Employees often incur expenses on behalf of their employers.  For instance, salespersons may use their automobiles and cell phones in the course of their duties.  Other employees may purchase office supplies or advance payment for hotel rooms or meals.  When must an employer reimburse employees for expenses incurred?  Must employers reimburse employees for actual expenses—whether or not the expenses were reasonable?  Alternatively, may employers give their employees a fixed amount intended to reimburse them for reasonable expenses?

 Recently, many of these questions were answered by the California Supreme Court in Gattuso v. Harte-Hanks Shoppers, Inc.   At issue in Gattuso was whether the employer was required to reimburse outside salespersons for the exact amount of the automobile expenses incurred by them, or whether the company was permitted to simply pay their outside salespersons more in salary and commissions than other employees to generally cover the expenses.

What is the Employer’s Obligation Under California Law?

Labor Code Section 2802 requires employers to “indemnify” employees for all “necessary expenditures . . . incurred by the employee in direct consequence of the discharge of his or her duties . . .” Clearly, if an employer reimburses its employees for the actual amount spent on expenses, then the employer’s duty under Labor Code Section 2802 is discharged.  For instance, if the employee pays for a hotel room for a business-related trip and the employer reimburses the employee for the exact amount paid, then the employer has met the requirement under Labor Code Section 2802.

May Employers Reimburse Auto Expenses by Using the Mileage Reimbursement Method?

Actual automobile expenses include insurance, repairs, registration, fuel, maintenance and depreciation.  It would be difficult and burdensome for employees to keep track of all such expenses and to apportion the expenses between work-related trips and personal use of the automobile.  It would likewise be burdensome for employers to review all the paperwork prepared by employees in connection with their actual expenses.

Employers are under an obligation to reimburse reasonable expenses.   Is it reasonable for one employee to drive a much more expensive car than his or her colleagues and expect the employer to cover those expenses?  How does an employer determine what is reasonable?

To avoid these sticky issues, most employers use a mileage reimbursement method, applying the Internal Revenue Service rate or some other rate agreed upon between employer and employee.  The IRS rate is intended to include an approximation of fuel, maintenance and other costs of automobile operation per mile driven.  The Gattuso court approved this method.  While the IRS mileage rate is less accurate than an actual reimbursement method, the Gattuso court noted that employees are permitted to challenge the mileage reimbursement method if they believe that their actual expenses exceed the mileage reimbursement.

May Employers Use the “Lump Sum Method” to Reimburse Employees for Auto

Employers sometimes pay employees a fixed lump sum that may be a per diem amount, a monthly sum or some other fixed stipend which is intended to reimburse employees for expenses.  The Gattuso court held that employers may use this method; however, the amount paid must be sufficient to provide full reimbursement for actual expenses necessarily incurred.  This method works best when employees incur similar expenses day after day, such as the same mileage every day that they work.   In the situation of predictable expenses, it would be of little value, and too much burden, for employers to require daily mileage reports of employees.

As with the mileage reimbursement method, employees retain the right to challenge the lump sum payment method if they believe the lump sum does not reimburse them for actual and reasonably incurred expenses.

Note that lump sum payments raise tax issues.  If the payments are considered taxable income to the employee—as opposed to reimbursed expenses—the decrease in actual dollars received by the employee must be taken into account in determining whether the payment provides full reimbursement of actual expenses.

May Employers Add a Lump Sum Payment to Other Compensation Paid to the Employees?

This was the ultimate issue in Gattuso.  The employer there paid the outside salespersons more in both salary and commissions to reimburse the employees for expenses incurred.  The court concluded that employers could add a lump sum payment to wages, but because wages are subject to numerous legal requirements including deductions, paycheck stub details, etc., the employer must include the lump sum reimbursement in a manner that differentiates what is wages and what is expense reimbursement.

Some employers with sales forces reimburse employees not only through increased wages, but also commissions.  If employers reimburse employees by increased commission percentages, then they run the risk of not reimbursing actual expenses.  If sales are low in a particular pay period, for instance, and the employee receives low commissions but continues to incur the same expenses, then it is likely the employee will not have been adequately reimbursed for car expenses.

