Vicarious liability—a heavy burden of proof04 August 2016
In Kelly v Bluestone Global Ltd and Anor  WASCA 90, the Court of Appeal of Western Australia considered the contentious issue of a host employer's liability for injuries sustained to a labour hire worker and the sliding scale of "control". The decision highlights that there must be a distinction between the liability of labour hire employers for the actions of their employees and the non-delegable duty of care owed to employees by labour hire employers.
The Plaintiff, Mr Kelly, was employed by Ngarda Mining and Civil Pty Ltd (Ngarda). Ngarda was the operator of the Yarrie Mine, owned by BHP Billiton and situated in the Pilbara region of Western Australia.
Mr Kelly was responsible for driving a dump truck as part of his job. On one occasion, during the course of his employment, Mr Kelly reversed the dump truck into an area that was directly underneath a loaded excavator bucket. At the time, another employee, Mr Scanlan, was operating the excavator and dropped the fully loaded bucket onto the tray of Mr Kelly's dump truck, causing it to shake violently. Mr Kelly subsequently suffered neck and back injuries.
Mr Scanlan was employed by the labour hire company, TSS Recruitment Pty Ltd (TSS), and worked for the host employer, Ngarda. Mr Kelly sued TSS, rather than Ngarda. The issue was whether TSS was vicariously liable for the alleged negligence of Mr Scanlan.
The Court found there was a complete transfer of control over Mr Scanlan from TSS to Ngarda. TSS had no control or authority over Mr Scanlan and its role was confined to paying his wages only. Key factors in coming to this conclusion included:
- Ngarda provided inductions and training to all workers who came to Yarrie Mine
- Ngarda coordinated all works at Yarrie Mine. TSS had no involvement in the day-to-day operations at the Mine
- Ngarda conducted safety investigations onsite
- there was no differentiation between Ngarda and TSS employees
- no TSS workers were employed in supervisory roles
- most workers supplied by TSS became Ngarda employees after three months, and
- TSS had more of a HR function rather than that of a labour hire company, as the hired workers were usually retained by Ngarda following an initial trial period.
Decision at first instance
Mr Kelly was unsuccessful at first instance. The trial judge held that control of Mr Scanlan's services was completely transferred to Ngarda by TSS. On this basis, the trial judge held that TSS was not vicariously liable for any negligence of Mr Scanlan.
As for the primary liability, the trial judge found that Mr Scanlan did not breach his duty of care to Mr Kelly, as he operated the excavator within the usual and accepted practice to which he was appropriately trained.
On appeal, McLure P and Murphy JA upheld the trial judge's decision that TSS was not vicariously liable for the actions of Mr Scanlan.
McLure P applied the test in Mersey Docks and Harbour Board v Coggins & Griffith (Liverpool) Ltd  2 All ER 345 (Mersey Docks), which outlines—when questioning whether an employer had transferred the services of one of its workers to a third party and consequently transferred any liability for negligent acts—the burden of proof rests with the employer and vicarious liability can only be discharged in exceptional circumstances. McLure P considered TSS performed more of an HR function than that of a labour hire company and concluded that vicarious liability for Mr Scanlan's negligent acts was transferred from the labour hire employer to Ngarda as host employer.
Murphy JA came to a similar conclusion and referred to the decision in McDonald v The Commonwealth (1945) 46 SR (NSW) 129, which found that:
"If by the agreement the employer vests in the third party complete, or substantially complete, control of the employee, so that he is entitled not only to direct the employee what he is to do but how he is to do it, and the employee was performing services stipulated for, or authorised by, the third party at the time, the third party is liable."
Murphy JA concluded no material authority over Mr Scanlan rested with TSS as it had been transferred to Ngarda and, as such, TSS could not be held vicariously liable for Mr Scanlan's allegedly negligent acts.
In dissent, Mitchell J also referred to Mersey Docks and said that the burden to prove a complete transfer of control of Mr Scanlan to Ngarda was not discharged by TSS. Mitchell J also noted that, nevertheless, the Plaintiff had failed to establish primary liability.
Insurers and labour hire companies should take note of the accumulating body of case law, which confirms that it should not be assumed that liability will rest with labour hire employers for claims involving the negligence of their employees.
Each matter will be determined on the facts and the burden of proof for shifting liability to a host employer for an employee's actions is a heavy one.