committed by the employee whether or not it is solely for the employee’s benefit, unlike in time past when that was not the case.

The trend in Nigeria, a reflection of the development in England is to hold an employer criminally liable for the acts of his employee even if the company had no knowledge of such commission. Statutes have been specifically enacted to accommodate this trend. Such statutes include the Food and Drug Act, Standard Organisation of Nigeria Act (SON), Weight and Measures Act, The Companies and Allied Matters Act, The Consumer Protection Council Act, The Federal Environmental Protection Agency Act and a host of other statutes.

The Consumer Protection Council Act seeks to safeguard consumers from the hands and gimmicks of unscrupulous companies, firms and trade etc.

Section 9(1) of the Act states that;

‘It shall be the duty of the manufacturer or distributor of a product, on becoming aware after such a product has been placed on the market of any unforeseen hazard arising from the use of the product to notify immediately the general public of such risk or danger and cause to be withdrawn from market such product.’

Section 9(2) also states that;

‘Any person who violates the provision of sub-section of this section is guilty of an offence and liable on conviction to N50,000.00 fine or imprisonment for five years or both.’

This Act therefore makes an employer criminally liable notwithstanding him expressly prohibiting his employee from marketing such products or even expressly stipulating that it be withdrawn from the market.

Ideally, employers will not normally be liable for the crimes of their employees, unless the employee was instructed by the employer to commit the crime, or the crime was committed under duress. However, the current legal jurisprudence, provides that the employer will be liable if the crime was committed in furtherance of the employers business. Even though vicarious liability is a tortuous wrong, it has gradually evolved to accommodate crimes committed by employees, making the employers liable for them.

Employers should also note that in certain circumstances they can also be held liable for the tort of their independent contractors under the following circumstances:

A) If the tortuous wrong was expressly authorised by the employer, both the employer and the independent contractor will be held liable.

B) In torts of strict liability such as nuisance or trespass, the employer may be liable for the tort of the independent contractor.

C) An employer will be liable for his own negligence if he hires an incompetent contractor and also fails to include in his contract with him that he (the contractor) has to take proper precautions where he foresees risk of harm.

D) In certain circumstances the duty of an employer to take care is non-delegable. Such duties arise where the projected work is intrinsically dangerous or hazardous and involves a high risk of requiring special precautions. Hospital authorities fall into such categories, they cannot delegate their duty to care for patients to the staff and as such they are liable for the negligence of independent contractors such as visiting consultant doctors etc.

Conclusion

The Common Law rule of vicarious liability has come to stay whether employers feel it is fair or not. As at today, the rule is deeply imbedded in our legal system and employers will do well to understand and have a good grasp of it.

A saving grace for employers is the implied term at Common Law in contracts of employment that an employee will exercise all reasonable care and skill during the course of employment. If an employee is in breach of such a term, the employer who has been held vicariously liable for his tort could seek indemnity from the employee to make good the loss.

In Lister v Romford Ice and Cold Storage Ltd, a father whose son was an employee of the respondent, was injured by the said son. The courts held the employers vicariously liable and the father’s claim was met. The company exercised their right of subrogation under the contract of insurance and sued the son. It was held that the son was liable to indemnify the employer and consequently the insurers.

An employer should note that he will in most cases be held liable for the tortuous wrong of his employee and in some cases the criminal wrongs of his employees, except he can prove that such actions or omissions were not done in the course of employment, or that the defendant is not his employee but an independent contractor over whom he has no control.

TOKUNBO ORIMOBI LP is a full-fledged commercial law firm with offices in Lagos, Ibadan and Abuja.