VICARIOUS LIABILITY

and the Recruitment Industry

Paul McNallyTowergate Insurance

5 March 2013

Introduction

• What is Vicarious Liability?

• How does it affect you?

• What can you do about it?

Vicarious Liability

Simplified definition in this context

‖ The liability of an Employer arising from the actions of their Employees that are committed during the course of their employment.

Vicarious Liability

• This can be liability for injury, damage or errors and omissions in the course of the work.

• Employer does not need to be at fault themselves, just deemed to have authority.

Implications

• Responsibility for actions of the temp workers, including• Damage to third party property• Injury to third party persons• Errors and omissions• In addition to the traditional risks of their own mistakes • Not usually applicable to Permanent placements.

Employment Status

• The employment status of temporary agency staff is unclear in the law.

• Temporary worker can be deemed an employee of agency despite no control or supervision.

• Certain factors can affect the likelihood of temporary worker being deemed an employee o the agency.

Agency Worker Regulations 2010

• Came into effect 1 October 2011.• Giving agency workers the same basic employment

conditions as directly employed staff.• Subject to 12 weeks continuous work in the same role.• Does not clarify employments status.• May increase likelihood of temporary worker being

deemed as employee of the agency.

Standard Contract Conditions

• REC model can be used by member agencies.• Seeks to make end client the employer of the

temporary worker.• Employment status still not 100% clear and could be

challenged.• Contingent liability could still arise.

Non-standard Contract Conditions

• Larger clients may insist• Onerous clauses, not just for insurance/indemnity.• Employment status can be passed back to agency.• May expressly make agency responsible for errors and

omissions of temporary worker.• Must be disclosed to insurance underwriters.• Broker/insurer contract vetting services.

Insurance – Standard Non Vicarious

• May only cover acts of negligence, errors and omissions by the agency itself.

• Errors and omissions committed by the temporary worker would not be covered.

Insurance - Vicarious

• Extended specialist recruitment policies.• Rating and exposure.• Not an off the shelf solution.• Do you have the correct cover?

Examples of liability

Standard Non Vicarious• Agency own staff negligent in checking qualifications,

experience of references.Vicarious• Breach of Covenant committed by a temporary worker.• Software engineer produces a faulty system.• Medical professional administered incorrect treatment.

Summary

• Employer can be liable for actions of employees.• This can include Employment Agencies.• AWR and Terms of Business can affect this.• Protect with insurance.• Cover must be correctly advised.