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Key Topics
- Requirement
- Solution
- Practice of Business and ethics- extent to which the employer can be held liable for the acts of an independent contractor
- Issues the company will face
- Liability of the employer for the negligence of the independent contractor
- Defenses that the Corporation may take-in the light of business ethics
- Extent to which the Corporation is liable for negligence of the independent contractor
- Remedies available for Widget Corporation
- References:
Requirement
Assignment based on Widget Corporation Practice of Business and ethics- extent to which the employer can be held liable for the acts of an independent contractor
Solution
Practice of Business and ethics- extent to which the employer can be held liable for the acts of an independent contractor
The question of the ‘course of employment’ and ‘within the scope of the duties’ when given a wide definition includes delegation of authority, regular employment or hiring of independent contractors on work to work basis. Although the procedural and the substantive laws binding the principle of respondeat superior, in a strict sense, is (W.H. Anderson Company, 1961) not binding between the employer and an independent contractor, the question of vicarious liability arises between the two, making the employer liable for the acts of the independent contractor under certain circumstances. When the principal who directs another to act in a particular manner, it is expected that he takes reasonable care and caution in supplying proper goods and ensuring that the deliverables are fitted as per safety guidelines; whosoever, he may choose to employ. In this case, the corporation had supplied the widgets to Texas Customer as per the specifications and had given clear instructions to Lyle to proceed with the installations of the widgets. However, due to sheer negligence the last widget installed by Lyle gave way causing suffering and injury to the Texas customer.
This report analyzes whether the Widget Corporation is liable; and, if so to what extent and limit. Since the business involves a number of ethical issues, it is vital to understand whether the corporation has acted in an ethical manner and in accordance with the principles of business and ethics. This report also analyzes whether this issue can be resolved in an equitable manner and in accordance with the terms and conditions acceptable to both the corporation and the Texas customer.
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Issues the company will face
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If the company is liable for the tort committed due to the negligence of independent contractor, during the scope of employment?
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Whether the company had given clear instructions pertaining to installation and inspection of widgets to Lyle?
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Whether the company has supervised and overlooked the installation and made sure that the widgets installed by him are fit for use and safe consumption of the customer?
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Whether the corporation had taken reasonable care before employing Lyle as contractor for installation of widgets?
Liability of the employer for the negligence of the independent contractor
As a long established doctrine of respondeat superior that the employer of an independent contractor is immune from vicarious liability for damages to a third party for the negligent acts of contractor, committed during the performance of the agreement. § 409, (Prosser, 1984) of the Law of Torts, state the general Law principles governing the employer and independent contractor wherein, the principals are not liable for the torts and acts of independent contractor. However, in case where the where the principal has provided specifications for the independent contractor’s procedures and processes, the principal is made liable. The independent contractor has to follow the instructions of the principal, which will also entail liability to the principal. (Jennings, 2015) In other words, the independent contractor steps into the shoes of the principal to carry out the duties as per the instructions given by the principal. For which reason, the same has to be carried out by use of reasonable care, caution and understanding.
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In this case, Lyle has carried out the specific instructions given by the contractor, which he failed to follow; as a result of which the injury was caused. The principal is liable as it was his duty to oversee and supervise that the work is carried out in the manner in which it has to be carried out.
The relation between employer and an independent contractor presupposes that the employer has to regularly inspect the work of the independent contractor to make sure that it is being performed in accordance with the contract specification. Such supervision is a part of the employer’s duty and will not change the worker’s status as an independent contractor (Miller, 2014). This is all the more so, when there is reasonable danger that can be expected such as this case. In the case of Bower v Peate, (1876) it was held that “ a man who orders a work to be executed, from which in the natural course of things, injurious consequences must be expected to arise, unless means are adopted by which such consequences may be prevented, is bound to see to the doing of that which is necessary to prevent the mischief and cannot relieve himself of his responsibility by employing someone else to do what is necessary to prevent the act he has ordered to be done from becoming wrongful ” this holds true whether the person is an independent person, or a contractor or an employee.
Similarly, in the case of Privette v. Superior Court (Contreras) (1993) it was held that a person engaging the services of an independent contractor to perform work that is inherently dangerous can be held liable for tort damages when the contractor's negligent performance of the work causes injuries to others.
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Ethically speaking, Widget Corporation owed a duty of reasonableness and care towards the customer that necessarily entails supervision during the course and after the installation. Having failed to adhere to the basic checklist that is required of every employer, the corporation has failed to exercise its duty of due care and reasonableness.
In determining whether the employer can be held responsible for he acts of the independent contractors, it is vital to examine the nature or work and the relationship binding the two. Although the rules are prescribed by the IRS, similar parameters are adopted to measure the nature and extent of the liability of the employers over independent contractors. (IRS, 2016) The criteria used by the courts in determining whether a worker has the status of an employee include the following questions:
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How much control can the employer exercise over the details of the work?- in this case, it is the corporation which has the wherewith alls with respect to the installation methods, stating considerable control over the details of the work
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Under whose direction and instructions is the work being carried out?- in this case, employer’s direction is a must signifying employee status
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Whether the employer supplies the tools with respect of work?-since it is the corporation in this case, it signifies the status of employee (Roger LeRoy Miller, 2014)
Lyle having committed this act of negligence during the course of his business with the corporation also fulfills all the above parameters required for independent hiring of contractors for which the principal can be held liable.
