Employers may incur liability:

1. As a result of the acts of their employees (vicarious liability).
2. As a result of the acts of their supervisors and managers (directing minds).
3. As a result of misstatements made during the hiring process (negligent misrepresentation).
4. As a result of their hiring practices (negligent hiring).

Vicarious Liability

Vicarious liability is a legal concept that holds employers liable for the negligent acts of their employees, if those acts occur in connection with the employee's employment. The fact that the employer did not authorize or direct the act will not necessarily protect the employer from being held liable. Vicarious liability will not apply where the employee's act was completely unconnected to the nature of the work being performed or outside the scope of the employee's responsibilities.

The Supreme Court of Canada in 671122 v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983, in part citing the Supreme Court of Canada in Bazley v. Curry, [1999] 2 S.C.R. 534, explained the rationale for the doctrine of vicarious liability as follows:

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.

...a person who employs others to advance his own economic interest should in fairness be placed under a corresponding liability for the losses incurred in the course of the enterprise. [Also] 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.

Notably, while vicarious liability may make an employer liable for the act of its employee, vicarious liability does not eliminate the responsibility of the employee who actually caused the harm.

Despite the fact that vicarious liability will generally apply to an employer-employee relationship, vicarious liability will generally not apply to an employer-independent contractor relationship.

The following are examples of cases where the doctrine of vicarious liability was considered:

• In the Ontario Court of Appeal decision of Wright v. Jeffrey, [1937] 1 DLR 227, the employer was found liable when its salesperson caused a car accident while driving to get an order for the employer.
• However, in the Ontario High Court decision of Moore v. Fox, [1945] OWN 247, the employer was found not to be liable when an employee hit a pedestrian with his car on his day off work.
• In the British Columbia Court of Appeal decision of Cole v. California Entertainment Ltd., [1990] B.C.W.L.D. 077, the employer was held liable when one of its bouncers severely beat a customer after being instructed by the employer to clear the Club's doorway.
• In the Ontario High Court decision of Turner v. Thorne and Thorne (1959), 21 DLR (2d) 29, the employer was held liable for trespass and negligence when a homeowner was injured tripping over parcels that the employee delivered.
• In the Supreme Court of Canada decision Bazley v. Curry, supra, the employer was held liable for sexual abuses committed by its employee. The employee was responsible for the care of emotionally troubled children in a non-profit group home.

Employers can attempt to reduce the risk of being found vicariously liable for the acts of their employees by establishing and enforcing rules of conduct during working hours, including rules relating to the use of company vehicles. Employers are not vicariously liable for acts of employees who are on a "frolic of their own", and clearly published rules may assist in helping to establish parameters so that liability can be avoided.

Liability For Acts of Supervisors and Managers

Employers may also incur liability for the acts of their supervisors or managers, if those individuals are found to be the directing mind of the employer.

For example, the Ontario Human Rights Code places liability on an employer for discrimination and harassment engaged in by a directing mind of the employer. Employees who perform management duties or who are supervisory are typically considered to be part of the directing mind.

The employer may also be liable for a directing mind's failure to put an end to discrimination or harassment that he or she is aware is taking place but does not attempt to remedy.

Negligent Misrepresentation During the Hiring Process

Liability may also be incurred by the employer if, during the course of the hiring process, the employer misrepresents the terms and conditions of employment. The employer's misrepresentation must be relied upon by the employee, must have affected the employee's choice to work for the employer, and must have resulted in foreseeable damages to the employee.

The type of conduct which may lead to a negligent misrepresentation claim includes:

• Inducing a potential employee to leave stable employment after misrepresenting income levels and employment stability.
• Falsely advising a potential employee that funding for a project is already secured, when the funding has not been secured and the employee is put out of work as a result.
• Misrepresenting to an employee that their job is secure until they have a chance to prove themselves.

An employee who has been induced to work for an employer as a result of the employer's negligent misrepresentation may be entitled to receive damages for loss of income and benefits, the costs of obtaining new employment, and general damages. One employee was compensated for losses suffered on the sale of a new home, purchased as a result of the offer of employment made by the employer.

An employee can not claim that the employer has made a negligent misrepresentation simply because the actual job was not what they had hoped that it would be. Similarly, a misunderstanding about the employment is not a negligent misrepresentation.

Negligent Hiring

An employer may be exposed to liability in the form of a negligent hiring claim.

Negligent hiring attributes liability to an employer for failing to investigate an employee's background prior to hiring where that employee ultimately commits an act against a third party. The cause of action is premised on the failure of the employer to do an appropriate background check which would have discovered that the employee was not suitable for the position, and which would have avoided the third party's losses.

Negligent hiring is a rarely applied concept in Canadian employment law cases. One example of the application of negligent hiring is found in the decision of the British Columbia Court of Appeal in Wilson v. Clarica Life Insurance Co., [2002] B.C.J. No. 2042.

In Wilson, supra an insurance agent stole funds from a customer of Clarica Life Insurance. Clarica was held to have been negligent in hiring the agent. Prior to hiring the agent, a representative of Clarica met with one of the agent's former employers. The employer advised the representative that they believed the agent had stolen from them and that the agent had once cashed a cheque which he obtained under false pretences. The agent, after being hired by Clarica, then stole funds from a customer of Clarica who brought the action against the insurance agency.

Some examples of situations where allegations of negligent hiring might be raised include the following:

• The employee is entrusted with valuable goods or monies of third parties such as accountants or bank personnel, but has stolen in the past.
• The employee is entrusted with the care of vulnerable members of society, such as children, the infirm or the elderly, but has abused that trust in the past.
• The employee is required to have certain qualifications, such as a valid driver's licence or a certificate warranting the completion of technical training but does not possess those qualifications.

In each case, a negligent hiring claim may be established if reasonable inquiries made by the employer could have discovered the employee's lack of suitability.

An employer may protect its exposure to negligent hiring claims by taking reasonable steps to satisfy itself that an applicant is in fact qualified for the position applied for. An employer may protect itself in the following ways:

• An employer should review all of the requirements of the position before advertising, in order to determine with certainty what qualifications should be held by candidates for employment.
• An employer should list these qualifications in the advertisement and on the application form.
• An employer should make any offer of employment conditional on receipt of proof that the employee has the qualifications sought for the position.
• An employer should conduct reference checks on the employee, which should include personally speaking to former employers.
• An employer should not only ask former employers about the applicant's job performance, but also about the circumstances under which the employee left.

Where an employee's qualifications are demonstrated through a degree, or other documentation, the employer may wish to obtain a certified copy of the document directly from the issuing institution.

Where security is at issue, the employer may require the individual to undergo a criminal reference check which will indicate what, if any, criminal record exists for the individual.