Independent contractors and vicarious liability – not quite as “on the move” as it was

In our July and September 2018 articles we reported that the law around vicarious liability was “on the move” and highlighted cases where the Court of Appeal decided that self-employed independent contractors were nevertheless engaged in a relationship with the party contracting with them such that the party contracting with them was vicariously liable for their acts and omissions.

As our articles were focussed on the consequences of this development in a health care setting ( for example in the context of arrangements between an independent hospital and a self-employed surgeon with so called “practising privileges”) we highlighted the case of Barclays Bank v Various Claimants. A doctor contracted by the bank to medically examine potential employees of the bank had sexually assaulted those he examined. In the subsequent group action against the bank (the doctor having died and his estate having been distributed leaving nothing against which redress for those assaulted might bite, and with any insurance he might have carried not covering deliberate acts) the Court of Appeal  held that the bank was vicariously liable for the deliberate acts of the doctor. The outcome of the bank’s successful appeal to the Supreme Court (delivered on 1 April 2020) is revealed below.

The Supreme Court

The issue was whether the bank was indeed vicariously liable for the sexual assaults committed by the late doctor. He was a medical practitioner in Newcastle-upon-Tyne with what was described as a portfolio practice. That entailed work as an employee in local NHS hospitals, undertaking medical examinations for emigration purposes, work for insurance companies, a mining company and a government board and undertaking medical assessments and examinations of employees or prospective employees of the bank. The bank arranged the appointments, told the applicants when and where to go, and provided the doctor with a pro forma bank report to be completed. The bank did not retain the doctor but paid a fee for each report.

At first instance and before the Court of Appeal it was held that the bank was vicariously liable for any assaults proved to have been occasioned by the doctor. The bank appealed to the Supreme Court.

The analysis of the law and the relationships

Two elements are required for a person or organisation to become vicariously liable for the torts committed by another. The first is a relationship between the two persons which makes it proper for the law to make the one pay for the fault of the other. The second is the connection between that relationship and the wrongdoer’s (tortfeasor’s) wrongdoing.

We have covered the development of vicarious liability in previous articles by Wanda Karow and myself, alongside the development of the law around non-delegable duties of care. As an example, in the House of Lords’ (as it was then known) 2001 decision in Lister v Hesley Hall Ltd, the owners of a children’s home were held vicariously liable for the sexual abuse of children by their employee, the warden. The court was concerned there with stage two of the enquiry - the connection between the employment and the wrongdoing - and not with stage one. That decision was influential in later cases, partly because of the willingness of the courts to expand the law, and partly because of the prominence the court gave to some important decisions of the Supreme Court of Canada, which had placed emphasis on the policy considerations underlying the law.

The Supreme Court identified a tendency to merge the policy reasons for the existence of the doctrine of vicarious liability, with the principles guiding the development of that liability. This tendency was leading the courts to apply both approaches to relationships which are not employment but which are sufficiently similar to employment such that it is fair and just to impose such liability. Such a tendency was likely to have arisen, so the Supreme Court thought from what Lord Phillips said in the case known as the Christian Brothers case: 

“I have identified those incidents of the relationship between employer and employee that make it fair, just and reasonable to impose vicarious liability on a defendant. Where the defendant and the tortfeasor are not bound by a contract of employment, but their relationship has the same incidents, that relationship can properly give rise to vicarious liability on the ground that it is ‘akin to that between an employer and an employee’. That was the approach adopted by the Court of Appeal in E’s case [2013] QB 722.” 

But the Supreme Court noted that the question has always been whether the tortfeasor is carrying on business on their own account or whether they are in a relationship akin to employment with the defendant. In cases where there is doubt, the five “incidents” identified by Lord Phillips may be helpful in identifying a relationship which is sufficiently analogous to employment to make it fair, just and reasonable to impose vicarious liability. Those incidents were: 

1. The employer is more likely to have the means to compensate the victim and can be expected to have insured against that liability
2. The tort will have been committed as a result of activity being taken by the employee on behalf of the employer
3. The employee’s activity is likely to be part of the business activity of the employer
4. The employer, by employing the employee to carry on the activity will have created the risk of the tort committed by the employee
5. The employee will, to a greater or lesser degree, have been under the control of the employer

The Supreme Court made clear that the key lies in understanding the details of the relationship. Where it is clear that the tortfeasor is carrying on his own independent business then it is not necessary to consider the five incidents.

The present case

In this case the doctor was a part-time employee of the NHS. He was never an employee of the bank, nor, according to the Supreme Court “was he anything close to an employee”. He undertook work for the bank on occasions and when he did the bank made the arrangements for the examinations and sent him the forms to complete. The bank therefore chose the questions it wanted answered. The same was true, so the court noted, of others who undertook work for the bank but were clearly independent contractors such as the company hired to clean its windows and the auditors hired to audit its books. The doctor was not paid a retainer obliging him to accept referrals from the bank. He was paid a fee for each report and was free to refuse an offered examination should he wish to do so. He was in business on his own account as a medical practitioner with a portfolio of patients and clients. One of those clients was the bank.

As we have previously reported, until recent developments, it was assumed a person would be an employee for all purposes - employment law, tax, social security and vicarious liability. Recent developments have broken that link. Employment law now recognises two different types of “worker”:

(a) those who work under a contract of employment and (b) those who work under a contract “whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual” (Employment Rights Act 1996, section 230(3)).

Those workers who come within limb (b) above enjoy some but not all the employment rights enjoyed by limb (a) workers. The Supreme Court noted how tempting it was to say that limb (b) encapsulates the distinction between people whose relationship is “akin to employment” and true independent contractors. Asking that question may be helpful in identifying true independent contractors, but it would be going too far, so the Supreme Court said, to align the common law concept of vicarious liability, developed for one set of reasons, with the statutory concept of “worker”, developed for a quite different set of reasons. 

Comment

To conclude, the Supreme Court allowed the bank’s appeal. On the same day they also decided Morrisons were not vicariously liable for the acts of an employee who deliberately revealed confidential information for which the supermarket had been held responsible. So there has been a rolling back to an extent of the broader liability attaching to a contractor, in this case a doctor, who actually was in business on his own account.

Contrast that with the position of doctors or nurses working on a self-employed (for tax purposes) basis, but in a way that is so enmeshed with the provision of the services the hospital is in business to further and develop, that the hospital is fixed with a vicarious liability.

In this case as in others, the issue of vicarious liability will only really arise where there is a lacuna in the availability of redress for those who have been harmed. But it does mean that organisations who thus far believed they had laid off potential liabilities to the professionals who practice at their clinical sites might want to reconsider their potential liabilities.