Vicarious Liability For Damages Committed By Independent Contractors- Module 2 of 5

Vicarious Liability For Damages Committed By Independent Contractors- Module 2 of 5


Module II:Vicarious Liability For Damages Committed By Independent Contractors


      Although an employer may be vicariously liable for an employee’s misconduct, an employer is typically not vicariously liable for an independent contractor’s misconduct. However, there are three exceptions. First, an employer may be liable for an independent contractor’s misconduct if the employer was negligent in selecting or retaining the independent contractor. Second, an employer may be liable if the tasks assigned to an independent contractor are non-delegable. Third, employer may be liable if the work performed by the independent contract is ultra-hazardous.       

In this module, we will discuss the legal standards that courts use to distinguish employees from independent contractors and discuss the circumstances in which an employer may be vicariously liable for the independent contractors’ misconduct.


Distinguishing Independent Contractors From Employees

      Unlike an employee, an independent contractor is not subject to the employer’s supervision, direction, or control. As one legal commentator states:

The primary basis for determining whether someone is an employee or independent contractor for purposes of attaching vicarious liability to the employer is whether the employer has the right to control the manner in which the employee performs the job. So, even if a company hires what it thinks is an independent contractor, the reality is that if the hiring party can control and direct the work being done by the contractor to a certain level, then that person no longer is an independent contractor and instead will be treated as an employee of the hiring company.[1]

            Therefore, “one who exerts significant control over the physical details of the work is characteristic of an employer-employee relationship,” whereas “[o]ne who controls the more general process by which the assignment is accomplished is evidence of independent contractor status."[2]  This distinction can be summarized as follows:

 

An independent contractor is commonly defined as one who contracts to perform a certain task or duty independently according to their own means and methods without being subject to the control of the hiring party except as to the ultimate goal or result. Historically, in circumstances where this level of independence existed, the imposition of liability on the hiring entity who only exercised limited control over the method in which the contracted work was performed resulted in inequity. . . . The distinction between an ‘employee’ and an ‘independent contractor’ therefore, can become a critical liability issue to the hiring entity.[3]

 

            Put simply, “the amount and level of autonomy exercised by the party performing the work is the hallmark of the distinction.”[4] Courts also rely on other factors when determining if an individual should be classified as an employee or independent contractor. As you may recall, these factors include:

The skill level required. If someone performs a service that requires a special skill, that person will not likely be considered an employee, particularly if the services performed are distinct from those that the employer typically performs.

 

The existence of a written contract and benefits. If an employer and the agent sign a written employment contract that includes a salary and benefits, such as health and retirement, that agent will likely be deemed an employee.

 

The right to discharge. If an employer has the right to terminate the person, that individual will likely be considered an employee.

 

Furnishing tools and a place to work. If an employer provides the person with tools and a place to complete work-related tasks, he will likely be considered an employee.

 

The length of the employment relationship. Courts will consider the length of time that the agent is retained to perform tasks for an employer. The more permanent the relationship, the more likely that she will be deemed an employee.

 

The parties’ intentions. Courts will give some weight to whether the parties believe that they are entering an employee-employer relationship, although the parties’ intentions are not determinative.[5]

 

            Let’s consider a couple of examples.

 

Example 1

A criminal defense firm hires a clinical psychologist to assess whether one of the firm’s clients suffers from a mental illness. In this situation, the psychologist will be considered an independent contractor, not an employee. The psychologist possesses specialized expertise and skill and, as such, the law firm has neither the ability nor the experience to supervise, direct, or control the manner in which the psychologist conducts her examination.

Example 2

Workout Fever, U.S.A., a nationally-respected fitness center, hires Thomas as a personal trainer. Thomas signs a contract to work twenty hours per week at a salary of $20.00 per hour. One week later, while training a seventy-two-year-old gym member desires to improve her cardiovascular health, Thomas instructs the member to sprint as fast as she can on a treadmill for five minutes. The member suffers a heart attack and dies. In this situation, Workout Fever, U.S.A. is vicariously liable because Thomas was an employee, not an independent contractor. Workout Fever, U.S.A. contracted with Thomas to provide a service (personal training) that was directly related to the services Workout Fever provides, it agreed to pay a specific salary and it had the authority to supervise the manner and method by which Thomas trained its members.

            Now let’s discuss the general rule regarding employers’ liability for independent contractors’ misconduct and the three exceptions to this rule.


The General Rule Concerning Employers’ Liability For Independent Contractors’ Misconduct and Exceptions

 

The general rule is that an employer is not liable for an independent contractor’s misconduct.[6]

 

However, there are three exceptions.  An employer may be liable for an independent contractor’s misconduct if: (1) the employer was negligent in selecting or retaining an independent contractor[7]; (2) the tasks assigned to an independent contractor are non-delegable[8]; or (3) an independent contractor’s work is ultra-hazardous or inherently dangerous.[9]

 

The courts have construed these exceptions broadly and, in so doing, have significantly undermined the general rule. In fact, one commentator notes that “the general rule of non-liability of an employer for torts committed by independent contractors has been eroded to the point that some legal experts now argue that ‘the rule is now primarily important as a preamble to the catalog of exceptions.’”[10] 

 

The Restatement of Torts highlights the increasing frequency with which employers are liable for independent contractors’ misconduct. As one legal commentator explains:

 

The Restatement of Torts has gone so far as to say that the many exceptions have eroded the "general rule" to the point that the rule can now be said to be "general" only in the sense that it is applied where no good reason is found for departing from it. In other words, just because you hire independent contractors does not mean you should assume you will not be held liable for the work they perform.[11]

 

We will now discuss each of these exceptions in more detail.


