Earlier this month, the Court of Appeal handed down a decision that significantly changes the landscape in employer negligence.
In Viasystems (Tyneside) Ltd v Thermal Transfer (Northern) Limited and others, the claim stemmed from a flood caused by a fitter’s mate at a factory, which caused extensive damage. The main contractors, Thermal Transfer, had been engaged to install air conditioning in the factory at South Shields.
Thermal subcontracted to S&P Darwell, which in turn subcontracted with CAT Metalwork to provide fitters and fitters’ mates on a labour-only basis.
Until this Court of Appeal decision, it was assumed that only one employer could be vicariously liable for damage caused by an employee. Previously, the courts had taken one of two approaches:
Where the employee ‘on loan’ effectively remains under the control of their own employer (eg a catering contractor working within a catering service provided to a main contractor), the employee’s ‘general’ employer would be liable.
Where an employee is, in effect, seconded (on a temporary or permanent basis) to another employer which supervises the employee,
it is likely that liability for the employee’s negligence will pass on to the ‘secondary’ employer.
However, in the Thermal Transfer case, for the first time, the Court of Appeal decided that there could be dual responsibility for negligence committed by a ‘borrowed’ employee. S&P and its subcontractor, CAT, were each ordered to pay 50% of the total liability.
The Court of Appeal acknowledged that there would not always be a 50% split. One of the judges also observed that it was possible that dual liability could only occur where the right of control of the employee was shared (as in the Thermal Transfer case).
A serious consequence of this case is that employers operating in contracting-out situations will now be uncertain as to whether they will be vicariously liable for the employees of subcontractors. Also, if they are liable, what proportion of the liability will be theirs, and what can be passed on elsewhere?
Employers need to make sure they consider such issues before contracting-out duties, and apportion liability in the contract.
There are many situations in which one employer lends an employee to another employer, so all employers should be aware of the potential consequences when an employee causes negligent damage to a third party.
In this particular case, the damage was caused by the flooding. However, the circumstances in which individuals can cause damage are numerous. The box below highlights the areas of danger.
Vicarious liability hotspots
Many organisations contract-in catering services. What happens if the catering contractor causes a fire? What if a person is injured slipping on drink or food spilled by a catering contractor employee?
Contract nurses are increasingly being used by the NHS, often supplied by agencies. Nurses carry responsibility for patient care in many areas and clinical negligence is an area in which claims can be costly.
Security consultancies may subcontract onsite security to one or more subcontractors. If an act of theft or vandalism occurs, the issue of liability is raised.
Building and engineering
Construction and engineering projects of all sizes now involve a myriad of subcontractors working closely together to fulfil labour-only as well as specialist roles.
Organisations sometimes engage a managed service provider (contractor) to deliver a new IT system. The managed service provider could subcontract work to IT consultancies.
A computer reseller, for example, may engage a company to build computers using components manufactured by subcontractors.
partner, Reynolds Porter Chamberlain