Vicarious Liability: Misconduct By Municipal Employees, Among Others

26  Vicarious liability has always been concerned with policy:  Fleming,  supra, at pp. 409 et seq.  The view of early English law that a master was responsible for all the wrongs of his servants (as well as his wife’s and his children’s) represented a policy choice, however inarticulate, as to who should bear the loss of wrongdoing and how best to deter it.  The narrowing of vicarious responsibility with the expansion of commerce and trade and the rise of industrialism also represented a policy choice.  Indeed, it represented a compromise between two policies __ the social interest in furnishing an innocent tort victim with recourse against a financially responsible defendant, and a concern not to foist undue burdens on business enterprises:  Fleming, ibid.  The expansion of vicarious liability in the 20th century from authorization-based liability to broader classes of ascription is doubtless driven by yet other policy concerns.  “[V]icarious liability cannot parade as a deduction from legalistic premises, but should be frankly recognised as having its basis in a combination of policy considerations” (Fleming, at p. 410).

27  A focus on policy is not to diminish the importance of legal principle.  It is vital that the courts attempt to articulate general legal principles to lend certainty to the law and guide future applications.  However, in areas of jurisprudence where changes have been occurring in response to policy considerations, the best route to enduring principle may well lie through policy.  The law of vicarious liability is just such a domain.

28  Recognizing the policy-driven perspective of the law of vicarious liability, La Forest J. in London Drugs, supra, opined that vicarious liability was traditionally considered to rest on one of two logical bases:  (1) that the employee’s acts are regarded in law as being authorized by the employer and hence as being the employer’s acts (the “master’s tort theory” or “direct liability theory”); or (2) that the employer was the employee’s superior in charge or command of the employee (the “servant’s tort theory”) (at pp. 335-36, citing G. H. L. Fridman, The Law of Torts in Canada (1990), vol. 2, at pp. 314-15; Atiyah, supra, at pp. 6-7; G. Williams, “Vicarious Liability:  Tort of the Master or of the Servant?” (1956), 72 L.Q. Rev. 522).  La Forest J., quoting Fridman (at p. 315), went on to note, however, that  “neither of the logical bases for vicarious liability succeeds completely in explaining the operation of the doctrine . . . ‘express[ing] not so much the true rationale of vicarious liability but an attempt by the law to give some formal, technical explanation of why the law imposes vicarious liability’” (p. 336).  Faced with the absence in the existing law of a coherent principle to explain vicarious liability, La Forest J. found its basis in policy (at p. 336):  “the vicarious liability regime is best seen as a response to a number of policy concerns.  In its traditional domain, these are primarily linked to compensation, deterrence and loss internalization.”

29  Fleming has identified similar policies lying at the heart of vicarious liability.  In his view, two fundamental concerns underlie the imposition of vicarious liability:  (1) provision of a just and practical remedy for the harm; and (2) deterrence of future harm.  While different formulations of the policy interests at stake may be made (for example, loss internalization is a hybrid of the two), I believe that these two ideas usefully embrace the main policy considerations that have been advanced.

30  First and foremost is the concern to provide a just and practical remedy to people who suffer as a consequence of wrongs perpetrated by an employee.  Fleming expresses this succinctly (at p. 410):  “a person who employs others to advance his own economic interest should in fairness be placed under a corresponding liability for losses incurred in the course of the enterprise”.  The idea that the person who introduces a risk incurs a duty to those who may be injured lies at the heart of tort law.  As Cardozo C.J. stated in Palsgraf v. Long Island R. Co., 162 N.E. 99 (N.Y. 1928), at p. 100,  “[t]he risk reasonably to be perceived defines the duty to be obeyed, and risk imports relation; it is risk to another or to others within the range of apprehension.” This principle of fairness applies to the employment enterprise and hence to the issue of vicarious liability.  While charitable enterprises may not employ people to advance their economic interests, other factors, discussed below, make it fair that they should bear the burden of providing a just and practical remedy for wrongs perpetrated by their employees.  This policy interest embraces a number of subsidiary goals.  The first is the goal of effective compensation.  “One of the most important social goals served by vicarious liability is victim compensation.  Vicarious liability improves the chances that the victim can recover the judgment from a solvent defendant.”  (B. Feldthusen, “Vicarious Liability for Sexual Torts”, in Torts Tomorrow (1998), 221, at p. 224.)  Or to quote Fleming, the master is “a more promising source of recompense than his servant who is apt to be a man of straw” (p. 410).