Guidance by the Court

The Gattuso court concluded that while employers are permitted to pay employees increased salary and/or commissions to reimburse them for expenses, some means to identify the portion of compensation intended to reimburse expenses must be established.  The employer must also ensure that the amounts are sufficient to fully reimburse employees for actual expenses incurred.

Companies should review their policies and procedures in light of the Gattuso holdings to make sure that they are in compliance with Labor Code Section 2802 obligations.


Olivia Goodkin has over two decades of experience representing corporations, individuals and closely-held businesses in employment law and business litigation. She advises on the termination of employees, wage and hour laws, employment contracts and other employment issues, and she defends companies in wrongful termination lawsuits. Olivia also creates trade secret programs for companies seeking to protect their valuable intellectual property. Olivia can be reached at, or by telephone at 310.286.1700.


Century City-based law firm Rutter Hobbs & Davidoff Incorporated represents clients in matters involving bankruptcy and corporate reorganization, business disputes and litigation, corporate and securities, estate planning and litigation, family law, intellectual property, labor and employment, and real estate. For more than one-third of a century, the firm’s experienced attorneys have represented middle market companies, early stage entities, large corporations and individuals.

For more information visit

Employment Law: Dismissals For Incapability & Other Topics

Incapability Dismissals Contrary to popular belief ‘ill health’ is a potentially fair reason for dismissal since it relates to the employee’s capability to perform the work that they were employed to do. However, in the context of incapability dismissals, the Employment Tribunal will scrutinise the procedures followed by the employer prior to termination, in order to determine whether the decision to dismiss was reasonable in the circumstances. A ‘reasonable’ employer would normally be expected to consider all the relevant medical evidence, consult with the employee and consider whether there are any steps that could be taken to assist the employee in returning to work. (Employers should also be mindful of the disability discrimination legislation and the need to make reasonable adjustments.)

But what if the employee’s ill-health was caused by the employer in the first place? Should this be taken into account when deciding whether the employee’s dismissal was reasonable?

This question was recently addressed by the Employment Appeal Tribunal (EAT) in the case of Royal Bank of Scotland Plc v McAdie (2006).

The Facts

Ms McAdie went off sick with work-related stress following her employer’s failure to adequately address her grievances and the intimidating manner in which the process had been handled. After 9 months’ absence, Ms McAdie was referred to an occupational health doctor who diagnosed “severe adjustment disorder, secondary to alleged work-place issues, including harassment”. The doctor expressed doubt that the condition could be treated due to the depth of ill-feeling held by Ms McAdie and concluded that a return to work appeared impossible. Following this report, Ms McAdie was dismissed on grounds of incapability. She subsequently brought a claim for unfair dismissal.

The Employment Tribunal initially upheld her claim, finding that her ill-health had been caused by the manner in which the Bank had dealt with her grievance and that this was crucial in determining the fairness of the dismissal. In the Tribunal’s opinion “no reasonable employer would have dismissed in these circumstances, because no reasonable employer would have found themselves in these circumstances. A reasonable employer would have investigated the matter properly at an early stage.”

EAT’s Decision

However, the EAT overturned this decision. In their view, the fact that an employer may have caused the incapacity did not mean that it could never effect a fair dismissal. Whilst the cause of an employee’s illness was a factor to be taken into consideration, the focus must always be on the reasonableness of the employer’s actions in the circumstances that existed at the time of the proposed dismissal – not whether the employer should have got itself into those circumstances in the first place.

In the present case, the medical evidence was very clear and the simple fact was that there was no alternative to dismissal. The Bank’s decision could not therefore be said to be unreasonable. The appeal was allowed and the claim dismissed.


The case of McAdie serves as a useful reminder of the dividing line between unfair dismissal claims and personal injury claims. Save in the context of discrimination cases, the Employment Tribunal has no jurisdiction to hear claims for personal injury. The appropriate course of action for an employee who suffers injury (physical or mental) as a result of a breach of duty by their employer, is to bring a personal injury claim in the civil courts. However, this will require the employee to show that the injury suffered was reasonably foreseeable and this can prove to be a significant hurdle, particularly in “work-related stress” cases.


