Parent companies need to be aware of their potential duty of care to the employees of their subsidiaries. The Court of Appeal has recently held that, in certain circumstances, a parent company will have a duty of care to, or be assumed to have responsibility for, the employees of its subsidiary and this assumption can be made without needing to the lift the corporate veil.

In Chandler v Cape plc [2012] two companies based on the same site shared a group medical advisor. The employee in question contracted an industrial illness from working for the subsidiary but could neither claim against the subsidiary which had employed him, as it had been dissolved, nor claim under the employer’s liability insurance due to a specific exclusion. The Court felt that it was appropriate in these circumstances to impose upon the parent company a duty of care and responsibility for the health and safety of its subsidiary’s employees.

The Court specified that the duty would be imposed on a parent company where the business of parent and subsidiary companies are the same in a relevant respect, the parent has or ought to have superior health and safety knowledge in relation to the particular industry, the subsidiary’s system of work is known to be unsafe, and the parent knows or should foresee that the subsidiary or its employees will rely on its superior knowledge for the employees’ protection.

The Court was careful to highlight the fact that the duty of care/assumption of responsibility cannot be imposed simply by reason of a company being a parent company. The parent company must take an active involvement in the subsidiary’s trading operations to establish a direct duty to the subsidiary’s employees and the duty is not, therefore, limited simply to health and safety matters. Again, an opportunity for lawyers to contribute and add value – Rawlison Butler is experienced in advising on the employment and corporate issues arising in circumstances such as those outlined here.

This document is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from taking any action as a result of the contents of this document.