John McGowan and Tim Pinos Corporate Counsel Seminar Series Vicarious Liability. June 3, Cassels Brock

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1 John McGowan and Tim Pinos Corporate Counsel Seminar Series 2008 Vicarious Liability June 3, 2008

2 Overview Vicarious Liability Background Office Parties Social Host Liability Employee Internet Use Cell Phone / PDA Use While Driving

3 Vicarious Liability Test An employer is not responsible for a wrongful act done by his employee unless it is done in the course of his employment

4 Vicarious Liability Test What is in the course of employment? A wrongful act authorized by the employer; or A wrongful and unauthorized mode of doing some act authorized by the employer

5 Vicarious Liability Test Issue #1: To whom does the principle apply? Agents? Independent contractors? Employees?

6 Vicarious Liability Agents Agent: a person authorized to do something on behalf of another. Not an employee: the agent does not act under the principal s control or supervision. Not an independent contractor: the agent is subject to the principal s instructions and is not independent of his control.

7 Vicarious Liability Agents Is a Principal Vicariously Liable for the Actions of its Agent? While technically not vicarious liability, a principal will be liable since the agent is acting in a representative capacity for him Extends to torts committed by the agent acting within the scope of the agency actual, apparent or ostensible Principal may be personally liable if the acts were expressly authorized or subsequently ratified or adopted

8 Vicarious Liability Independent Contractors Independent Contractors Relationship does not typically give rise to a claim for vicarious liability. Exception: where the independent contractor is undertaking inherently dangerous activities. Factors: control, equipment, responsibility

9 Vicarious Liability Employees Employees: Various tests to determine who is an employee: Control Test Entrepreneur Test Organization Test

10 Vicarious Liability Employees Control Test Where the employer tells him/her not only what to do, but how to do it. Entrepreneur Test Who bears the business risks ownership, profits Organization test Whether integral part of business

11 Vicarious Liability Nature of Activity Issue #2: Is activity the type of conduct for which the employer can be liable? Is it unauthorized mode of committing an authorized act as opposed to conduct so unconnected from an employee s job as to be something apart from it?

12 Enterprise Risk Theory Bazley v. Curry (SCC): Whether the wrongful act is sufficiently related to conduct authorized by the employer to justify the imposition of vicarious liability. Vicarious liability is generally appropriate where there is a significant connection between the creation or enhancement of a risk and the wrong that accrues therefrom, even if unrelated to the employer s desires.

13 Enterprise Risk Theory Factors: The opportunity afforded the employee to abuse power; Did the wrongful act may further the employer s aims; Was wrongful act was related to friction, confrontation or intimacy inherent in business; The extent of power conferred on the employee; The vulnerability of potential victims to wrongful exercise of the employee s power.

14 Case Studies Office Parties Employee Internet Use Cell Phone/PDA Use while Driving Blackberry Use Web 2.0 Technologies

15 Social Host Liability Office Parties Case #1: Hunt v. Sutton Group Incentive Realty Inc., et al. (2001) Company served alcohol at an office party (on premises, during work hours). Employee went from the work party to a bar, and continued to consume alcohol. On the way home from the bar, the employee was seriously injured in a motor vehicle accident.

16 Social Host Liability Office Parties Case #1: Hunt v. Sutton Group Incentive Realty Inc., et al. (2001) Employer owed a duty of care to the employee to safeguard her from harm, and this duty extended to making sure the employee did not become intoxicated while at the employer s premises.

17 Social Host Liability Office Parties Case #1: Hunt v. Sutton Group Incentive Realty Inc., et al. (2001) Trial judge held that the employer and the bar were jointly liable and severally liable for damages in excess of $300,000. The bar was bankrupt; hence, the employer was the only available pocket.

18 Social Host Liability Office Parties What factors did the Courts look at? Is the office party on the employer s premises? Is the party during office hours? Was alcohol provided? If so, was transportation provided?

19 Case Study #2: Employee Internet Use Doe v. XYC Corporation (2005) (N.J.) Company had a computer policy in effect that provided it with a right to monitor employee website activity and s Employee transmitted three clandestinely taken photos of his child from a workplace computer arrested and charged The child s mother brought an action against the company, in which she sought to hold the defendant responsible for the activities of one of its employees

20 Employee Internet Use Decision: The Court held that that an employer who is on notice that one of its employees is using a workplace computer to access pornography, possibly child pornography, has a duty to investigate the employee s activities and to take prompt and effective action to stop the unauthorized activity, lest it result in harm to innocent third-parties.