Flexible Working Extended to Carers

The Government has published the Flexible Working (Eligibility, Complaints and Remedies) (Amendment) Regulations 2006, which extend the right to request flexible working to certain carers of adults. The Regulations will come into force on the 6 April 2007 and will extend the right to request flexible working to employees who are, or expect to be, caring for a person who is over the age of 18 and in need of care, and who is either: married to, the partner of, or the civil partner of the employee; a relative of the employee; or living at the same address as the employee. The right is subject to a qualifying period of 26 weeks continuous employment.

Disability by Association

Carers of disabled people may acquire further legal rights following the referral of Attridge Law v Coleman to the European Court of Justice. Although most discrimination legislation protects employees from detrimental treatment on the grounds that they associate with someone in a protected group (e.g. a white employee dismissed for marrying a black person), the same does not apply to the Disability Discrimination Act 1995 (DDA).

On the face of it, the DDA only applies if the employee themselves are a “disabled person”. The issue before the ECJ is whether the DDA should be given a wider interpretation so as to prohibit discrimination of an able bodied employee on the grounds of their association with a disabled person. If the claimant’s case is upheld, the scope of the DDA will be significantly extended.

Tim Davies is an Associate Solicitor at Michelmores Solicitors in the Employment Law Department. Contact Tim on

Employment Agreement Issues

Since the beginning of the capitalist society in the world, the struggles contradictions between employers and employees have existed along with it. And also the agreements made binding by putting them on paper. During the early days, individuals just trust and rely on each other’s words in establishing an employment agreement from the plowing of the fields, gathering of produce, herding animals and even in building and repairing furniture, houses and things.

As the changes in society go on, the word of individuals lose more credibility, what once was effective by just a handshake or a nod between people now need thousands of words written in ink. More so, it has come to that time where even written words are not enough to bind people’s contracts. Notarization has now become the standard. Employers and employees both have different needs and purposes for entering into an employment agreement.

On the part of the employer, it is a security against unscrupulous, dishonest and unfit employees. It is a way of making employees commit to the terms of employment from the work hours, job description, quality of work and compensation among many other things.

On the part of the employee, an employment agreement works to bind an employer also to labor standards and relations involved in the employment. It is a safeguard from wrongful termination, discrimination and non-payment of benefits among others.

Employment agreement is crucial to achieve a secure working relationship between employer and employees. Sometimes disputes could be avoided or easily resolved if the same had been included in the employment agreement. An example would be the manner of resolving disputes. If the agreement includes grievance mechanisms to resolve employment problems at the first instance, then there will be no confusion or impasse in case employment matters arise.

Actually, employment agreement is beneficial for both. An employer will feel secured from unnecessary and bogus suits against corrupt or untrustworthy employees who just want to claim easy money by blackmailing employers in dragging them to employment law suits unless said employers would be willing to settle the matter for a sum.

An employee actually is even more benefited by an employment agreement. People are sometimes defined by what they do and often times people work as a necessity, the only means to provide for the family. An employment agreement will give an employee job security as well as protection from harassment and discrimination. Employees are also more vulnerable from lawsuits from their employers without an employment agreement. Oftentimes, they just settle if only to avoid the costs and stress related to the problems of litigation.

In the end, it is best for both employers and employees to have a just and complete employment agreement that can be provided by an expert employment attorney. For both parties, seeking counsel is money and time well spent.

For more information about Employment Agreement visit our Los Angeles Attorneys.

Employment Contracts: Workers’ Written Statement Rights

There exists a contract between each employee and employer which is not necessarily, but is preferred to be, in writing, not necessarily as a single, and often more than one, document readily accessible, containing in a written statement which must be issued to the employee by the employer within a period of not longer than two months from the date of the commencement of the employment, if the employee works more than eight hours per week and has continuously been employed for at least one month, which must contain the major terms of the contract of employment ~of which some are express terms and found also in itemised pay or salary slips and notices and in such other documents as work-rules and relating to any collective agreements affecting and not by the individual employee contracted with objected to -as well as in verbal exchanges such as oral instructions (if only can be proven, in practice), and some are legally bindingly implied terms in common-law and/or by custom and practice and increasingly by statute.

