This Employment Update examines the High Court’s recent decision to uphold an employer’s appeal against a decision where $432,000 in damages was awarded to an employee who suffered a psychological injury after a co-worker urinated on his face while he was sleeping.

This decision provides much needed clarity for employers on the issue of vicarious liability, and particularly in claims involving tenuous connections to employment.

CCIG Investments Pty Ltd v Schokman [2023] HCA 21

A Daydream Island Resort food and beverage supervisor (‘Supervisor’) lived in shared accommodation on the island with a colleague who was a team leader at the same restaurant (‘Team Leader’). This accommodation arrangement was governed by the terms of each employee’s employment contract, amongst other documents, as the employees’ positions required them to “live on the island” as part of the Staff Village.

On 6 November 2016, both employees went to the staff bar and after some time both employees separately returned to their shared accommodation. When the Team Leader returned to the apartment, he began complaining about the work environment. The Supervisor responded by saying that he did not want to discuss work issues at home and they could talk about this the following day when they were at the restaurant. The Team Leader agreed and left the unit, and the Supervisor went to bed.

The Supervisor then awoke in the early hours of the morning to the Team Leader standing next to his bed, urinating on his face. The Supervisor choked and inhaled urine.  The ordeal caused the Supervisor to suffer a cataplectic attack, a condition of the Supervisor’s narcolepsy which was being effectively managed by medication until this incident.

The Supervisor brought proceedings against the employer, claiming that the Team Leader’s actions violated the duty of care owed to him by his employer or, in the alternative, that the employer was vicariously liable for the negligence of the Team Leader as an employee.

History of the proceedings

At first instance, the Queensland Supreme Court found that the employer was not liable for the Team Leader’s actions nor did those actions breach the employer’s duty of care to the Supervisor. Justice Crow determined it was not a “fair allocation of the consequence of the risk” to hold the employer vicariously liable for the “drunken misadventure of [the Team Leader] in respect of his toileting”. The Supreme Court found that, given there was no history of the Team Leader becoming intoxicated or engaging in any intoxication-related incidents, the employer was not on notice that the employee, more than any other person, might engage in the “bizarre conduct” that was the urination incident.

The Supervisor appealed this decision on the ground that the Supreme Court was wrong to find the employer not vicariously liable for the Team Leader’s conduct. The Court of Appeal  overturned the first instance decision, determining that there was a “requisite connection between the employment and the employee’s actions” and on the basis that the employment contract required the employees to reside in shared accommodation.

High Court decision

On appeal, the High Court overturned the Court of Appeal’s decision that the urination event was “in the course or scope of” the employee’s employment. The High Court found that there was no connection between the Team Leader’s employment and his actions against the Supervisor beyond the location in which the action was committed, given that shared accommodation was required to facilitate the employment of both employees.

Applying the relevant case law to the circumstances, the High Court found that the shared accommodation presented a “mere opportunity” for the act to take place and it did not rise to the level required to establish vicarious liability, being that the employment “provide the very occasion” for the act. The example referred to by the High Court to make that distinction was the case of Prince Alfred College v ADC [2016] HCA 37.  That case related to an act of sexual abuse of a child that took place in accommodation in a school.  Vicarious liability arose in that instance because it was not merely the opportunity presented by the accommodation, but that the “special role” assigned to perpetrator employee (features such as authority, power, trust, control) provided the very occasion for the act to occur.

The High Court also distinguished the Team Leader’s actions from previous cases which describe acts not committed within the course of employment as “frolics of the employee’s own”. In this case, the Team Leader’s actions were found to be not just a “mere deviation” from the employer’s business, but instead occurred when the employee was completely off duty and engaging in his own personal activities.

The High Court noted that while an employer may be held liable for “unauthorised, intentional, or even criminal” acts by an employee, it is “unjust” to make an employer responsible for every act an employee chooses to do.

Key take-aways for employers

This decision provides much needed clarity on the extent to which vicarious liability can be applied to an employer.  It should empower employers to defend claims involving tenuous connections to employment more confidently. Specifically, the High Court clarified that vicarious liability does not require an innocent party, in this case the Supervisor, to bear their loss or have the sole remedy of suing the perpetrating employee. However, this is only justified where the perpetrating employee causes the loss in carrying out the employer’s business, which was found not to have occurred in this case.

If you have shared accommodation arrangements for employees who work away from home, or when employees travel, it is important to understand why the employer avoided liability in this decision, and how you can mitigate the risk of being found vicariously liable for the actions of your employees. Contact the expert employment lawyers at Aitken Legal to discuss how your risk can be managed, and what policies and training might assist to manage these risks.