Learning Outcomes
After reading this article, you will be able to explain when an employer is vicariously liable for an employee’s tort, the legal basis for an employer’s right to seek indemnity from an employee, and how joint tortfeasor principles apply. You will be able to identify and apply the relevant legal rules and principles to SQE1-style MCQs involving employer indemnity and vicarious liability.
SQE1 Syllabus
For SQE1, you are required to understand vicarious liability and the employer’s right to indemnity from both a practical and theoretical viewpoint. In your revision, focus on:
- the requirements for establishing vicarious liability in tort
- the legal basis and limits of an employer’s right to seek indemnity from an employee
- the concept of joint tortfeasors and contribution between employer and employee
- how indemnity interacts with public policy and practical enforcement
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
- What are the three requirements for an employer to be vicariously liable for an employee’s tort?
- In what circumstances can an employer seek indemnity from an employee after paying damages for the employee’s tort?
- What is the difference between joint tortfeasors and several tortfeasors in the context of employer and employee liability?
- True or false? An employer can always recover the full amount of damages paid from an employee if the employee was at fault.
Introduction
Vicarious liability is a key principle in tort law, making employers liable for torts committed by employees in the course of employment. When an employer is found vicariously liable and pays damages, the question arises whether the employer can recover those damages from the employee. This article explains the legal basis for an employer’s right to indemnity, the concept of joint tortfeasors, and the practical and policy limits on recovery.
Vicarious Liability: The Employer-Employee Relationship
To establish vicarious liability, three elements must be satisfied:
- There is an employer-employee relationship.
- The employee has committed a tort.
- The tort was committed in the course of employment.
Key Term: vicarious liability Vicarious liability is the legal principle that holds one person (usually an employer) liable for the torts committed by another (usually an employee) in the course of employment.
Employee or Independent Contractor?
Vicarious liability applies only to employees, not independent contractors. Courts use the control test, incorporation test, and economic reality test to distinguish between the two.
Key Term: economic reality test A test used to determine employment status, considering factors such as control, mutual obligations, and incorporation into the business.
Course of Employment
The tort must be committed in the course of employment. This includes acts the employee is authorised to do, and unauthorised ways of doing authorised acts. If the employee is on a “frolic of their own,” the employer is not liable.
Key Term: course of employment Acts done by an employee as part of their job, or closely connected to their duties, for which the employer may be vicariously liable.
Employer’s Right to Indemnity
When an employer is held vicariously liable and pays damages, the employer may seek to recover some or all of those damages from the employee. This is known as the right to indemnity.
Key Term: indemnity The right of one party (here, the employer) to recover from another (the employee) the amount paid to a third party (the claimant) due to the latter’s fault.
Legal Basis for Indemnity
The employer’s right to indemnity is based on two main sources:
- Common law (implied contractual duty)
- Statute (Civil Liability (Contribution) Act 1978)
Common Law Indemnity
At common law, an employee owes a contractual duty to exercise reasonable care and skill. If the employee breaches this duty and causes loss to the employer, the employer may claim an indemnity.
Key Term: joint tortfeasors Two or more persons who are both liable for the same tort, either because they acted together or because one is vicariously liable for the other.
Key Term: contribution The right of a person who has paid damages to recover a fair share from another person who is also liable for the same damage.
Worked Example 1.1
A delivery driver employed by Alpha Ltd negligently causes a road accident while making deliveries. Alpha Ltd is sued and pays £20,000 in damages to the injured party. Can Alpha Ltd recover this sum from the driver?
Answer: Alpha Ltd may seek indemnity from the driver, as the driver breached the duty to exercise reasonable care. However, courts rarely order full indemnity except in cases of wilful misconduct or gross negligence, due to policy concerns.
Joint Tortfeasors and Contribution
When an employer is vicariously liable, both employer and employee are joint tortfeasors. The Civil Liability (Contribution) Act 1978 allows a person who has paid damages to recover a contribution from another person liable for the same damage.
Worked Example 1.2
A hospital is found vicariously liable for a nurse’s negligent act and pays £50,000 in compensation. The hospital seeks a contribution from the nurse. What will the court consider?
Answer: The court will consider the nurse’s degree of fault and all the circumstances. The court may order the nurse to pay a contribution, but will rarely require full indemnity unless the conduct was intentional or reckless.
Policy Limits on Employer Indemnity
Although the right to indemnity exists, courts are reluctant to enforce it strictly. Public policy recognises that employees are usually less able to bear the financial burden, and that employers are better placed to insure against such risks.
Exam Warning
In SQE1, beware of assuming that an employer can always recover the full amount from an employee. Indemnity is rarely granted in full except for wilful or grossly negligent acts.
Revision Tip
For SQE1, remember that indemnity is discretionary. Courts consider the employee’s fault, the employer’s conduct, and policy factors before ordering contribution or indemnity.
Summary
Employers who are vicariously liable for employee torts may seek indemnity or contribution from the employee, but recovery is limited by policy and the court’s discretion. Both employer and employee are joint tortfeasors, but full indemnity is rare except for serious misconduct.
Key Point Checklist
This article has covered the following key knowledge points:
- Vicarious liability requires an employment relationship, a tort, and the tort to be committed in the course of employment.
- Employers may seek indemnity from employees for damages paid, but recovery is limited by policy and court discretion.
- Employer and employee are joint tortfeasors; the Civil Liability (Contribution) Act 1978 allows for contribution.
- Full indemnity is rare and usually only ordered for wilful or grossly negligent acts.
Key Terms and Concepts
- vicarious liability
- economic reality test
- course of employment
- indemnity
- joint tortfeasors
- contribution
