Christmas Cheer may not lead to an Employer’s Cheer!

Who is liable for an Employee’s unauthorised act?

Who is deemed ultimately responsible and liable for an employee’s unauthorised act? Is it the responsibility of the employee or the employer? A happy team party can lead to unplanned repercussions.

The definition of “vicarious liability” is the principle whereby employers are found by a court to be liable for the actions of its employees. Recently, the High Court has considered the issue of vicarious liability in New South Wales v Lopore (2003) HCA 4. Of interest was the courts consideration of whether or not an employer can be held vicariously liable for the unauthorised and in particular, criminal acts, of the employee.

The principle of vicarious liability holds an employer responsible for an act committed by an employee, in the course of the employee’s employment. The high court stated that the concept of “course of employment” is functional as well as geographical and temporal. Where the wrongful act of an employee is authorised by the employer, the employer is vicariously liable.

The difficulty arises however, where the employee acts in an unauthorised manner, for example by committing sexual or physical assault or behaving inappropriately at a staff function.

The interesting thing to note is that misbehaviour can not only damage the reputation of the employee and the reputation of their organisation but can also lead to damages claims to the company for vicarious liability. Not a good end result from a Christmas party! The difficulty is that no one can ever measure the loss of corporate profile in situations like these.

In an interesting case in 2003, Chief Justice Gleeson and Justices McHugh, Gummow, Hayne, Callinan and Kirby held that the State could not be held vicariously liable for the sexual assault of a student by a teacher. Such an act constituted a deliberate criminal act, that was clearly not connected with the employee’s employment.

Chief Justice Gleeson said that in this case, the sexual predatory behaviour by a teacher was an unauthorised act and foreign to what a teacher was employed to do. It was Chief Justice Gleeson’s view that where a sufficient connection exists between the misconduct of the employee and what the employee was employed to do, the misconduct would be regarded as in the “course of employment”.

This decision is welcomed as it seeks to clarify and limit the extent to which an employer is liable for the acts of its employees. Although employers cannot predict what employees will do, it reminds employers to be vigilant to prevent any unlawful behaviour, as unlawful behaviour by their employees may expose them to liability.

Employers need strict policies around Codes of Conduct both during both work hours and also outside hours, such as when attending company functions. Make sure that your Christmas party does need lead to unplanned negative consequences for you as an Employer and an Employee.

As the busy holiday season approaches with its many functions and events it is especially important and highly recommended that all employees sign an appropriate “Code of Conduct” with their employer.

For more information contact Simone Allan, Director at Mondo Search on 1300 737 917 or email simone@mondosearch.com.au.

 

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