A risky enterprise: Liability of employers for the wrongful acts of their employees

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Should the employer of an employee who commits sexual abuse against children be liable for the employee’s wrongs, even when the employer has not itself been negligent. It is generally recognized that the imposition of liability on employers in the absence of any fault — known as ‘vicarious liability’ — is based on two key policy concerns: the provision of a just and practical remedy to the victim and the deterrence of future harm.

It is one thing, however, to define vicarious liability, but quite another to predict when it will be applied. This can be seen in a pair of cases recently decided by the Supreme Court of Canada, in which the Court unanimously described the test for finding vicarious liability in cases of child sexual assault, and then split badly on its application.

CURRY: “A SPECIAL RELATIONSHIP OF INTIMACY AND RESPECT” FOSTERED BY THE EMPLOYER

In Bazley v. Curry (June 17, 1999), the issue was whether the Children’s Foundation, an organization operating two residential care facilities, could be held vicariously liable for sexual abuse committed by an employee against persons under its care. Proceeding on the assumption that the Foundation was not negligent in its hiring and supervision of the employee, the lower court and the British Columbia Court of Appeal both ruled that it was nonetheless liable for the employee’s acts. The Foundation appealed to the Supreme Court of Canada.

The traditional common law test for applying vicarious liability to employers is known as the “Salmond” test, and has two branches. Under this test, employers are vicariously liable for employee acts authorized by the employer, and for unauthorized acts so connected with authorized acts that they may be regarded as modes (albeit improper modes) of doing an authorized act. The parties in this appeal agreed that the issue here was the second, more difficult, branch of the test, with the disagreement being whether the sexual assaults were a “mode” of performing authorized tasks.

As the Court noted, it is not easy to distinguish between an unauthorized mode of an authorized act that attracts vicarious liability and an entirely independent act that does not. When there is no clear precedent, therefore, courts are increasingly turning for guidance to the policy considerations that underlie vicarious liability.

This led the Court to suggest a new approach to drawing this fine distinction. It held that courts should first determine whether legal precedents provide a clear answer. If they do not, courts should be guided by the following set of principles:

(1) They should openly confront the question of whether, from a policy perspective, the employer should be held vicariously liable for the employee’s wrong.

(2) The fundamental question is whether the wrongful act is sufficiently related to conduct authorized by the employer. Where there is a significant connection between the employer’s enterprise and the act, vicarious liability is generally appropriate. This is to be contrasted with an incidental connection, such as the mere fact that the wrong was committed during work hours or at the workplace.

(3) In determining the sufficiency of the connection between the employer’s enterprise and the wrongful act, the following factors may be relevant:

(a) the opportunity afforded by the enterprise to the employee to abuse his power;
(b) the extent to which the wrongful act may have furthered the employer’s aims;
(c) the extent to which the act was related to friction, confrontation or intimacy inherent in the employer’s enterprise;
(d) the extent of the power conferred on the employee in relation to the victim; and
(e) the vulnerability of potential victims to wrongful exercise of the employee’s power.

With these factors in mind, the Court provided the following summary of its approach to the test for vicarious liability for an employee’s sexual abuse of a client:

“[T]he test … should focus on whether the employer’s enterprise and empowerment of the employee materially increased the risk of the sexual assault and hence the harm. The test must not be applied mechanically, but with a sensitive view to the policy considerations that justify the imposition of vicarious liability — fair and efficient compensation for wrong and deterrence. This requires trial judges to investigate the employee’s specific duties and determine whether they gave rise to special opportunities for wrongdoing. Because of the peculiar exercises of power and trust that pervade cases such as child abuse, special attention should be paid to the existence of a power or dependency relationship, which on its own often creates a considerable risk of wrongdoing.”

Applying these principles to the Foundation, the Court held that it was vicariously liable for the sexual misconduct of its employee:

“The opportunity for intimate private control and the parental relationship and power required by the terms of employment created the special environment that [led to the] sexual abuse. The employer’s enterprise created and fostered the risk that led to the ultimate harm. The abuse was not a mere accident of time and place, but the product of the special relationship of intimacy and respect the employer fostered, as well as the special opportunities for exploitation of that relationship it furnished. … Fairness and the need for deterrence in this critical area of human conduct — the care of vulnerable children — suggest that as between the Foundation that created and managed the risk and the innocent victim, the Foundation should bear the loss.”

GRIFFITHS: CHILD SEXUAL ABUSE TOO REMOTE FROM “MENTORING” ORGANIZATION

Despite the Court’s unanimous endorsement of the approach to vicarious liability in the Curry case, the same panel split 4-3 in its companion decision, Jacobi v. Griffiths (June 17, 1999), against the imposition of liability. Griffiths was Program Director with a youth club that offered group recreational activities. He pled guilty to 14 counts of sexual assault against children involved in the club.

The majority of the Court held first that existing legal precedents did not support the imposition of no-fault liability in this case. Then turning to the analysis set out in the Curry case, the majority also held that there was an insufficiently strong connection between the Club’s “enterprise” risk and the harm caused by the employee’s misconduct:

“The key to this case … is that the Club’s “enterprise” was to offer group recreational activities for children. … The opportunity that the Club afforded Griffiths to abuse whatever power he may have had was slight. The sexual abuse only became possible when Griffiths managed to subvert the public nature of his activities . … The progress from the Club’s program to the sexual assaults was a chain with multiple links, none of which could be characterized as an inevitable or natural “outgrowth” of its predecessor.

Where, as here, the chain of events constitutes independent initiatives on the part of the employee for his personal gratification, the ultimate misconduct is too remote from the employer’s enterprise to justify “no fault” liability.”

The majority also expressed disagreement with the view of the dissenting judges that the Club’s mentoring function encouraged the formation of an intimate relationship between Griffiths and the children:

“I do not accept that an enterprise that seeks to provide a positive role model thereby encourages intimacy. Nor do I believe that “mentoring”, as such, puts one on the slippery slope to sexual abuse. If it did, any organization that offered “role models” would be looking at no fault liability.”

Therefore, holding that intimacy was neither a necessary nor desirable part of Griffith’s role and that the power used by him to accomplish his purposes was neither conferred by the Club nor characteristic of its enterprise, the Court ruled against vicarious liability.

In Our View

In the Curry case, the Court stressed that a wrong that is only coincidentally linked to the employer could not justify a finding of vicarious liability, as there would be little an employer could do to prevent the wrong from occurring. Nor is the test one of the simple “but for” variety: but for the fact that the wrongdoer was employed by the employer, the wrong would not have been committed. However, the Court added, when the wrong is closely connected to a risk entailed in the employer’s enterprise, it is appropriate that the employer should bear the loss. This is because, the Court noted, the employer has profited from the activity that created the risk of the harm, and is in a better position than the innocent victim to bear the costs of the harm and to shift those costs, through prices or liability insurance, to the public at large. (See also “Firm held liable for misconduct of ‘independent contractor'” on our Publications page.)

In this connection, however, it should be noted that, while a unanimous Court rejected the argument that non-profit organizations should be exempted from vicarious liability, the majority in the Griffiths case observed that they are not well-placed to internalize the costs of no-fault liability. Accordingly, it urged judicial restraint in expanding vicarious liability to non-profit organizations based on the policy analysis mentioned above. This would seem to indicate that, while there is no clear exemption for non-profit organizations, they will be entitled to insist on a rigorous application of the “strong connection” test before vicarious liability is found against them. For more recent developments on the law of vicarious liability, see “Liability for the actions of others considered by Supreme Court of Canada in trio of sexual abuse cases” on our What’s new page.

For further information, please contact Lynn Harnden at (613) 563-7660, Extension 226.