Two UK Court Rulings Limit Corporate Responsibility for Employee Conduct

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UK companies may let out a “sigh of relief” after Barclays Plc and Wm Morrison Supermarkets Plc won a pair of Supreme Court cases that drastically limit corporate responsibility for employee conduct.

First, the court said Morrisons wasn’t responsible for a disgruntled worker who leaked the data of thousands of his colleagues online. Minutes later, the court said Barclays wasn’t financially liable for the actions of a doctor who allegedly sexually abused prospective bank employees more than 30 years ago.

Both cases set new precedents for the theory of vicarious liability — when companies are responsible for the acts of their employees. But the rulings are also a departure from a string of cases where the court said corporations had a much larger duty to provide benefits to a host of contractors and gig economy workers.

“Businesses will be breathing a loud sigh of relief today,” said Rohan Massey, a lawyer at Ropes & Gray in London. The Morrisons decision in particular will be “well received” by HR departments that are considering the “security risks arising from the sudden shift to a remote workforce as has been mandated by the response to the COVID-19 pandemic.”

The rulings were a surprise because of the fact that both Barclays and Morrisons had been strongly rebuked in lower courts. The facts also seemed to make the victims in both cases particularly sympathetic.

In the Barclays case, more than 100 employees said they were sexually assaulted by a doctor who performed medical tests for the bank from the 1960s through the 1980s. But the court ruled the doctor, Gordon Bates, who died more than a decade ago, wasn’t an employee and had only a limited relationship with the bank.

“Nothing in this judgment seeks to deny or downplay the very serious harm,” Judge Brenda Hale said in the ruling Wednesday. “But the relationship between Dr. Bates and the bank was not such that the bank should be made to pay for it.”

In the Morrisons case, a senior auditor leaked payroll data of almost 100,000 employees in 2014. He’s been convicted over the data leak and sentenced to an eight-year prison term.

Hale said that although the cases were similar, the rationale behind the rulings wasn’t the same.

In Morrisons, the court thought it would be unfair to make the supermarket chain responsible for an employee who was taking revenge on his bosses and a co-worker following a disciplinary proceeding. In Barclays, the court said that the doctor was truly independent, taking his own patients and even writing a newspaper column.

“The scope of vicarious liability has now reverted back to where it was,” said Alexander Milner-Smith, a partner at law firm Lewis Silkin. “In order for an employer to be vicariously liable, broadly there needs to be a sufficient connection between the position in which an employee was employed and any wrongful conduct.”

Still, the the legal reasoning of the April 1 rulings will be of little comfort to victims in either case, some of whom have been waiting decades for their day in court.

“The enormity of my disappointment cannot be put into words,” said one of Bates’ alleged victims, who Bloomberg News has identified as James in line with court rulings to protect the identities of the plaintiffs. “British ‘justice’ has let a significant number of people down today, it is truly April Fool’s Day.”

Barclays said in a statement after the ruling that it sympathized with the victims. The company has long argued that it wasn’t responsible for what the doctor might have done because he wasn’t an employee.

“We take the welfare of all employees, including former employees, very seriously,” Barclays said in a statement.

Morrisons said it had removed the information from the internet when it discovered the leak and offered protection to employees’ banking accounts and other financial data.

–With assistance from Stephanie Bodoni and Max Abelson.