Vicarious Liability

Discuss about the HRM and Employment Relations.

The case study given is to analyse the relationship between the Nickel Back and William James. It is to identify that William James is independent contractor or an employee. This has to identify in order to find out the liability of both the parties in respect to QR. It is also to be analysed that Nickel Back will be vicarious liable for the act of William James or not.

Vicarious liability is considered as a situation where someone is held liable and responsible for the actions of the third party. In an organization, an employer can be held responsible for the actions performed by its employees and these actions should be performed by employees in the course of employment.

From the case of New South Wales v Lepore [2003], it can be drawn that everything done by employee at workplace or in between work hours is not cornered under vicarious liability. The act of employee should be connected with the roles and responsibilities of the organisation in regard within the scope of employment. It is also to be noticed that any wrong doing away from the work place and not in working hours by employee is not conclusive against arising of liability against employer.

Courts of Australia approach in determining the relationship between of employer and employee or employer and independent contractor

To analyse between the employee and independent contractor the courts in Australia takes into consideration various factors to find out the real nature of particular work relationship. The case of Hollis v Vabu helps in analysing the totality of relationship. The first factor is control over work. An employee works in the organization as directed by the employer and in contrast to this the contractor carry out his work on his own without much interference of employer. Payment is to be made to employees on the basis of salary or wages according to hour. But, the contractor is paid on the basis of results achieved regardless of time.

Contractors obliged to insure on their own against work injury but employees are not obliged to do so.  Employees generally do not bear the risk of financial loss incurred by the organization for which they work directly but contractors are directly linked to the financial loss. An employee in the organization cannot delegate the work but the contactor can delegate the work. Special tools and equipments are provided to the contractor to perform the job. Income tax of an employee is paid by the employer but contractors make their own arrangements.

Application of Vicarious Liability

The court looks at the totality of the relationship in order to analyse the relationship between the parties i.e. the worker is employee or contractor. Generally, the employer tries to falsely describe the nature of relationship exist between the parties so that responsibilities can be avoided but the courts make their decision on the basis of totality of relationship.

Under the control test the worker is considered to be an employee, if the worker follows the order of employer. The order of employer includes place of work and the manner in which the work has to be performed. The real fact which is considered is the degree of control exercised by the employer. In addition to degree of control the amount of control and nature of control is also seen. In the case if the worker possesses professional skills then it becomes hard to determine the relationship between parties as it becomes difficult to determine actual control. The case of Zuijs v Wirth Brothers Pty Ltd states that a mere right to control in place of actual exercise of control may lead to the existence of independent contractor relationship.

The organisational test was developed because of the difficulties arrived in control test in analysing the difference between an independent contractor and an employee. The organisation test is carried out to develop a check on the result framed up from the control test. The organisational test is recognised as distinctive consideration in analysing the relationship between both the parties. The case of Stevens v Brodribb Sawmilling Co Pty Ltd and Jordan and Harrison Ltd v McDonald and Evans states that under a contract of service, a worker is employed as a part of the business and the work performed by him is considered as an integral part of the business and part and parcel of the organization. In contrary to this, under a contact for services, the work performed by worker for business although but not integrated with the business activity.

Business test is carried out to check out the services performed by worker on his own account or not. The case of Market investigations v Minister of Social Security states that whether the worker is performing the service on his own account or service as a person. The test of control is no longer conclusive if control is lacking. If the contract is of short term basis then the absence of employment rights such as sick pay and holidays are immaterial to the determination of employment status.

Courts of Australia approach in determining the relationship between of employer and employee or employer and independent contractor

The multiple factor test was firstly established at the time of Stevens v Broadribb Sawmilling Co Pty Ltd and later proved in Hollis v Vabu Pty Limited as the one of the most favourite test in Australia to identify vicarious liability. The High court identifies control cannot be considered the only factor but the totality of the relationship between both the parties should also be considered. This multiple factor test considers all situations uncovering the employment so that the working relationship can be identified. Only one factor cannot be used to determine the relationship as it will mislead because it do not provide proper guide so that relationship existence can be identified between both the parties.

When the provision of using of equipment and tools is supplied by worker himself then the relationship of independent contractor is established. If the worker has integrated in to business activities like wearing of uniforms, signage used on vehicles then relationship of employee is established. When the employer provides the salary to worker without tax deduction then the relationship of independent contractor is established because he himself has to pay taxes and the employer do not take the responsibility of paying taxes. The factor of entitlements and allowances is also considered for identification of relationship between both the parties.

If leave facilities, superannuation and provident fund facility is provided to the worker by the employer then the relationship of employee is formed. Nature of task also determines the kind of relationship between both the parties. Tradespersons and professionals are the class which generally conduct their own business and are termed as independent contractor. If the worker is employed only to perform a specific task then the relationship of independent contractor is established. If worker is employed for an indefinite period then the relationship of employee exists. If the remuneration is paid in the form of wages then the relationship of employee exists. On the contrary to this, the relationship of independent contractor exists if the remuneration is paid on lump sum basis or on results basis. If the worker controls and owns his control over the place and hour of work then the relationship of independent contractor is established otherwise vice versa.

If the worker has the authority to delegate the job to others then the relationship of independent contractor is established. If the employer has total control over the worker and specify a proper manner in which the task has to be carried out and the worker cannot perform the task on his own then the relationship of employee is established. If the worker is not obliged to perform the task in a specified manner then the relationship of independent contractor is established. These multiple indicia are generally weighed up in order to determine the nature of the employment relationship.

Control Test

It is obvious that in order to determine the relationship between the parties there should be a contract which defines the actual role and responsibilities to be carried out by the employee. In addition to the existence of contract the requirement that the contract require some sort of work is also important because the essence of contract of service is the supply of the work and skill of man as observed in the case of Humberstone v Northern Timber Mills.

In Humberstone v Northern Timber Mills case states “The question is not whether in practice the work was in fact done subject to a direction or control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in the performance of his work resided in the employer so that he was subject to the latter’s order and directions.”

In applying the multiple factor tests to the case study given, the following factors indicate of a relationship of independent contractor and employee.

William James does not have the relevant expertise and do not have direct control over the manner in which he can carry out the duties. William has to perform his duties according to the Nickel Back’s manual of operating procedures and William also do not have the power to delegate the duties without the permission of Nickel Back. This factor is similar to the case of Zuljs v Wirth Bros Pty Ltd.  This shows the absence of factor of the ability to delegate the duties on its own.

Work is carried out according to the desire of Nickel Back where Nickel Back provides fuel and servicing to the truck. It also supplies footwear and clothing having the logo of the company and also supplies camping requirements and other equipments. The following indicates the relationship of employee.

The mode of remuneration was fixed $2700 each week including month of leave, directly into the bank account of William and also no tax is being deducted. This shows that the tax has to be arranged by William on own. This strongly indicates the relationship of independent contractor.

By applying this multi factor test it is observed that are factors of both employee and independent contractor relationship. So, weight to the factors would be more appropriate to analyze the relationship between William James and Nickel Back.

Conclusion

From the above study it can be concluded that the type of relationship exists between Nickel Back and William James is of independent contractor relationship. The main reason for this existence of relationship is the mode of remuneration and tax arrangements, In addition to this William James was hired by Nickel Back to complete only specific work without any integration with the organization. Moreover, in the contract it was also mentioned that William can be dismissed at any time without prior notice and it was also mentioned by Nickel Back that William is only an independent contractor and not an employee. So, from the above study it can be analyzed that these factors weight more and outweigh very less existence of control over the activities of William by Nickel Back and using of signage of Nickel Back on truck.

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