Two recent House of Lord’s decisions bring concern but hope to employers whose employees engage in conduct such as sexual abuse of children under their care in the employment role.

In Lister v Hesley Hall Ltd [2001] UKHL 22 (3 May 2001) the House of Lords ruled that employers are liable vicariously for the actions of abuse carried out by employees if there is a sufficient nexus between the conduct and the employment.

Two quotes from the judgment illustrate the Court’s reasoning. The employee

“abused the special position in which the school had placed him to enable it to discharge its own responsibilities, with the result that the assaults were committed by the very employee to whom the school had entrusted the care of the boys.”

“Experience shows that in the case of boarding schools, prisons, nursing homes, old people’s homes, geriatric wards, and other residential homes for the young or vulnerable, there is an inherent risk that indecent assaults on the resident will be committed by those placed in authority over them, particularly if they are in close proximity to them and occupying a position of trust.”

In New Zealand our accident compensation legislation prohibits claims for compensatory damages arising from personal injury cases such as Lister but does not prevent exemplary damages claims. Employer’s liability vicariously for exemplary damages is therefore a live issue as yet unsettled by the Courts.

In Kuddus v Chief Constable of Leicestershire Constabulary [2001] UKHL 29 (7 June 2001) some encouraging statements were made by Lord Scott.

“The conduct meriting punishment was not his conduct but that of his officers. It appears to me that, silently and without any proper or principled justification for it, a system of vicarious punishment of public employers for the misfeasances of their employees has crept into our civil law. In my opinion vicarious punishment, via an award of exemplary damages is contrary to principle and should be rejected.”

The Judge refers only to public officials because in England exemplary damages are limited generally to those holding public office. They are not so limited here so there is potential for employing authorities such as schools to be liable for exemplary damages vicariously in the sexual abuse area.

His Lordship’s comments are not binding on New Zealand Courts but may be seen as persuasive when the issue arises here for decision. The Judges did not have to decide the issue in Kuddus because they were dealing with a preliminary legal agreement not the substance of the matter.

Employers who are in the position of trust over vulnerable young or elderly need to be aware that vicarious liability for exemplary damages has not yet been decided in New Zealand. We are acting as counsel in a case shortly to be set down for hearing involving this very issue but a decision is likely to be some time away given that if the Court finds against the employer there are likely to be appeals.

Employing authorities can also be liable for exemplary damages for their own actions in failing to protect those under their care if the employer’s own conduct merits punishment eg failing to carry out suitable checks on employees backgrounds before putting them in positions of trust. Police checks should always be required in these situations. Employees are not obliged to answer questions on their criminal history but an employer is allowed to ask for permission to obtain a police check.If permission is refused the person should not be hired.

Police checks are a good start but are not foolproof protection. Do you follow up on references in person? What other steps do you take to safeguard the people you are entrusting to an employees care?

Are your employment interview processes up to scratch?

We can assist with developing a proper process to minimise risk to you as the employer.