 

Negligent Selection or Retention

Employers may be vicariously liable for an independent contractor’s misconduct if the employer is negligent in selecting or retaining the contractor. This exception can be summarized as followed:

 

After engaging an independent contractor, the employer may still face exposure to independent liability as opposed to vicarious liability, should the employer personally conduct himself in a negligent manner. The thrust of this analysis will be to consider one aspect of the employer's independent liability that can result from the negligent selection of an independent contractor. The status of employing an independent contractor does not absolve the hiring party from its personal negligence when the employer fails to exercise reasonable care in engaging only independent contractors competent to safely perform the work.[12]

                                                                                                       

            Simply put, the “selection of an independent contractor requires the exercise of that amount of care that a reasonable person would exercise under the same or similar circumstances.”[13]

 

When analyzing whether an employer negligently selected or retained an independent contractor, courts will consider the following factors, among others:

 

Due diligence. Whether the employer examined the independent contractor’s background, experience, and competence before hiring the contractor.

The nature of the work.  Whether the work lies within the competence of the average person or is work that can be done properly only by persons possessing special skill and training.

Danger to others. The danger to which others will be exposed if the contractor's work is not properly done.

For example, in Philip Morris, Inc. v. Emerson, the Supreme Court of Virginia held an employer vicariously liable for an independent contractor’s misconduct because, apart from examining the independent contractor’s brochure, the employer failed to conduct any investigation into the contractor’s background and competence.[14] The employer’s failure to do so was particularly egregious because the independent contractor was responsible for the dangerous task of disposing of toxic chemicals from pressurized tanks.[15]  As the Supreme Court of Virginia explained, “a perusal of a contractor's self-serving brochure is not sufficient to discharge an employer's duty of reasonable care to employ a contractor who is competent to perform a dangerous task.”[16]

Additionally, in Woodward v. Mettille, the Illinois appellate court allowed for the possibility that a defendant-employer, who relied only on anecdotal evidence from a third person regarding the independent contractor’s reputation, could potentially be vicariously liable for the contractor’s misconduct because of his failure to conduct an adequate pre-hiring investigation.[17]

Let’s now consider two examples to determine whether an employer is liable for the misconduct of an independent contractor.

Example 1

The owner of an apartment complex advertises for a contractor to repair damaged wiring in several tenants’ apartments. The owner’s friend recommends someone that he claims, “is really good at that stuff.” The owner hires the contractor, who subsequently installs faulty wiring. This results in a massive fire that seriously injures five tenants. In this situation, the employer may be vicariously liable because the employer failed to investigate the contractor’s background, experience, and competence, and because the contractor was hired to perform a complex and dangerous task.

Example 2

The ABC Olympic Training Team hires Jordan, a nationally-respected orthopedist, to care for its athletes’ injuries. Jordan has an exemplary reputation and no criminal record. Over the course of two years, Jordan molests several children under the guise of treating them. In this situation, ABC is probably not vicariously liable because Jordan was hired to perform a special and complex skill (orthopedic treatment to its athletes) that ABC lacked the ability to supervise, and because it had no reason to suspect or foresee that Jordan would engage in such conduct.


Non-Delegable Duties

An employer may be vicariously liable for an independent contractor’s misconduct if the employer assigns non-delegable responsibilities, namely, those that implicate public safety or welfare to an independent contractor.[18] This exception can be summarized as follows:

 

. . . [C]ertain of the employer's responsibilities are so important to the community that they are deemed to be non-delegable duties, even when that task is done by an independent contractor. This doctrine holds the employer vicariously liable for the negligence of the independent contractor even given a showing that the employing party exercised due care. Examples of this exception based on nondelegability include: the duty of the government to maintain highways and roads, a railroad's duty to maintain safe tracks and crossings, the duty to provide safe working environments for employees, and the duty to provide a reasonably safe premise for business visitors.[19]

 

Let’s consider one example.                                 

The mayor of New City, in conjunction with the city council, hires a private contractor to repair noticeable corrosion on a city bridge that has slightly weakened its foundation. The contractor fails to perform the work properly, and, several weeks after the work is completed, the bridge partially collapses and kills fifteen motorists. In this situation, the mayor and city council may be vicariously liable because the bridge repairs implicated public safety and welfare and were therefore not delegable.


