THE COURT of Appeal recently overturned a longstanding assumption among legal and lay people by ruling that more than one employer can be vicariously liable for an employee's act of negligence.
In July 1998, a manufacturer called Viasystems engaged a contractor, Thermal Transfer, to install air conditioning in its factory. Thermal Transfer then subcontracted the ducting work to a company called S&P Darwell, which in turn contracted with labour-only subcontractor CAT Metalwork Services to provide fitters and fitters' mates.
The fitters worked under the supervision of one Mr Horsley, who was employed by S&P Darwell, while the two employees supplied by CAT Metalwork Services were Mr Megson, a fitter, and his fitter's mate, Darren Strang.
Mr Strang caused a serious f lood by crawling through a duct, breaking it and setting off the sprinkler system.
Thousands of pounds of damage was caused to the factory and clearly Mr Strang had been negligent and was responsible.
Mr Strang could not be sued as he had no money. But English law holds that an employer is vicariously liable for any negligent act done by an employee in the course of his job.
The question in this case was whether it was just Mr Strang's employer, CAT, that was responsible for the actions of its employee.
Was it only the duty of the fitter, Mr Megson, to tell Mr Strang, the fitters mate, not to go into the duct?
Was it not for the supervisor Mr Horsley ? employed by a different employer ? to say something?
Both Mr Megson and Mr Horsley were present when the negligent act occurred and arguably both could have prevented it.
The first judge to hear the case based his decision on case law stretching back 200 years.
He said that as Mr Strang was under the control of Mr Megson, then his employer, CAT Metalwork Services, was liable for his negligence.
The judge concluded that Mr Strang had remained under the 'immediate control' of his fitter, Mr Megson, and made the point that Mr Strang's employment had not been 'transferred' to S&P Darwell.
This was a standard and unexceptional decision and few thought that it would be challenged, but CAT Metalwork Services appealed.
CAT said that the responsibility for the flood lay with Mr Horsley, employed by S&P Darwell, who was supposed to be in charge of both the fitter and his mate.
CAT said that Mr Horsley could and should have said something to Mr Strang and stopped him going in the duct.
The Appeal Court said that the case raised the possibility of 'dualvicarious liability'. This was a new idea for the courts, which have always struggled to keep up with ideas such as subcontracting and outsourcing.
'Dual liability' was something that the court has always said could not exist. But one Appeal Court judge said that the Viasystems case was a prime example of where it would be possible to say that both S&P Darwell and CAT Metalwork services could be equally to blame.
The Court said that the old case law of putting all blame onto one party was outdated.
It said that 'in a modern context, there is little intrinsic sense in, or justification for' this principle.
The court said that the core question when determining vicarious liability was 'who was entitled, and perhaps in theory obliged, to give orders as to how the work should or should not be done'.
The legal inquiry should focus on the relevant negligent act, and consider who was responsible for preventing it. In the Court of Appeal's view there will be some cases in which the sensible conclusion to this line of enquiry is to hold more than one employer liable.
The court noted that, in the Viasystems case, the key question was whether either employer or both had been entitled to prevent Mr Strang's 'foolish act'.
In the court's view, both Mr Megson, on behalf of CAT Metalwork services and Mr Horsley, on behalf of S&P Darwell, had been entitled or obliged to stop Mr Strang but they did not do so. Therefore both employers were vicariously liable for Mr Strang's negligence.
Turning to the task of dividing the responsibility between the two companies, the court found that CAT Metalwork services and S&P Darwell should each contribute 50 per cent of the total liability.
The court said that this would almost certainly be the norm in these cases and in the absence of any personal fault on the part of either employer, 'the responsibility of each employer for the purposes of contribution must be equal'.
This case will have implications for subcontractors and contractors, depending on the degree of control the service provider and client ? or subcontractor and contractor as the case may be ? exert over the employees in the outsourced function.
On a practical note, in most cases the indemnities in a contract between the two employers will determine who will be responsible for a 'borrowed' employee's negligence.
Suppliers and subcontractors who engage in the lending or hiring of employees should bear the issue of vicarious liability in mind when negotiating such contractual arrangements and should ensure that they have the appropriate insurance cover.
For the past 200 years, English law has never allowed for more than one employer to be held vicar iously liable for an employee's negligence.
The Viasystems case has overturned this principle and introduced the concept of dual vicarious liability.
In the Viasystems case, both employers had people on the site who could have stopped the negligent act but did not.
Both compan ies were held 50 per cent liable for the negligent act.