21 Employee Internet Use The Doe case suggests that if a company has an internet use policy in effect, it must actually follow its own policy. Otherwise: a company may risk exposing itself to liability for an employee s inappropriate internet use.

22 Employee Internet Use Inappropriate use of the internet can lead to potential risk of employer liability for: Harassment and Discrimination Online Copyright Infringement Cyberlibel

23 Employee Internet Use Harassment and Discrimination 1995: U.S. settlement of over $2.2 million after four female employees sued the company following receipt of s that allegedly were sexually harassing.

24 Employee Internet Use Online Copyright Infringement 1997: A U.S. trade organization was found liable for copyright infringement after its employee used copyrighted clip art on the company website.

25 Employee Internet Use Cyberlibel Improper employee internet use can lead to an increased risk of defamation suits 1995: A U.S. company s former employee prevailed in a cyberlibel suit against the company after an employee sent an to a third party stating that the former employee was terminated for credit card abuse.

26 Employee Internet Use Reducing risk: Distributing a carefully-crafted internet use policy that clearly outlines the legitimate business uses of the internet, prohibited online conduct, as well as the consequences of improper internet use. Monitoring and internet activity but only if you are prepared to take action. Use of filtering devices to block access to inappropriate websites.

27 Case Study # 3: Cell phone/ PDA Use While Driving Since an employer can be held vicariously liable for permitting an impaired employee to drive, a natural extension is that an employer could be vicariously liable for an accident caused by an employee driving while speaking on a cell phone/pda.

28 Cell Phone/PDA Use While Driving If the telephone call is work-related, there could be a significant connection between the creation or enhancement of a risk and the wrong that accrues therefrom.

29 Cell Phone/PDA Use While Driving 2001: Miami jury found a lumber company liable for more than $20 million in damages after one of its employees struck another car while making a sales call on his cell phone. 2001: State of Hawaii was ordered to pay $1.5 million in damages after a state teacher who had just completed a call on her cell phone struck a pedestrian while driving to work.

30 Cell Phone/PDA Use While Driving Newfoundland and Labrador, Nova Scotia, and Québec have enacted laws banning the use of hand-held devices that include telephone and text messaging functions while driving May 26, 2008: Ontario looking into implementing legislation to encompass a ban on all electronic distractions while driving

31 Cell Phone/PDA Use Policies Companies supplying/subsidizing/requiring use of call phones/pdas should consider: Banning cell phone use while driving. Requiring employees to use hands-free devices or to pull over to take phone calls. Limiting the scope of job descriptions so that it is clear that they do not include using cell phones while driving. Providing instruction on the risks and responsibilities associated with cell phone/pda use

32 Case Study #5: Web 2.0 Technologies Sites such as Facebook, MySpace, YouTube and blogs run the risk of: Posting information that may damage the company s reputation, breach customer/ client confidentiality, defame or discriminate against an employee or third party

33 Web 2.0 Technologies Companies might consider: Installing internet filters to prevent all or some of these sites from being accessed Implementing clear and well thought out guidelines as to the appropriate business uses, if any, of these sites Ensuring all monitoring policies are in line with privacy legislation

34 Summary and Conclusions Vicarious Liability Background Office Parties Social Host Liability Employee Internet Use Cell Phone / PDA Use While Driving

35 John McGowan As a partner in the firm's Employment Law Group, John represents various clients at all stages of the employment relationship from recruiting, to drafting employment, consulting and personal service contracts, to the negotiation and administration of collective agreements and to grievance arbitration and wrongful dismissal litigation.

36 Tim Pinos Tim is a partner in the firm s Commercial Litigation Group, and has been certified by the Law Society of Upper Canada as a Specialist in Civil Litigation. He also actively litigates for the Information, Communications & Entertainment (ICE) Group.

37 Tim Pinos In the course of his wide-ranging commercial litigation practice, he has built up substantial expertise in complex litigation issues. He is also active in the defence and prosecution of class and large-scale multi-party litigation.

38 Scotia Plaza, 40 King Street West, Toronto, Canada M5H 3C2 Phone & Blackwell LLP. Cassels Brock and the CB logo are registered trade-marks of Cassels Brock & Blackwell LLP. Trade-mark of Cassels Brock & Blackwell LLP. All rights reserved.

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