UK Supreme Court Rows Back on Widening Extent of Employer's Vicarious Liability
Two significant decisions delivered by the UK Supreme Court in April 2020 will provide welcome relief to employers on the extent to which they can be held "vicariously liable" for the actions of employees or individuals acting under the employer's direction.
In the cases of Barclays Bank plc v Various Claimants  UKSC 13 and WM Morrison Supermarkets plc v Various Claimants  UKSC 12  UKSC 12, the UK Supreme Court rowed back on an apparent widening of the doctrine of vicarious liability. The Court reversed previous findings that the relevant employer should be liable for the actions of individuals that were outside the employer's control.
The UK Supreme Court concluded that Morrisons was not vicariously liable for a massive data breach committed by a rogue employee nor was Barclays Bank vicariously liable for sexual assaults allegedly committed by an independent contractor (a doctor conducting pre-employment medical assessments on behalf of Barclays). The two-pronged themes of the Court's analysis in these cases focused on (1) the relationship between the employer and the individual in question; and (2) the connection between that relationship and the wrongdoing.
This case concerned a data breach in which the personal data of 100,000 Morrisons employees was deliberately posted online by a disgruntled employee, Mr Skelton. Mr Skelton was a senior internal auditor tasked with transmitting payroll data to the supermarket's external auditors, KPMG. Mr Skelton bore an "irrational grudge" against the supermarket following earlier disciplinary proceedings against him and went on to publish the data online and send it anonymously to UK newspapers. He received an eight-year prison sentence. Subsequently, over 9,000 Morrisons employees brought an action against the supermarket seeking compensation for the stress and anxiety they had experienced as a result of Mr Skelton's data breach, arguing that, as his employer, Morrisons should be vicariously liable.
The UK Court of Appeal found Morrisons vicariously liable for the rogue employee's actions.
In this case the question was whether Barclays Bank could be held vicariously liable for the alleged sexual assault of 126 individuals by Dr Bates during the course of medical examinations required by Barclays as a pre-condition to starting employment with the bank. The UK High Court concluded Dr Bates was in business on his own account as a medical practitioner with a portfolio of patients and clients, one of which was Barclays Bank. In other words, his relationship with Barclays was that of an independent contractor and client as opposed to one that resembles an employment relationship.
Notwithstanding the lack of employer/employee relationship, the UK Court of Appeal found the bank vicariously liable for Dr Bates' actions.
What did the UK Supreme Court decide?
The Supreme Court, in both cases, noted that the approach of the lower courts, if correct, would constitute a major change in the law on vicarious liability of employers.
The Supreme Court, in Morrisons, reaffirmed the "general principle" of employers' vicarious liability, known as the "close connection test" and held it out as an "authoritative" statement of the law which must be applied. Applying this test to the Morrisons case, the question was whether Mr Skelton's disclosure of the data was so closely connected with the acts he was authorised to do that his wrongful disclosure could "fairly and properly be regarded as done by him while acting in the ordinary course of his employment". The Court highlighted the important distinction between cases "where the employee was engaged, however misguidedly, in furthering his employer's business, and cases where the employee is engaged solely in pursuing his own interests on a 'frolic of his own". The Court concluded that on its own the fact that the employment gave an opportunity to commit the wrongful act would not be enough to impose liability on the employer and that Mr Skelton had pursued a "personal vendetta".
In Barclays, the UK Supreme Court focused on the relationship of the parties and pointed out that Dr Bates was not "anything close to an employee". Instead the Court drew comparisons between the service performed by Dr Bates on behalf of the Bank to that of a company hired to clean the Bank's office windows, or an auditor auditing the Bank's books. Crucially, Dr Bates did not have a retainer with the bank and was not required to accept any referrals for such pre-employment medicals. These factors differentiated Dr Bates from the status of "employee". The Court held that there is no basis in law "to suggest that the classic distinction between employment and relationships akin or analogous to employment, on the one hand, and the relationship with an independent contractor, on the other hand, has been eroded".
What is the Position in Ireland?
The UK Supreme Court's endorsement of the "close connection test" brings the UK doctrine of vicarious liability for employers more in line with the Irish approach. In the recent case of Elmontem v Nethercross Ltd  IEHC 91 the Irish High Court confirmed that in applying the close connection test, it must be considered if at the time of the wrongful incident would it be reasonable to state that the employee was acting "however mistakenly or excessively" in the interests of their employer or whether they were pursuing their own private goal.
As in the Morrisons decision, the Irish High Court rejected the notion that the mere creation of an opportunity for the wrong to be committed would satisfy the close connection test. Elmontem demonstrates that, as a matter of Irish law, it is possible for the close connection test to apply in cases of serious, intentional wrongdoing, and the Morrisons judgment illustrates that the same can now be said to apply as a matter of UK law.
While the Supreme Court in Barclays quite rightly pointed out that the law on the scope of vicarious liability had been "on the move", the recalibration effected by way of the two Supreme Court decisions will be welcomed by employers. The Supreme Court has confirmed that it "would be going too far down the road" if the concept of vicarious liability were stretched to address the UK's statutory concept of "worker". The UK has now moved closer to the Irish position and this provides a degree of certainty between the two jurisdictions given the close connections in the employment market.
Tomorrow our litigation and data protection team consider the Morrisons decision in the context of data breach cases and what this could mean post implementation of the GDPR.