Employers should protect their employees from harm because
it's the right thing to do, morally, legally – and,
also, commercially. What if a third party's negligence injures
or kills an employee? The employee or his or her family members can
sue – but can an employer?
The High Court has confirmed that when an employee is injured or
killed as a result of someone else's negligence, the employer
has at least two ways to recover some of its losses from the
negligent third party, in an important decision for companies which
depend upon "key persons" (Barclay v Penberthy  HCA
In this case, Nautronix hired an aeroplane and pilot to
transport five employees to test some equipment designed to be used
from an aeroplane. The right-hand engine failed during take-off;
the aeroplane crashed, killing two and injuring three. The
specialised equipment was also damaged or destroyed. The crash was
the result of others' negligence – the pilot whose
response was negligent, and the engineer who designed the part in
the engine that failed.
What did the High Court decide on an employer's
right to sue when an employee is injured?
The High Court confirmed:
generally, you can't sue at common law for the loss you
suffer from another's death (the rule in Baker v Bolton),
although this has been modified by legislation;
an employer can however sue the third party if it owed the
employer a duty of care to avoid pure economic loss;
it can also sue if the third party owed the employee a duty of
care, and the breach of that duty of care to the employee caused
loss to the employer.
When might an employer be owed a duty to avoid pure
The pilot (and thus his employer) owed Nautronix a duty of care
to avoid pure economic loss because:
they knew the commercial purpose of the flight and that the
passengers were employed by Nautronix;
Nautronix was thus the particular commercial entity which
depended upon the exercise of his professional skill as a pilot for
the successful performance of the service for which the aircraft
they knew that if the pilot breached that duty of care,
Nautronix was vulnerable in the sense that it was unable to protect
itself from the foreseeable harm of an economic nature caused, in
part, by the pilot's negligence.
When the duty of care is owed not to the employer but
the employee: Actio per quod servitium amisit
Actio per quod servitium amisit is an ancient action at common
law allowing employers to recover for losses caused by
another's negligent or intentional harm to their employees.
The High Court confirmed that it still exists at common law
(although somewhat modified by statute in NSW and Victoria) as a
means of protecting the employer's interests arising from the
employment contract it has with the employee. To use it, the
employer has to show:
the third party owed the employee a duty of care, and that duty
of care was breached or the third party harmed the employee
this caused the employer harm.
The damages that the employer can recover are not unlimited. The
basic measure of damages is the market value of
the services. This is generally calculated by the price of a
substitute, less the wages which the employer no longer has to pay
to the injured employee.
The employer won't be able to recover:
any sick pay or medical expenses it must pay to the employee
because of terms in an industrial award, employment contract, or
any lost profits it might have made if the employee was able to
perform his or her work; or
anything at all if a substitute can be hired on more favourable
It also must take reasonable steps to mitigate the loss it
suffers from the third party's interference with the injured
employee's ability to do his or her work. If the employer can
engage a substitute, at or as near as practicable to the level of
skill of the injured employee, but does not do so, then the
employer fails to mitigate the loss.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
Persons listed may not be admitted in all states and
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).