>>>Section 1 of the Employment Rights Act 1996, as amended, treats the written two-month statement as being the most crucial and important source of the express terms of the contract of employment which the Act requires that must include the following:

i… The names of both the employer and the employee;

ii… the date of commencement of the employment;

iii… the remuneration -including the method of payment and at what intervals paid ~and in the case employment outside the UK longer than one month extra pay;

iv… the holiday and sick-leave entitlements;

v… pensions and pension schemes;

vi… notice requirements -or reference to statutory entitlements if not better;

vii… the area of employment -indicating if place of work is more than one;

viii… the job-title and description -which may be brief;

ix… details of the disciplinary and grievance procedures -ACAS’s are regarded the minimum.

>>>As to implied terms, there exist in common-law and by statute a number of duties of which some are on the part of the employee, and those binding on, or also on, the employer are…

i… Mutual respect.. in Warner -v- Barbers Stores 1978 refusal to give leave of absence to attend to a domestic crisis was breach of contract, as was to swear at the employee in Palmanor -v- Cedron 1977 but if in that particular trade in common use Futty -v- Brekkers 1975 might excuse it, and to have been heard by another speaking derogatorily of the employee also was a breach in Isle of Wight Tourist Board -v- Coombes 1978…

ii… Remunerating and paying wages so long as the employee is available for work, even if no work is provided -unless collectively or as guarantee payments in cases of short-time work or lay-offs…

iii… Provision of Work.. for.. in Devon -v- Roser & Son 1906 one might be on piece-work or Turner -v- Goldsmith 1891 commission-wise might suffer, at any rate Provincial Financial Group -v- Hayward 1989 is entitled to practise and retain his skill -Clayton -v- Oliver 1930 it may affect his reputation…

iv… Indemnifying.. any expenses employee reasonably incurred the course his job…

v… References.. if chooses to give about the employee to another, with care must do so, Spring -v- Guardian Assurance plc 1994 else he may be liable to the (former) employee for negligence or recklessness for any loss so caused…

vi… Confidentiality.. of the details furnished by the employee must not without his permission without a right in law to do so be broken, for they were not in Dagleish -v- Lothian Border Police Board 1991 in the public domain and an injunction prevented disclosure for identifying non-payers of poll-tax…

vii… Care in safety.. must be not less than reasonable in providing and maintaining a safe place of work as well as tools and equipment and competent colleagues -Walker -v- Northumberland County Council 1944: else may be liable to the employee for any physical injury or psychiatric harm.

viii… By statute implied terms include those below:

a… Paid maternity leave and job protection;

b… time off for union activities or to seek work if under redundancy notice;

c… a safe system of work;

d… guarantee and statutory sick pay;

e… equal opportunities regardless of race, gender, marital status;

f… not to dismiss wrongfully, nor unfairly -including constructively.

An employee has the right to ask an employment tribunal has the obligation to order an employer to issue these and, if the Written Statement is not in issued or not in full or clear, in case of employment termination or any other employment dispute to deem it issued as statutorily required and binding in determining the matter -as well as to hold the employer in breach of the laws relating to contracts of employment.

This is an outline –laws change, always ascertain current law.

The author has a website at:


Affect who the employer is and who is responsible for one’s wage or salary, holiday pay, employer’s contribution to national insurance, pension rights, and employment protection, the legal distinction made between “employees” and “workers”, and between those and “contractors” ~one’s entitlements depend on whether in the eyes of the law one is an employee, or a worker, subcontractor, self employed contractor –or partly a freelancer.

Because of their different legal definitions an ’employee’ or a ‘worker’ in the eyes of the law may be in fact a ‘contractor’ or a ‘subcontractor’, and vice-versa -and employment through an employment agency may or may not itself fall in different category. Definitions and categories affect entitlements.

Many employees lose out on entitlements, because their legal employment category, or because who the law regards as employer, is different than they think or have been told. When one is paid to do work for another it is important to know how the employment contract is formed, and one’s employment status.

Are you liable for your income tax or must the employer deduct it and attend to it at source, what are your holiday and pension entitlements and whose responsibility are they, are you entitled to employer’s part of your national insurance contribution –who is your employer at the workplace that you work, the business you work on the premises of, or an employment agency, or is it you whose responsibility those are, in the eyes of the law?

