Australia: Liability alert: How healthy are your employment and contracting arrangements?

Last Updated: 1 April 2015
Article by Katrina Welch

Organisations (including companies, incorporated associations and other trading entities) can be rendered liable in a number of different ways for the conduct of their employees and contractors, as well as other persons associated with the activities of the organisation. If a person suffers injury or damage in the course of the organisation's activities, the organisation will likely find itself the target of allegations that it is responsible for the conduct of the "associated person." As a result, it is important for managers of organisations to understand the potential sources of liability, identify the current level of risk and to take all reasonable steps to manage that risk. Identifying the Relationship The first step is to identify what relationship currently exists between your organisation and each associated person. In practice the relationship is likely to fall into one of the following categories:

  • Employment pursuant to a written contract of employment.
  • Employment pursuant to a verbal agreement or unspoken arrangement.
  • Independent contractor pursuant to a written contract for the provision of services.
  • Independent contractor pursuant to a verbal agreement or unspoken arrangement.
  • Provision of services to the organisation via a third party.
  • Provision of services to third parties held at the organisation's premises or at an event sponsored by the organisation.

It is important to remember that labels are not conclusive, as the law looks to the substance of the relationship. Just because a person is called a contractor does not mean this is correct. Various factors may suggest that they are in reality an employee and would be treated accordingly at law. More generally, a verbal or unspoken arrangement gives rise to uncertainty that is not in the interests of your organisation. Once you have identified the relationship, you will be in a much better position to appreciate the options available to your organisation to better manage the risks posed by the conduct of the association person. It may even change your organisation's perspective more generally as to the terms upon which it engages services, or how it allows those services to be provided by third parties or at your organisation's premises or sponsored events. Understanding the Sources of Liability and Risk As a rule of thumb, the greater the ability of the organisation to exert control, the more likely it is that the organisation will be held responsible to some extent for the conduct of an associated person. However, the level of control available to an organisation is not entirely a matter that can be dictated by the organisation. Even where an organisation has lawfully sought to limit its level of control, an organisation might still be held responsible depending upon its statutory obligations, the context of the relationship and the circumstances of the incident. The potential sources of liability on the part of an organisation for the conduct of its associated people are numerous but include:

  • Damages for breach of a duty of care owed either directly to third parties by the organisation or vicariously through the actions of the associated person.
  • Damages for breach of contractual obligations owed to a third party.
  • Occupier's liability.
  • Prosecution for contravention of the Working with Children (Criminal Record Checking) Act 2004.
  • Prosecution for contravention of the Occupation Safety and Health Act 1984.

As you can see, the conduct of associated people can give rise to civil and even criminal liability on the part of an organisation. This demonstrates how important it is for you to ensure that your organisation's relationships with its associated people are managed appropriately, with a view to providing a safe environment for the conduct of your organisation's activities and limiting the risk of liability arising from unsafe practices. Managing the Risk Identifying the nature of your organisation's relationships with its associated people and recognising the organisation's potential liability for their conduct is crucial to developing appropriate strategies to manage that risk. Kott Gunning Lawyers can provide a basic health check for your organisation by:

  • Reviewing the organisation's relationships with its associated people.
  • Providing a checklist of issues that could affect the organisation's liability
  • Providing recommendations on how to better protect the organisation from the risk of liability, as well as an estimate of legal costs for implementing those recommendations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Katrina Welch
 
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