Who's the boss?

They work on your premises but are employed by an agency. Legal responsibility for their actions depends on the offence

In many cases, the increased use of staffing firms has transformed the traditional scenario of employer-employee relationship into a three-way affair.

This tripartite-partite relationship between the user organization, agency and temporary worker is increasingly attractive to organizations because it avoids obligations and liabilities associated with employees — or so some think. But, what happens when the temporary worker transforms into the schoolyard bully to harass, discriminate or injure an employee of the user organization? Which entity is liable? Situations like this can digress into a game of hot potato where one party throws the problem to the other and tries to avoid liability. Inevitably, one party faces vicarious liability.

Vicarious liability is the responsibility for the misconduct of another. In employment law, vicarious liability has been used to impose upon employers liability for the conduct of employees, which includes misconduct directed at other employees and third parties. Generally, it is recognized that there are two important principles underlying this concept: to provide a just remedy for the victim and to deter future harm.

In temp situations, the question becomes: who is the employer? Typically, where more than one organization has control over a worker, the courts have applied certain tests developed by the common law to determine the true identity of the employer. However, this is not the case in the area of human rights, occupational health and safety matters, and where a temp worker injures a third party. In these three areas, courts and tribunals will apply the principle of vicarious liability to attach to one or the other party.

Human rights and H&S violations

In the area of human rights in Canada, all employers have a duty to provide a harassment free, discriminatory free, safe and healthy environment for employees regardless of whether the worker is an actual employee of the user organization or a temporary employee.

In Ontario, section 45 (1) of the Human Rights Code makes clear an employer will be held vicariously liable for the acts of its agents and employees. This principle of vicarious liability in a human rights context was confirmed in the Supreme Court of Canada’s decision in R. v. Robichaud (1987), 40 D.L.R. (4th) 577. In that decision, referring to the code, the court stated the “statute contemplates the imposition of liability on employers for all acts of their employees.” According to the code in Ontario, employers not only have a responsibility to provide a working environment free from harassment and discrimination, but an additional duty to deal effectively and efficiently with any situations which come to their attention. The distinction as to whether the employee is temporary or not is irrelevant.

If a temporary worker harasses or discriminates against another employee of the user organization during the course of the placement, liability will rest with the user organization. This same principle extends to occupational health and safety issues.

Employers have a duty to provide a safe environment. Therefore, liability for any mishaps under occupational health and safety legislation will rest with the user organization.

Injuries caused by temp workers

However, the lines are not as clearly defined when a temp worker injures a third party. Is the user organization still liable? Interestingly, the answer may be no, unless there are extenuating circumstances. Under the common law, an employer will be found vicariously liable for any wrongs committed by an employee. But in this case, the employer in the eyes of the court is likely to be the employment agency.

Canadian courts have adopted the principle of vicarious liability outlined in the British House of Lord’s decision of Mersey Docks and Harbour Board v. Coggins and Griffiths (Liverpool) Ltd., [1947] A.C. 1 (H.L.). In Mersey, a firm in the business of loading and unloading ships (user organization), hired a crane and driver from the Harbour Board (agency) to assist in loading a ship.

The Harbour Board paid for and retained the authority to dismiss the driver. The user firm said which tasks should be performed. At some time throughout this arrangement, the driver injured an employee of the user firm. Despite the fact that there was a contract in which it was stated that the driver would be the “servant” of the user firm, the House of Lords held that the question of vicarious liability for the actions of the driver was to be determined by the control test of who the employer was at the relevant time. The court held that the Harbour Board had control of the employee and found it liable.

The case law shows that it is only in exceptional circumstances, where the entire and absolute control over the worker has passed to the user organization, that courts will hold the user organization liable. Although the courts will examine many factors, as long as the agency retains authority over payment of wages and retains the responsibility for firing of the temporary worker, historically, courts have held the agency liable.

Steps to take

In cases where a user organization is found vicariously liable, the user organization can and should claim contribution and indemnity from the temporary agency. Users of temporary workers can go a long way in protecting themselves by taking certain steps to minimize liability.

Define the parameters of the relationship. The importance of a clearly defined, well-drafted contract cannot be overstated. The contract should be between the agency and user organization and should define the temporary worker as an employee of the agency. The contract should also contain a clause which confirms that any actions of the temporary worker will be the responsibility of the agency, and that the user organization has the right to claim contribution and indemnity against that agency if the temporary worker’s actions result in monetary damages being awarded.

Have good policies. These should be clearly defined written policies pertaining to human rights violations, harassment, discrimination and workplace safety. It is important that the user organization ensures these policies are followed and that once an issue comes to its attention immediate steps are taken to resolve the issue effectively and efficiently before it becomes an official complaint.

Document the relationship. Not only is a contract important, but so is the fact that all documentation pertaining to this tripartite-partite relationship is consistent with the contract and clearly reflects that the agency is the employer.

Let the agency maintain control over the worker. Ensure the agency maintains control over the temporary worker including provision of compensation and the power to hire and fire. Identify performance standards with the agency at the outset, but ensure the agency is responsible for any discipline required. This should not restrict the user’s right to demand that the agency remove any employee from the user’s employ immediately, if so requested.

Natalie C. MacDonald is an associate with Grosman, Grosman & Gale, a Toronto-based employment law firm. For more information contact (416) 364-9599.

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