Burges Salmon’s Peter Finding looks at the recent case of Kemeh v Ministry of Defence,  and the potential implications for employers.

A principle well established is that an employer may be vicariously liable for acts carried out by  its employees in the course of their employment. This is codified in relation to discriminatory acts  in the Equality Act 2010 and protection for whistleblowers in the Enterprise and Regulatory  Reform Act 2013. 

Less well known is that the Equality Act also provides for a similar regime for discriminatory acts  carried out by a business’ agents (as distinct from its employees). The Court of Appeal recently  considered the issues of both employee liability and agency liability in the case of Kemeh v Ministry of Defence. So what does this decision mean for businesses? 

Your own employees 

The Equality Act provides that employers will be liable for acts of discrimination, harassment and  victimisation carried out by their employees “in the course of employment”, unless they can show  that they took reasonable steps to prevent such acts. 

This can be particularly unnerving as “in the course of employment” is interpreted widely, and the  Act also states that the employer can be liable even where an employee has acted without the  employer’s knowledge or approval. 

A regular problem is the employee who gets frisky, noisy or both at the office party. An  employee’s actions at such work-related social events have been found to be in the course of employment, potentially resulting in liability for the employer. Not all work-related events will fall  into this category, though – the issue of whether or not an employee’s acts were “in the course of  employment” will depend on the particular situation, taking into account factors such as whether  or not the employer organised the event and whether or not non-employees attended.

For example, an act of harassment at a private birthday party to which some work colleagues  have been invited is unlikely to result in the employer being liable. However, the employer may  well be liable in respect of similar acts occurring during a team night out that has been organised  by a line manager.

An employer may be able to avoid liability for an employee’s acts of discrimination, harassment  or victimisation if it has taken all reasonable steps to prevent the unlawful act or any similar acts  from happening (the “reasonable steps defence”). This is a difficult defence to establish, but it is  prudent to ensure that relevant codes of conduct are in place and that they are kept up to date  with the latest Acas and Equality and Human Rights Commission guidance.

Of course, putting policies in place will not be a panacea. Line managers should be instructed to  set an appropriate standard through their own behaviour and employees should be given  associated training to encourage acceptable behaviour in the workplace and at work-related  events. It may also be appropriate, depending on the event, to give specific guidance to  employees prior to attendance – or at least refer them to the code of conduct.

Your contractors and agents

So far so good – but, as mentioned above, the Equality Act also provides that businesses can be  responsible not only for the acts of their employees, but also for the discriminatory acts of their  agents. An agency relationship – not to be confused with the law relating to agency workers –  exists where a person or business (the principal) authorises another party (its agent) to act on its  behalf, for example a sales agent who is authorised to make sales on behalf of the principal.

It is important to note that the authorisation does not need to extend to the commission of the  discriminatory act in question for liability to arise. Of course it would be unlikely that a business  would authorise its agent to act unlawfully. Indeed, vicarious liability may occur even if the  business is not aware of its agent’s unlawful acts.

Authorisation to act on the principal’s behalf is a critical element in establishing an agency  relationship, which in turn is a prerequisite to agency-related vicarious liability. The recent Court  of Appeal case, Kemeh v Ministry of Defence, demonstrates that an agency relationship will not  exist between an end-user and a service-provider or its employees in the absence of  authorisation.

Mr Kemeh, a cook, and Sergeant Simmons, his line manager, were employed by the Ministry of  Defence (MoD). Mr Kemeh also worked with Ms Ausher, a butcher employed by Sodexo, to  whom the MoD had outsourced certain services. Both Sergeant Simmons and Ms Ausher  subjected Mr Kemeh to racist abuse in separate incidents.

Mr Kemeh had a relatively straightforward case against the MoD in respect of the abuse by  Sergeant Simmons. As Sergeant Simmons was its employee, the MoD was liable for his unlawful  conduct. However, Mr Kemeh faced an uphill battle in achieving a legal remedy in relation to Ms  Ausher’s conduct. Ms Ausher was not an employee of the MoD, and so the MoD was not liable  for her act as an employer. Mr Kemeh had no claim against Sodexo as he was not its employee.  He therefore tried to argue that Ms Ausher was an agent of the MoD and that the MoD should be  held liable, as principal, for her act.

Deciding on the case

The Court of Appeal decided that the ordinary common law meaning of “agency” should apply in  the discrimination context. Accordingly, although the concept of agency could not, according to  the Court, be “readily encapsulated in a simple definition”, it carried the sense of one person  acting on behalf, or “standing in the shoes”, of another, with that person’s authority.

In the circumstances, Ms Ausher was held not to be an agent of the MoD. This appears to be  based on the fact that Ms Ausher was not authorised by the MoD to act on its behalf, the basic  agency test. The Court commented that, generally, the employee of a service-provider (here,  Sodexo) will not be the end-user’s (MoD) agent as the crucial element of authorisation will not  exist. However, this will not always be the case. In Kemeh, for instance, if Ms Ausher had been  authorised by the MoD to buy supplies with MoD funds she would have been the agent of the  MoD; consequently, the MoD would have been liable for her unlawful acts.

The Court was troubled by the fact that, in this situation, Mr Kemeh had no legal remedy in  relation to Ms Ausher’s abuse. It contrasted the situation with the rights conferred upon contract  workers, who have statutory protection against discrimination by the end-user for whose ultimate  benefit they provide services. For example, had Mr Kemeh abused Ms Ausher on racial grounds,  Ms Ausher would have had a potential claim against the MoD.

The Court suggested that Parliament may wish to remedy this gap in the law. While no such  reform is currently proposed, this is a potentially important issue, as expanding the discrimination  protection to cover relationships such as those between Mr Kemeh, Ms Ausher and the MoD  would significantly increase the risk of liability for end-users.

Practical steps to limit risk 

  • In Kemeh, the MoD avoided liability for Ms Ausher’s acts as no agency relationship was established. However, had the Court of Appeal found Ms Ausher to be the MoD’s agent, the MoD could have been liable. Businesses therefore need to be aware of the implications of entering into relationships that might constitute agency relationships, given the potential to be found vicariously liable for their agent’s discriminatory acts. 
  • While commercial considerations will generally be prioritised, businesses may wish to consider structuring commercial relationships in such a manner that avoids an agency relationship. This may be as simple as limiting the actions that a contractor is authorised to carry out on the end-user’s behalf.
  • Where it is not possible to avoid an agency relationship, businesses should consider  negotiating indemnity protection in their commercial contracts in order to limit the risk of  agency-based claims.