Liability for subcontractors

13 April 2006
Liability for subcontractors

The problem
A hotel undergoes refurbishment and engages a contractor to do repair work. The contractor engages a subcontractor, who supplies an electrician to do wiring, working under the control of both the contractor and subcontractor. The wiring is faulty, causing a fire. Is the hotel liable for wrongdoing by the electrician?

The hotel engages doormen through a security company. During an argument, one of the doormen hits a customer. Is the hotel liable for wrongdoing by the doorman?

The law
An employer is responsible for its employees' acts carried out during the course of employment. However, if an employee is supplied by his employer to another organisation, an issue arises as to which organisation is liable for any misconduct by him: the direct employer, the organisation he is supplied to, or both?

With regard to the electrician, both the contractor and subcontractor are likely to be liable to the hotel for the damage caused by his work. It is likely that where two parties have equal control over a worker, both would be liable for the worker's negligence, as both will have been obliged to control and prevent his actions. In this example, both the contractor and subcontractor are on site to supervise the electrician's work.

With regard to a subcontracted doorman, if the hotel exercises sufficient control over the doorman in terms of directing when and how he carries out his duties - for example, if the doorman wears a uniform and follows directions from the hotel's head of security - then it is likely that he will be deemed to be a hotel employee. The role of the security company in this arrangement is simply to pay his wages for as long as the hotel is willing to use his services. The hotel will, therefore, be liable for any wrongdoing by the doorman, such as an excessive restraint of a hotel guest and any resulting injury.

Expert advice The key issue in deciding who will be responsible for an individual's actions is that of control. If an individual is an employee or supplied worker working under the immediate supervision and control of a business, then the business will be responsible for his actions and will have a responsibility to prevent misconduct or negligence by him.

The importance of control and supervision has been demonstrated over a period of years by a number of cases involving temporary workers supplied by employment businesses. The courts have demonstrated a willingness to decide that a contract of employment can be implied between the individual and the business where an individual has been supplied to the business for a significant period of time (about one year or more) and has effectively been integrated into the business's workforce.

Check list Any organisation using the services of employees supplied by another business should take care to safeguard its contractual position and ensure:

  • It's clear who's responsible for a deemed employee's negligence or misconduct.

  • It has adequate insurance cover, including public liability insurance and employer's liability insurance.

  • It includes appropriate indemnities in its contracts with labour suppliers.

  • It provides adequate training and guidance to individuals, particularly those engaged to deal with or manage the public.

  • That individuals have the requisite qualifications; that they are trained and licensed to do the work they are engaged for; and that they do not have previous convictions.

  • It issues policies governing conduct in the workplace and dignity at work.

  • It regularly monitors conduct and issues timely reminders to all individuals, whether supplied temporary workers or direct employees, to maintain professional standards of behaviour.

  • If the individual is in a security role, then caution against the disproportionate use of force with the public.

Beware! A deemed employee's wrongdoing or negligent action can cost the business dearly. The guest's injury in our example could result in a court award in excess of £100,000, depending on the nature of his injuries, the long-term damage and the extent of medical care required.

ContactsSara Khoja
Field Fisher Waterhouse
020 7861 6754

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