Sharing the blame

A Court of Appeal decision at the end of last year will have major reverberations where staff are subcontracted or hired on a temporary basis. The judgment changed the long-held assumption that only one employer is liable for workers' negligent acts. It is now possible that both a background employer (or agency) and a subcontractor will have to pay damages for the same act of negligence.

If a worker (such as a labourer on a building site) has been subcontracted or seconded to a temporary employer, there could be a dispute as to who employed him and was therefore liable for his acts. In practice, it has usually been the background employer who carried the can, unless it was possible to show that the worker's employment had been completely transferred to the temporary employer. However, the recent case known as Viasystems has thrown all previous assumptions out the window.

Dual vicarious liability

Viasystems used a contractor, Thermal Transfer, to install air-conditioning in its factory. Thermal Transfer subcontracted the ducting work to S&P Darwell, which in turn contracted with labour-only subcontractor, CAT Metalwork Services, to provide fitters and fitters' mates. CAT provided a fitter called Mr Megson and his mate, Mr Strang. The ductwork was supervised by Mr Horsley, who was contracted to S&P Darwell.

Megson sent Strang to get some fittings. On his return, rather than taking a sensible route, Strang crawled through some sections of ducting, which moved and fractured part of the fire protection sprinkler system, causing a serious flood. Viasystems lost considerable sums of money and sued Thermal Transfer, who was liable under the contract. Thermal Transfer claimed an indemnity against either S&P Darwell or CAT.

Strang had clearly been negligent and was responsible. However, with the lengthy chain of employers, the question was whether CAT (Strang's employer), or S&P Darwell was vicariously liable. At the first trial in the High Court, the judge ruled that Strang was under Megson's control, that there had been no transfer of employment and that therefore CAT was vicariously liable.

The case then went to the Court of Appeal, which examined who was entitled to give orders as to how the work should be done. Who, given the opportunity, was obliged to stop Strang crawling through the duct? The Court of Appeal said that the only sensible answer was that both Megson and Horsley were obliged to stop Strang's foolishness (Megson was the fitter in charge of Strang and Horsley was the foreman on the spot).

In practice, the background employer has usually carried the can, but the Viasystems case has thrown all previous assumptions out of the window

The court found little justification for the principle that two employers cannot both be liable. This represents a major change to the law and will hit the building industry in the hip pocket.

S&P Darwell and CAT were each ordered to pay 50% of the total liability. The court stated that, depending on the facts, an equal contribution may be close to a logical necessity in most cases. If two employers have dual control of workers, it is highly likely that the level of their control will be equal.

This case has implications for subcontractors and contractors. Dual liability is most likely to arise where only labour is provided and personnel from both employers are on the scene. In most cases, the worker will be acting under the direction of his background employer, who will have the right to instruct him about proper practices and other matters. However, the borrowing employer may well be able to issue running orders and exert some degree of control over the worker, so it too is likely to be liable.

Importance of indemnities and insurance cover

Indemnities in contracts often determine who ultimately bears the burden. Suppliers and sub-contractors should consider the issue of vicarious liability when negotiating contracts and ensure that they have appropriate indemnities in place.

There are also insurance implications. Insurers will be aware that it is possible to recoup their loss by suing the second employer for contributory negligence. All parties involved will therefore need to make sure they have appropriate insurance cover.