These affect liability, vicarious liability and the statutorily implied terms of any contract -as well as various other statutory requirements ~from equal treatment to employment protection under the employment laws -many have sued and lost because the employer was not in law the sued party but another.

Often these also affect ‘pay’ (in law defined as being what is received directly or indirectly in cash or kind for work done) ~an ’employee’ gets full holiday pay, paid leave -a ‘worker’ does not.

In employment there is sometimes a company pension scheme; as the norm the employer must pay part of one’s national insurance contributions (covering, e.g., unemployment, health-care, state-pension) if one is an ’employee’; but the entitlement is partial if one is a ‘worker’, and nil if one is in law a ‘contractor’ -one’s employment status matters.

The following helps ascertain one’s employment status in law, and who in law is one’s employer.

Is one an ’employee’ or ‘self-employed contractor’? There are three tests that are applied to the question:-

The first is the ‘Control Test’ and is based on this that if the employer controls the job to be done but not how it is done than the person doing the job is an employee; but this test would not be satisfactory, because also to an employee with specialist knowledge, e.g. a company nurse, the employer would not tell how to do the job.

The second, ‘Organisational Integration Test’, seeks to ascertain whether the person paid is an integral part of the business: an anaesthetist was not a self-employed contractor in Cassidy -v- The Ministry of Pensions 1961 ~he was a resident of the hospital -an employee.

But this did not suffice: drivers who were paid for an agreed minimum number of jobs per year and had to wear company uniforms as well as to have the company colours on their lorries and who could not work for the competition without the employer’s permission, but who could choose to do extra work and decided their own routes and used their own lorries and could use at their pleasure substitute drivers, in Ready Mixed Concrete -v- The Ministry of Pensions 1968 were self-employed contractors, not employees.

There is a third, the ‘Multiple Test’ to be applied: ‘one is an employee if.. provides work or service for remuneration.. the business has some degree of control.. without any terms contrary to the employment relationship.’

This is the consideration in the case of those engaged or introduced by employment agencies:-

Who is the employer? Is one, as a specific individual, under the direct supervision and control of the business? If so, one is an employee of the client business -where one works…

Does the business where one works pay that agency and that agency itself pay one? If so, one is not an employee of the client business, but may be an employee or worker of that agency itself -agency staff.

Employees normally receive holiday pay, self employed contractors do not ~but what about the ‘worker’-the casual worker who is not in self employment and yet is also not a regular employee?

Is one an ’employee’ or ‘worker’? There is a different ‘worker’ category for casual workers which was created under the Employment Rights Act 1996 s.230 (3) to deal with this question.

If a casual worker is genuinely on an ad hoc basis employed, that casual worker is, in law, an employee while he is employed, and for the period/s of such employment has employment rights -e.g., to receive wages and holiday pay.

A ‘subcontractor’ normally would be in the category either of employee or of worker on the same basis, but instead of the business where the sub contractor works, of the self employed contractor who engaged the sub contractor.

If there is a dispute about whether a contractor engaged a subcontractor as a self employed person, then the same three tests above are applied to ascertain the employment status of that subcontractor in relation to that contractor.

If that subcontractor receives a wage and is not self-employed in relation to that contractor, then if the subcontractor works regularly for that contractor he is an employee of that contractor, and if he works casually for that contractor he is a worker of that contractor.

Being a ‘freelance-worker’ is, to all intends and purposes, the same as being a self-employed contractor.

One can lawfully be both: an employee or worker, as well as a freelancer -self employed.

If one who is normally an employee or worker wants also to do some freelance work, then one officially is an employee or worker and one’s entitlements in relation to ones normal status are not affected -but those entitlements do not extend to one’s freelance work and employment.

If one normally self employed wants also to do some work as an employee or worker of a business, then one’s official status as self-employed does not change -but one’s entitlements for work done as an employee or worker are not affected to the extent of one’s such work.

If one is not paid for holidays.. if a pension scheme depends on whether one is a freelancer or not.. if the employer is responsible for one’s colleagues’ taxes or pension contributions but not one’s own.. if one is working for one business but is paid by another… one might need to ascertain one’s employment status -the above are the legal tests.