31  However, effective compensation must also be fair, in the sense that it must seem just to place liability for the wrong on the employer.  Vicarious liability is arguably fair in this sense.  The employer puts in the community an enterprise which carries with it certain risks.  When those risks materialize and cause injury to a member of the public despite the employer’s reasonable efforts, it is fair that the person or organization that creates the enterprise and hence the risk should bear the loss.  This accords with the notion that it is right and just that the person who creates a risk bear the loss when the risk ripens into harm.  While the fairness of this proposition is capable of standing alone, it is buttressed by the fact that the employer is often in the best position to spread the losses through mechanisms like insurance and higher prices, thus minimizing the dislocative effect of the tort within society. “Vicarious liability has the broader function of transferring to the enterprise itself the risks created by the activity performed by its agents” (London Drugs, per La Forest J., at p. 339).

32  The second major policy consideration underlying vicarious liability is deterrence of future harm.  Fixing the employer with responsibility for the employee’s wrongful act, even where the employer is not negligent, may have a deterrent effect.  Employers are often in a position to reduce accidents and intentional wrongs by efficient organization and supervision.  Failure to take such measures may not suffice to establish a case of tortious negligence directly against the employer.  Perhaps the harm cannot be shown to have been foreseeable under negligence law.   Perhaps the employer can avail itself of the defence of compliance with the industry standard.  Or perhaps the employer, while complying with the standard of reasonable care, was not as scrupulously diligent as it might feasibly have been.  As Wilkinson J. explained in the companion appeal’s trial judgment (at para. 69):

If the scourge of sexual predation is to be stamped out, or at least controlled, there must be powerful motivation acting upon those who control institutions engaged in the care, protection and nurturing of children.  That motivation will not in my view be sufficiently supplied by the likelihood of liability in negligence.  In many cases evidence will be lacking or have long since disappeared.  The proof of appropriate standards is a difficult and uneven matter.

33  I agree.   Beyond the narrow band of employer conduct that attracts direct liability in negligence lies a vast area where imaginative and efficient administration and supervision can reduce the risk that the employer has introduced into the community.  Holding the employer vicariously liable for the wrongs of its employee may encourage the employer to take such steps, and hence, reduce the risk of future harm.  A related consideration raised by Fleming is that by holding the employer  liable, “the law furnishes an incentive to discipline servants guilty of wrongdoing” (p. 410).

34  The policy grounds supporting the imposition of vicarious liability __ fair compensation and deterrence __ are related.  The policy consideration of deterrence is linked to the policy consideration of fair compensation based on the employer’s introduction or enhancement of a risk.  The introduction of the enterprise into the community with its attendant risk, in turn, implies the possibility of managing the risk to minimize the costs of the harm that may flow from it.

35  Policy considerations relating to the fair allocation of loss to risk-creating enterprises and the deterrence of harms tend to support the imposition of vicarious liability on employers.  But, as Fleming notes, there often exists a countervailing concern.  At one time the law held masters responsible for all wrongs committed by servants.  Later, that policy was abandoned as too harsh in a complex commercial society where masters might not be in a position to supervise their servants closely.  Servants may commit acts, even on working premises and during working hours, which are so unconnected with the employment that it would seem unreasonable to fix an employer with responsibility for them.   For example, if a man assaults his wife’s lover (who coincidentally happens to be a co-worker) in the employees’ lounge at work, few would argue that the employer should be held responsible.  Similarly, an employer would not be liable for the harm caused by a security guard who decides to commit arson for his or her own amusement: see, e.g., Plains Engineering Ltd. v. Barnes Security Services Ltd. (1987), 43 C.C.L.T. 129 (Alta. Q.B.).

36  On further analysis, however, this apparently negative policy consideration of when liability would be appropriate is revealed as nothing more than the absence of the twin policies of fair compensation and deterrence that justify vicarious liability.   A wrong that is only coincidentally linked to the activity of the employer and duties of the employee cannot justify the imposition of vicarious liability on the employer.  To impose vicarious liability on the employer for such a wrong does not respond to common sense notions of fairness.  Nor does it serve to deter future harms.  Because the wrong is essentially independent of the employment situation, there is little the employer could have done to prevent it.  Where vicarious liability is not closely and materially related to a risk introduced or enhanced by the employer, it serves no deterrent purpose, and relegates the employer to the status of an involuntary insurer.  I conclude that a meaningful articulation of when vicarious liability should follow in new situations ought to be animated by the twin policy goals of fair compensation and deterrence that underlie the doctrine, rather than by artificial or semantic distinctions.

Immunity

448 (1) No proceeding for damages or otherwise shall be commenced against a member of council or an officer, employee or agent of a municipality or a person acting under the instructions of the officer, employee or agent for any act done in good faith in the performance or intended performance of a duty or authority under this Act or a by-law passed under it or for any alleged neglect or default in the performance in good faith of the duty or authority.

Liability for torts

(2) Subsection (1) does not relieve a municipality of liability to which it would otherwise be subject in respect of a tort committed by a member of council or an officer, employee or agent of the municipality or a person acting under the instructions of the officer, employee or agent.