By Daniel Hunter

Many small and medium enterprises (SMEs) simply don't understand the implications of vicarious liability and how they could be hit with compensation claims that could potentially put them out of business, the employment law specialist Bibby Consulting & Support has claimed.

Vicarious liability is when an employer is liable for the acts and omissions of their employee. There are exceptions, notably if it can be proved that the employee's actions are not connected with their work. However, given that liability covers so many areas it is hardly surprising companies don't understand when they are liable and when they are not.

In essence, an employer is liable for what an employee does during the “course of their employment“ with or without the employer's knowledge or approval.

Frustratingly for many employers, they may also be held to be liable for any unlawful discrimination involving employees outside of work time. However, this is not the case if employees are doing something that is deemed to be “a frolic of their own”, in other words they are doing something under their own volition.

The law was introduced in recognition that victims would be more likely to get compensation from a company than an individual. But how far a company is responsible for its employees' actions is a grey area, says Michael Slade, Managing Director of Bibby Consulting & Support.

Specific examples include knowingly hiring unqualified employees which results in some level of harm occurring, if injuries occur through the business not providing adequate supervision or having insufficient/inadequate policies or procedures in place, or failing to train or direct employees in their duties.

Employers may also be liable if a person reacts violently to a lawful instruction. In a recent case where two cases of alleged vicarious liability were considered together by the Court of Appeal, it was pointed out that there must be a close connection between the wrongful act of the employee and his actual work.

Businesses can hope to avoid vicarious liability, then, if they can prove the employee was acting in his own right and his conduct was not within the scope of his employment. There are other defences for employers, including the employer having no knowledge of the conduct and not approving such conduct, if the employer acted reasonably to prevent and correct any negative actions, or if the employee unreasonably failed to use any measures offered by the employer to avoid harm or injury.

"The whole vicarious liability situation is a real minefield for companies," said Slade, "with the Court of Appeal saying that decisions would vary depending on the facts of each specific case.

"The most recent ruling has clarified the law a little, but it also underlines that it is absolutely essential for employers to ensure they have robust policies in place and never allow unacceptable conduct to be overlooked. As always, if in doubt companies should seek professional advice."

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