(Laws change –always ascertain current law.)

The author has a website at:

Employment – Do you Know your Rights?

Do you know your rights?

Your rights are governed by your contract of employment and by the law. Your contract does not have to be written. But, if you are an employee, once you work for your employer continuously for 2 months, you are entitled to a written record of the most important terms of your employment. You have different rights if you are ‘self-employed’, rather than ‘employee’.

Legal protection

What rights you have will depend, to some extent, on whether you are ‘employee’ or ‘self-employed’. Generally, employees have more legal protection than the self-employed. There is no precise, legal, definition of these terms. All the circumstances, and especially the overall picture they paint, are relevant. Generally speaking, you are more likely to be an employee if you have to do your duties personally, if your employer can tell you how to do your job, and if you cannot work for more than one employer at any given time.

Minimum rights

Your contract may be in a letter or a formal agreement. It may even be verbal. Normally, at least some rights will be written. If an employee, you are entitled to receive a written statement of the most important terms of your employment.

The law sets certain minimum rights. Your employer cannot give you less than what the law offers. If you did not agree to certain matters, your legal rights will apply automatically. They deal with matters such as minimum pay, minimum holidays, maximum working hours and right to maternity and paternity leave.

You also have certain rights which are often unwritten or unspoken (‘implied’ rights). They include the right to:

(i) be paid wages;
(ii) have your employer take reasonable care of your health and safety;
(iii) in some cases, receive work;
(iv) have trust and faith in your employer; and
(v) receive reasonable notice to end the employment (if your contract does not set a notice period).

Breach of contract

Your employer cannot normally change the terms of your contract without your agreement. To do so, is a breach of contract. However, if you don’t agree to the changes, your employer might decide to dismiss you. Depending on the circumstances, the dismissal may be ‘unfair’ and / or ‘wrongful’. If the changes have exceptionally serious effect on you, you may be able to resign and seek compensation for ‘constructive dismissal’.

Complying with the law

If your employer breaches any of your rights, you should speak to them. If necessary, make a written complaint and issue a formal grievance. Most employers want to comply with the law. So, a change should take place. If nothing happens, and you are a union member, see if it can help.

If you want to recover compensation, you could bring legal action. You should take full legal advice first. Most complaints will be heard at a local employment tribunal.

You must make sure that your claim arrives at the tribunal within 3 months. This begins from the date your employer breached your rights or, if you were dismissed or resigned, the ‘effective date of termination’. The effective date of termination is normally your last day at work. Only in truly exceptional circumstances will the tribunal allow you to make a later complaint.

If your claim is successful, the tribunal is likely to say that your employer should honour your rights. You are also likely to recover compensation. Where relevant, the tribunal will say what the terms of your employment are.

If you would like to find out more about the services that we provide, please visit our website mfg Solicitors Employment Law.

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Employment Law: Majrowski and Employers’ liability for psychiatric illness

The Protection from Harassment Act 1997 makes harassment both a criminal and civil offence, it was intended to deal with the problem of stalking. Section 1 – Prohibition of Harassment

A person must not pursue a course of conduct which:-

i) Amounts to harassment of another; and ii) which he knows or ought to know amounts to harassment of another.

For the purposes of this section the person whose course of conduct is in question ought to know that it amounts to harassment of another if a reasonable person in possession of the same information would think the course of conduct amounted to harassment of the other.

Majrowski v Guy’s & St Thomas’s NHS Trust [2006] UKHL 34

This case was a claim brought by an employee under the 1997 Act against his employer in respect of alleged harassment at work. The employee argued that his manager had breached a duty placed upon her by the Act and that the employer should be held vicariously liable for that breach.

This was not a case which the employee could bring under any of the discrimination legislation. The allegations were of general bullying intimidation and harassment.

The Act clearly established a statutory tort and the Court of Appeal had to carefully consider whether an employer could be held vicariously liable for a statutory tort committed by one of its employees where the legislation in question does not specifically provide for such liability. On the basis that unless the statute in question directs otherwise or there is a good policy reason why the principle of vicarious liability should not apply, the Court of Appeal believed that there was no reason to reject the argument of the employee.

