Vicarious liability for recruiters
Vicarious liability is by no means an easy concept to grasp. There also appears to be a lack of information around vicarious liability for recruiters. With this in mind, we are going to keep things straightforward and help you understand how vicarious liability affects the recruitment sector and how any of this might apply to you.
What is vicarious liability?
The principle of vicarious liability applies where one party assumes responsibility for the actions of another. In the context of commercial insurances, vicarious liability is particularly relevant in employer/employee relationships – generally speaking, an employer shall remain responsible for the actions of the employee. In practice, this means that an employer is exposed to legal claims resulting from negligent acts or omission committed by one of their employees, which have led to a third-party loss.
Professional Indemnity and Public Liability insurance will automatically include cover for the actions of employees as standard for most businesses. For example, an accountancy practice may employ numerous qualified accountants, all utilising their own professional expertise – as the accountancy practice is vicariously liable for its employees’ actions, their Professional Indemnity insurance will cover them if a negligent act on an employee’s part leads to legal action.
How does this apply to those in the recruitment sector?
The majority of businesses, and the insurers protecting them, are posed very few challenges by vicarious liability. However, more consideration is required for the recruitment sector.
In short, in the event that actions of a contracted worker lead to a third-party loss, there may be some ambiguity over who is the ‘employer’ for the purposes of establishing legal responsibility. This may involve identifying the party (if any) which directs, supervises, or controls the worker. In some cases, contractual terms dictate the liability, with certain parties accepting responsibility without being directly involved in the delivery of services. In other cases, the worker themselves may be primarily responsible – this is particularly relevant to the self-employed.
It is crucial that recruitment businesses have a clear understanding of their exposure to vicarious claims, and that their insurance adequately protects them.
Who could be affected by vicarious liability?
Below are some examples of how different parties may find themselves with exposure to vicarious liability, however it is important to remember that vicarious liability is not without its nuances and exceptions.
Recruitment Agencies – Typically, a worker placed by an agency will either be self-employed, engaged via an umbrella company, or employed directly by the end hirer. On this basis, a recruitment agency is unlikely to have de facto vicarious liability for the actions of the workers.
However, in order to protect their clients, many agencies will accept vicarious liability contractually – if this is the case, it is important that a form of insurance covering vicarious liability is maintained.
Umbrella Companies – Umbrella companies will employ their workers and, as such, may assume a degree of vicarious liability. However, frequently, umbrella staff will be under the supervision, direction, and control of the end hirer. On this basis, the vicarious exposure is mitigated, as the end hirer would likely be considered the ‘employer’ for the purposes of determining liability. This position should ideally be clarified within the contract.
CIS Payroll Companies – As workers in the construction sector are more likely to operate as Sole Traders, the workers themselves may carry a degree of liability.
As a self-employed resource, there is no separate employer to take vicarious responsibility. As with the above examples, the ultimate position should be clarified at contract level – in many cases payroll firms will take contractual liability for the actions of the workers, creating a vicarious exposure.
Managed Service Providers – A further degree of complication may be added by agencies that deliver a managed service. In these cases, primary rather than vicarious liability may be assumed. This is because the MSP is responsible for the delivery of a service rather than a staffing resource.
Appropriate insurance in these cases is crucial. It is important to remember that assistance may be required to ensure correct structure of such insurances.
How we can help you:
As a specialist provider to the contractor and recruitment markets, Qdos have a variety of insurances available to meet the needs of recruitment firms. Our team are on hand to discuss your requirements in detail and help you to navigate the potentially complex matter of vicarious liability faced by your business, your clients, and your workers.