When are employers liable for employees' unlawful acts?

For a potential claimant who has suffered loss because of an unlawful act, it's much more attractive to bring a claim against the employer rather than the employee, as the employer is much more likely to be insured (or have substantial funds). Three recent high-profile cases illustrate how harsh the results can be.

Case 1: Office party gone wrong

The first case concerned an office party (a frequent source of employment litigation). The Claimant worked for a recruitment company. He suffered serious brain damage after the managing director of the company, who had organised an after-party and was paying for drinks and taxis, delivered an impromptu lecture about his managerial authority and then punched the Claimant several times.

The Court of Appeal held that the company was vicariously liable for the managing director's actions (and hence the brain injuries suffered by the Claimant) as there was sufficient connection between the circumstances of the assault and the managing director's employment.

Case 2: Data breach

The second case involved a massive data breach by a disgruntled employee of Morrisons. He disclosed personal information (including names, addresses, bank account details and national insurance numbers) belonging to nearly 100,000 other employees. Around 5,000 of the employees whose data had been unlawfully disclosed brought claims against Morrisons. The Court of Appeal confirmed that Morrisons was vicariously liable for the disclosure, even though Morrisons had not authorised it and they had appropriate data security measures in place. The Court was not at all impressed by the argument that this could expose businesses to financially ruinous claims: it advised businesses to take out insurance.

Case 3: Whistleblowing

The third case was an Employment Tribunal whistleblowing claim. The Claimant had been dismissed after making protected disclosures and brought claims against his employer and against the two individuals who were key decision-makers. Although whistleblowing dismissal claims must be brought against the employer, whistleblowing detriment claims can be brought against individuals and their employer will be vicariously liable unless it took reasonably practicable steps to prevent the unlawful acts. Another key difference between detriment and dismissal claims is the causal link the claimant needs to prove. For detriment claims, the claimant needs only to show that their protected disclosures "materially influenced" the detrimental treatment, whereas for a whistleblowing dismissal claim the protected disclosures must have been the sole or main reason for dismissal. In short, detriment claims are easier to prove.

In this case, the Court of Appeal determined that the Claimant could bring detriment claims against the two individuals for their decisions which led to his dismissal, that he could claim from them the losses flowing from his dismissal and that the employer was vicariously liable for those losses. The effect of the case is that claimants will often (if not always) be able to avoid the stricter causation test which applies in whistleblowing dismissal claims.

Final thoughts

All three cases offer stark warnings for employers. In most scenarios, there is no way for an employer to avoid liability for an employee's actions if those actions are closely connected with employment. In discrimination and whistleblowing claims, the "reasonable steps" defence is often advanced but rarely succeeds. Minimising the risks of unlawful acts through robust policies and staff training (and, as the Court of Appeal advised, comprehensive insurance) is the best (and often the only) defence for businesses.