The Court of Appeal was prepared to accept that although it was generally understood that the 1997 Act had been introduced to deal with the problem of stalking, it was nevertheless an Act which dealt with the prohibition of harassment in a range of different situations, not just stalking.

The appellant NHS trust appealed against the decision ((2005) EWCA Civ 251, (2005) QB 848) that it was vicariously liable in damages to the respondent (M) under the Protection from Harassment Act 1997 s.3 for harassment committed by one of its employees in breach of s.1 of the Act. M, who had been employed by the trust, had alleged that his manager had harassed, bullied and intimidated him while acting in the course of her employment. An investigation by the trust had resulted in a finding that harassment had occurred. M had claimed against the trust for damages under s.3 of the Act based exclusively on the trust’s vicarious liability for its employee’s alleged breach of the statutory prohibition of harassment. The trust, relying on the phrase “damages may be awarded” in s.3 of the Act, submitted that the award of damages under that section was discretionary, and therefore harassment could not be equated with a common law tort. The trust also submitted that the Act was not aimed at the workplace but was a legislative response to the public order problem of stalking.

The House of Lords held that: (1) The principle of vicarious liability was not confined to common law torts, but was also applicable to equitable wrongs and breaches of statutory obligations. Unless statute expressly or impliedly indicated otherwise, vicarious liability was applicable where an employee committed a breach of a statutory obligation sounding in damages while acting in the course of his employment, Dubai Aluminium Co Ltd v Salaam (2002) UKHL 48 , (2003) 2 AC 366, Nicol v National Coal Board (1952) 102 LJ 357 and National Coal Board v England (1954) AC 403 applied, Harrison v National Coal Board (1951) AC 639 considered. An employer could be vicariously liable if the employee’s conduct was closely connected with the acts the employee was authorised to do and the conduct might fairly and properly be regarded as done by the employee in the course of her employment, Lister v Hesley Hall Ltd (2001) UKHL 22 , (2001) 2 WLR 1311 applied. (2) The effect of s.3(1) was to render a breach of s.1 a wrong giving rise to the ordinary remedies the law provided for civil wrongs. The enabling language “may be awarded” was apt simply to extend or clarify the heads of damage or loss for which damages were recoverable. (3) Neither the terms nor the practical effect of the Act indicated that Parliament intended to exclude the ordinary principle of vicarious liability. By s.3 Parliament had created a new cause of action, a new civil wrong, and damages were one of the remedies for that wrong. Parliament had added harassment to the list of civil wrongs because it considered the existing law provided insufficient protection for victims of harassment. The prospect of abuse in cases of alleged workplace harassment was not a good reason for excluding vicarious liability. (4) Section 10 of the Act inserted a new section, s.18B, into the Prescription and Limitation (Scotland) Act 1973, which assumed that in Scotland an employer might be vicariously liable in damages to the victim of a course of conduct amounting to harassment in breach of the relevant provision of the 1997 Act. Parliament could not have intended that the position should be different in England.


The Act however presents an employee with hurdles to overcome if a claim is to be brought in this way. Firstly the 1997 Act prohibits only a “course of conduct” amounting to harassment, meaning that a single incident of harassment by an employee will not be sufficient to lead to liability.

Secondly, in order to succeed, a claimant must establish that harassment within the meaning of the Act has taken place. This means “alarming” the person or causing the person “distress” amongst other things.

Thirdly, vicarious liability will only be established where there is a sufficiently close connection between the harasser’s conduct and the nature of his or her duties, and where it is just and reasonable to hold the employer liable for the harasser’s actions.

This is obviously an area of law which is very much in its infancy. However there is possible cause for concern. An employee who brings a claim for damages in the Civil Court has two significant hurdles to clear. The first is that any injury was “foreseeable” and the second is that if the claim is based upon a mental injury that that must be a “recognised psychiatric disorder” requiring significant medical evidence.

Ian Mann – Employment Barrister King’s Bench Walk Ian Mann was called to the Bar in 2000. He practices in employment disputes representing both employers and employees. His employment practice embraces the full spectrum of Employment Tribunal, High Court and appellate work and covers all areas of employment law, especially discrimination.