26 October, 2016
It's hardly news to employers that they can be held to be vicariously liable for the actions of their employees. But what if an employee engages in criminal behaviour or does something intentionally wrongful? Is an employer still vicariously liable in those circumstances? The High Court recently provided important guidance on this troubling question.
Although it is not an employment law case, the decision in Prince Alfred College Incorporated v ADC [2016] HCA 37 is clearly relevant in a variety of employment circumstances, including employees using commercially confidential information for personal financial gain, teachers who engage in inappropriate sexual relationships with students, finance brokers who engage in fraud or bank employees who unlawfully share a customer's private credit information.
In Prince Alfred College Incorporated v ADC the High Court considered whether a wrongful act that is a criminal offence precludes the possibility of vicarious liability .The decision is primarily concerned with an extension of time to the Limitation of Actions Act 1936 (SA), brought at first instance by the Respondent, a man who in 1962 was sexually abused by a housemaster whilst he was a boarder at the Applicant College. The Respondent brought proceedings in 2008 against the College, alleging it was liable in damages to him for breach of its duty of care and that it was vicariously liable for the wrongful acts of the housemaster, Mr Bain, who had sexually abused him. Owing to the passage of time, the Respondent required an extension of time to bring proceedings.
Decision of the Court
Ultimately the Court found that the Respondent was statute barred and that no extension of time should have been granted to him, thereby making it unnecessary for the Court to make any finding as to whether or not the College was vicariously liable.
However, the majority made clear that in cases of the kind in question, the fact that a wrongful act is a criminal offence does not preclude the possibility of vicarious liability. In a case where an employer's vicarious liability for an employee's intentional wrongful act is concerned, careful attention must be paid to any special role that the employer has assigned to the employee and the position in which the employee is thereby placed vis-a-vis the victim.
In determining whether the employee's performance of that role gave 'occasion' for the wrongful act, particular features should be taken into account, including:
- authority;
- power;
- trust;
- control; and
- the perpetrator's ability to take advantage of his/her position with the victim (or in a case of sexual abuse, to achieve intimacy with a victim).
Where, in such circumstances, an employee takes advantage of his/her position with respect to the victim, that may suffice for a Court to determine that the wrongful act was committed in the course/scope of employment and render the employer vicariously liable.
Necessary evidence
Another interesting feature of this decision was the general discussion about the evidence that is necessary in determining liability. If an employer, seeking to avoid a finding of vicarious liability, wishes to lead evidence about the role of its employee and whether or not that role gave occasion for the alleged offence, it will be useful to include:
- employment contracts;
- position descriptions;
- performance reviews;
- email correspondence; and
- other evidence of the employer's knowledge and expectations of how the employee is to perform his/her job day to day.
If this evidence is not available, the Court may not be able to determine the issue of liability.
This is of course a further opportunity for all employers to consider whether or not their contracts and position descriptions are currently up to date and are sufficiently detailed so as to accurately describe an employee's role and its' (the employer's) expectations.
For further information, please contact:
Kristy Peacock-Smith, Partner, Bird & Bird
kristy.peacock-smith@twobirds.com