Ultra-hazardous Activities

An employer may be vicariously liable for an independent contractor’s misconduct if the employer assigns responsibilities to the independent contractor that involve ultra-hazardous activities. This exception can be summarized as follows:

 

An exception to the general rule exempting employers from liability for independent contractors’ misconduct “involves situations where the independent contractor performs work likely to be a ‘peculiar risk’ or an ‘inherently dangerous’ function.  The essence of these phrases is that given the nature of the task, a high degree of danger to others can result absent special precautions. Circumstances demonstrating this hazardous situation exclusion include: a case wherein the Department of Defense contracted with an independent contractor for the disposal of oil contaminated with toxic chemicals from a Florida military installation, a case involving the construction of a dam and a case in which a private company produced antitank explosives for the government. The justification advanced for holding the employer liable for contractors’ inherently dangerous work is that it would be unconscionable if the employer escaped liability for burdensome obligations merely by contracting out or shifting its responsibility to the independent contractor.[20]

            Now let’s consider two examples.

Example 1

The City of New Hope hires Phil’s Fireworks, Inc. to perform its annual July 4th fireworks display, which is an event that thousands of New Hope residents attend. Unfortunately, during the show, one of Phil’s Fireworks employees fails to configure the fireworks properly, and, as the show begins, the fireworks are mistakenly fired into the crowd. Twelve residents are seriously injured. In this situation, the City of New Hope is vicariously liable because operating fireworks, particularly at a public event, is inherently dangerous.

Example 2

A small town in Sunrise, Montana owns and operates a public swimming pool that residents frequently visit during the summer. One summer, Sunrise hires five experienced swimmers to serve as lifeguards. One day while on duty, the lifeguards observe a man in his mid-40’s dive in the pool’s most shallow area, which is only four feet deep. The man suffers a severe concussion and damages two vertebrae in his neck. In this situation, Sunrise would not be vicariously liable because swimming is not an inherently dangerous activity for adults.

 

            In our next module, we will look at employers’ liability for employee conduct in the context of certain specific employer-employee relationships, such as employees of government, hospitals, restaurants and religious organizations.

 



[1] See You Could Face Tort Liability For Your Independent Contracts, InsuranceTrackingBlog (July 28, 2014, 3:40 PM), https://www.businesscredentialingservices.com/blog/2014/07/28/insurance-certificate-tracking-acord-form-changes-erm-vendor-screening-independent-contractor-liability (internal citations omitted).

[2] Linda S. Calvert Hanson, Employers Beware! Negligence in the Selection of An Independent Contractor Can Subject You to Legal Liability, U. Miami Bus. L. Rev.129, 136 (1995), https://repository.law.miami.edu/cgi/viewcontent.cgi?article=1213&context=umblr (internal citations omitted).

[3] Id. at 129-130 (internal citations omitted).

[4] Id. at 136; see also Bryant v. Delmarva Power & Light Co., 1995 Del. Super. LEXIS 438 at *23 (Del. Super. Ct. Oct. 2, 1995) (“[Ordinarily a property owner who hires an independent contractor owes no duty . . . unless the owner retains the power to control the method and manner of doing the contract work.”).

[5] Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323-24 (1992); Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 752-52 (1989); United States v. Silk331 U.S. 704, 718-19 (1947).

[6] See, e.g., Woodson v. Rowland, 407 S.E,2d 222, 234 (N.C. 1989) (citing Mack v. Marshall Field & Co., 12 S.E.2d 235 (N.C. 1940).

[7] See CoTemp, Inc. v. Houston West Corp., 222 S.W.3d 487, 492 (Tex. Ct. App. 2007).

[8] See Davis v. Devereux Foundation, 37 A.3d 469, 481 (N.J. 2012).

[9] See Woodson, 407 S.E.2d at 234-35.

[10] You Could Face Tort Liability For Your Independent Contracts, InsuranceTrackingBlog (July 28, 2014, 3:40 PM), https://www.businesscredentialingservices.com/blog/2014/07/28/insurance-certificate-tracking-acord-form-changes-erm-vendor-screening-independent-contractor-liability (internal citations omitted).

[11] Id. (citing Restatement (Second) of Torts § 409) (Am. Law Inst. 1965).

[12] See Hanson, supra note 2, at 131-32 (internal citations omitted).

[13] Id. at 139 (citing Restatement (Second) of Torts § 411).

[14] Phillip Morris, Inc. v. Emerson, 368 S.E.2d 268, 278 (Va. 1988).

[15] Id.

[16] Id.

[17] Woodward v. Mettille, 400 N.E.2d 934 (Ill. App. Ct. 1980).

[18] See Davis v. Devereux Foundation, 37 A.3d 469, 481 (N.J. 2012) (“[I]n contrast to the ‘scope of employment’ standard, which turns on the parameters of the employment relationship, the duty urged here derivers from the relationship between the employer and the person to whom the duty is owed. It is imposed because it is of extraordinary importance to the public.”).

[19] See Hanson, supra note 2, at 131-32see also Davis, 37 A.3d 469 at 481 (“Measures taken by the employer to guard against intentional harm by employees – careful review of an applicant’s educational and employment history, a thorough background check, probing interviews, meticulous training and exemplary supervision – would offer no defense to liability in the presence of the ‘non-delegable duty.’”).

[20] Id. (alterations added).