You may be forgiven for thinking that as a business using a contractor you’re not responsible for their actions, quite simply they are independent and whilst you will have varying responsibilities towards your permanent staff particularly if they step outside the law these same rules don’t apply to contractors or do they?
For many years, the law was clear on the position of vicarious liability and independent contractors, put simply, there was none. However, recently the law has shifted somewhat and the recent case of Barclays Bank Plc v Various Claimants is a reminder to companies engaging independent contractors to ensure that they really are ‘independent’.
Jennifer Smith is Employment Partner at leading Manchester law firm JMW, here she explains ‘vicarious liability’ and how businesses can ensure the contractors carrying out work for them are truly independent.
Vicarious Liability: A legal definition
‘Vicarious liability’ is the responsibility for wrongs committed by another person. For many years, the law was clear on the position of vicarious liability and independent contractors, put simply, there was none. However, recently the law has shifted somewhat and the recent case of Barclays Bank Plc v Various Claimants is a reminder to companies engaging independent contractors to ensure that they really are ‘independent’.
The Barclays case
Between 1968 and 1984, Barclays engaged Dr. Bates as an independent contractor. Candidates applying for employment at Barclays were required to attend his home, where he would assess their medical suitability for work and eligibility for life assurance at ordinary rates. In 2016, 126 Claimants brought a multi-claim against Barclays alleging that Dr. Bates had sexually assaulted them.
The Claimants argued that Barclays were vicariously liable for Dr. Bates’ actions. However, Barclays sought to rely on Dr. Bates’ status as an independent contractor to avoid liability. The case was brought before the High Court, where it was held that despite Dr. Bates’ status, Barclays were liable. This was a position that was maintained by the Court of Appeal.
Both Courts held that where the relationship between the independent contractor and the company was ‘sufficiently akin to employment’ (and the relationship between Barclays and Dr. Bates was), vicarious liability could be created.
The Courts relied on criteria established in the case of Catholic Child Welfare Society and Cox, as a means to determine if the relationship was ‘sufficiently akin to employment’.
When will the relationship be ‘sufficiently akin to employment’?
The criteria in Cox considered the following:
- Is the employer more likely to have the means to compensate the victim?
- Has the wrongdoing been committed as a result of an activity being taken on behalf of the employer?
- Is the activity part of the business activity of the employer?
- Has the employer created the risk of the wrongdoing being committed?
- What degree of control does the employer exercise?
In the case of Barclays, little reliance was placed on point 1 by the Courts. However, points 2 to 4 were found to be met. The assessments were carried out on Barclays’ behalf, for it was a condition of acceptance into employment that Barclays were satisfied that the candidates were medically suitable for service. The assessments were of no benefit to the candidate and by retaining Dr. Bates; Barclays had created the risk of wrongdoing by him.
In relation to point 5, the Courts noted that it did not matter that there were pointers to Dr. Bates independence, such as he organised his own professional life and he carried out work for other organisations other than Barclays. They held that Barclays exercised control over him for they identified the questions that he was to ask the candidates and told him what physical examinations he should carry out. The Courts also held that control was manifested in directing the Claimants to a particular doctor (Dr. Bates) for examination.
What does this mean?
There has been a lot of commentary around this case suggesting that this now means that companies are vicariously liable for wrongdoing of independent contractors. However, this is only if the relationship between the independent contractor and company is more akin to that of an employment relationship. Therefore, to avoid liability, the advice is to ensure that independent contractors are ‘truly independent’. The way to do this is to ensure that the tests in Cox are not met.
A few pointers for consideration are as follows:
- Companies should take care in how far they dictate how the independent contractor carries out their work.
- If possible, Companies should direct employees/ clients to several independent contractors as opposed to providing a sole name such as ‘Dr. Bates’.
Whilst it is too late for Companies to change the nature of their relationships with past contractors, it is not too late to rejig or reconsider the nature of any future relationships.
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