Case update: Employer’s liability – it’s less likely!

What do we already know?

 We updated you in our August 2018 Newsletter Case update (1) Employer’s liability – it’s more likely on the Court of Appeal’s decision in Barclays Bank plc v Various Claimants that Barclays was liable for the conduct of the late Dr Gordon Bates who was an independent contractor who conducted medical examinations and assessments on behalf of Barclays.

The Court of Appeal considered that the relationship between Dr Bates and Barclays was “akin to employment“ and that the wrongful conduct of Dr Bates was sufficiently closely connected with that employment.

We also updated you in our April 2020 Newsletter Case update: Morrisons data breach that the Supreme Court found in that case that an employer will not be liable for an employee’s criminal act if it was not closely linked to the employee carrying out their legitimate duties.

 What’s new?

 The Supreme Court has overturned the Court of Appeal’s decision (on the same day as handing down its decision on vicarious liability in Morrisons data breach).  The Supreme Court decided that Barclays was not vicariously liable for Dr Bates’ actions. Dr Bates was an independent contractor who was in business on his own account with a portfolio of patients and clients; he was neither an employee of Barclays nor anything close to an employee.

Summary:  Is an employer liable for the wrongful acts of an independent contractor?

No, says the Supreme Court in Barclays Bank plc v Various Claimants, (available here) (as long as the contractor was carrying on business on his own account and was not in a relationship akin to employment with the employer).

Facts:  The late Dr Gordon Bates conducted medical examinations and assessments on behalf of Barclays Bank from 1968 until 1984. The medical exam was an essential part of offers of employment with the bank and prospective employees had no choice but to have it. There was a set fee paid to Dr Bates for each examination (he would fill in a proforma provided by Barclays) and he was not obliged to accept any particular level of work from Barclays.

Dr Bates was later found to have engaged in inappropriate examinations requiring the individuals to strip down to their underwear and examined their breasts and/or digitally penetrated the anus or vagina.

Victims claimed that Barclays were vicariously liable for the actions of Dr Bates as an employee.

Barclays denied he was an employee or in a situation akin to employment. He was instead an independent subcontractor and, as such, liable only on his own part.

High Court and Court of Appeal decision

 The High Court considered the preliminary issue of whether Barclays was vicariously liable for the sexual assaults by Dr Bates.

The High Court considered the two stage test (as set out in previous case law):

• Is the relevant relationship one of employment or “akin to employment“?
• Was the wrongful act sufficiently closely connected with that employment?

On applying these tests, the Court found Barclays liable for the conduct of Dr Bates.

Barclays appealed to the Court of Appeal on the basis that the application of stage 1 of the test was incorrect and on the basis that Dr Bates’ status as an independent contractor was a complete defence to the claim.

The Court of Appeal upheld the High Court’s decision and held that Barclays was vicariously liable for the alleged sexual assaults carried out by Dr Bates.  The Court of Appeal rejected the submission that Dr Bates’ status as an independent contractor was a defence to the claim. The Court of Appeal emphasised that the correct method is to apply the two-stage test to the particular facts of the case.

On doing so, the Court of Appeal found as follows:

• the principal benefit of the medical examinations was to Barclays:
• Barclays had created the ‘risk’ of the act being committed as it had arranged for the medical examinations to be carried out solely by Dr Bates and provided the victims with details of where and when to attend;
• Dr Bates was under the control of Barclays (e.g. Barclays had identified the questions to be asked and form of the report);
• although the second stage of the test was not appealed by Barclays, the Court of Appeal reiterated that the “medical examinations were sufficiently closely connected with the relationship between Dr Bates and the Appellants [Barclays]. They were the whole purpose of that relationship.”

Barclays appealed to the Supreme Court.

Supreme Court decision

Lady Hale, giving the unanimous judgment of the Supreme Court, reversed the decisions of the High Court and Court of Appeal and held that Barclays was not vicariously liable.

Lady Hale said that “the question therefore is, as it always has been, whether the tortfeasor is carrying on business on his own account or whether he is in a relationship akin to employment with the defendant”.  She went on to find that Dr Bates was in business on his own account and therefore the Bank was not vicariously liable for any wrongdoing in the course of the medical examinations he carried out for the Bank.

Some of the key features of the Supreme Court’s reasoning were as follows:

• Dr Bates was a “classic independent contractor“- he carried out work for the NHS, conducted medical examinations for a range of clients, and wrote a weekly newspaper article;
• He was “working for his own business or enterprise” as opposed to for the bank: he was in business “on his own account as a medical practitioner, with a portfolio of patients and clients. The work for the bank was a very small proportion of his work“;
• It was also noted that “he no doubt carried his own medical liability insurance“;
• Dr Bates had autonomy – he could “refuse to do a requested examination if he chose”

Implications:   This decision (together with the Supreme Court’s decision in the Morrisons data breach case), marks a change in direction in the law on vicarious liability, which had been expanding in the last few years.  Both decisions will come as a relief to insurers and employers, who have seen their potential liability expand with previous decisions on the issue of vicarious liability.

The judgment of the Supreme Court in Barclays indicates the common-sense and pragmatic approach to be taken in the future: If an individual is carrying on a business on their own account (i.e. they are an independent contractor or acting under a contract for services) then no vicarious liability arises and that is the end of the enquiry. As Lady Hale states, this was, and always has been, the law.