Adding to the above points in determining the control, an employer-contractor agreement provides the evidence of extent of control. The contract gives an input into the contractor’s methods by requiring the contractor to carry out his work as per the terms and conditions specified by the employer. The requirements for such determination have been laid down in Joseph v Hess Oil (2011), where it has been held that the contract though, is not a conclusive proof; can prove to be a sufficient proof in determining control of an employer on the independent contractor.
The employer-contractor relationship which exerts significant control over the details of the work shows a typical employer-employee relationship, as against the one who controls the more general process by which the assignment is accomplished- who can be termed as an independent contractor. (NJ 425, 1959)The level of autonomy, the language of the contract is a determinative factor in assessing the relationship between the two. Applying the factors determining the relation between the employer and independent contractor to this case, it can be established that the Corporation had control over the methods of installation and the tools involved for the process. The wherewithal of the manner in which the widgets are installed is determined and exercised by the Corporation, which goes to prove that the employer is liable for the acts of the Lyle to the extent of the job undertaken by him.
Defenses that the Corporation may take-in the light of business ethics
The Texas customer had accepted the delivery of the widgets from Lyle after inspection and examination, is what is clear from the case. Hence, as a defense, the Corporation can state that the customer had done the necessary formalities and gave a ‘go ahead’ signal to proceed with the installation. Examination of the deliverables is thus a strong defense that is available to the company to be not held liable for the injury caused to the Texas customer.
Secondly, the corporation can take a defense that the work delegated to the contractor was not inherently dangerous in nature. By stating and proving that the widgets manufactured by the company is not inherently dangerous by nature so as to cause loss to person and property, or injury to others, the Corporation may be to some extent, be successful in avoiding the liability on itself.
The installation of widgets is not of a nature that could involve a peculiar danger or special risk. (Rowlett, 2013) In order to prove that the nature of the job is not abnormally dangerous, it is vital to state that the likelihood of the harm resulting from such installation is minimal and that there is little or no risk of harm to person, land or chattels of others.
Extent to which the Corporation is liable for negligence of the independent contractor
The Corporation is liable for the actions and negligent actions committed by the independent contractors both under law and equity. Although by a thumb rule, Widget Corporation is not vicariously liable for hiring the independent contractor, it has been proved beyond reasonable doubt that the relationship between the two is sufficiently close to make vicarious liability appropriate. This makes the corporation liable for the breach of act committed by Lyle. However, one of the strong defenses in this case, being that the installation of widgets by itself, is not an inherently dangerous activity. This defense can, to a certain extent reduce the liability of the Corporation. Using the Alternative Dispute Resolution methods, particularly arbitration and mediation, Widget Corporation can engage the services of a qualified person to negotiate on the monetary compensatory damages that it has to pay to the Texas customer.
Remedies available for Widget Corporation
The Corporation can resolve this issue with the Texas customer by way Alternative Dispute Resolution i.e., arbitration, mediation and negotiation. One of the plausible outcomes that can be expected by resorting to Alternative Dispute Resolution would be to negotiate on the terms and the monetary damages sought by the plaintiff. It must, however be remembered that this although will not absolve the liability of the corporation in entirety, it will limit the liability of the corporation to a great extent.
It is therefore clear and established that although the Corporation has hired an independent contractor in this case; it is liable for acts committed by Lyle under the given circumstances of the case. In the present case, since the principles of vicarious liability are applicable for the injury caused by the negligence of Lyle, the Corporation is liable to the extent of their liability. Secondly, Lyle committed this act during the course of employment and within the scope specified by his employer, which makes him liable under the act. Despite the application of the strict liability principles, there are a number of defenses that are available to Lyle, which the corporation can avail in order to prove their non-liability in the case as mentioned above.
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Bower V. Peate (1876) 1 Q.B.D. 321,326IRS. (2016, November 28). Independent Contractor (Self-Employed) or Employee? Retrieved December 10, 2016, from IRS: https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee
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Jennings, M. M. (2015). Business: Its Legal, Ethical, and Global Environment (10th Edition ed.). Stamford: Cengage LEarning .
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Majestic Realty Associates, Inc. v Toti, 153 A2d 321 (Supreme Court of NJ 1959).
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Miller, R. L. (2014). How can an employer use independent contractors? In Business Law Today, The Essentials: Text and cases (11th edition ed.). New York: Cengage Advantage Books.
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Pierre P.Joseph v. Hess Oil Virgin Island Corp, 2009-00054 (United States Court of Appeals for III Circuit December 8, 2011).
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Privette v. Superior Court (Contreras), S024758 (Superior Court of Santa Clara Jul 19,, 1993).
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Prosser, W. L. (1984). Prosser and Keeton on the law of torts (5th ed.). (W. L. Prosser, Ed.) Michigan: West Publication.
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Roger LeRoy Miller, F. B. (2014). Essentials of the Legal Environment (4th edition ed.). (R. Dewey, Ed.) Mason: Cengage Advantage Books.
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Rowlett, G. A. ( 2013). How To Recover For A Subcontractor’s Negligence. National Association of Subrogation Professional , 72-77.
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W.H. Anderson Company. (1961). American Trial Lawyers Association . (p. 86). NACCA.
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