Can employees be sued for negligence?

Most doctors and dentists know that employers are legally responsible for the actions of their employees – "the buck stops with the company" - i.e. if an employee makes a mistake, it is the employer who is held accountable and must make good any damage done. Its called the doctrine of vicarious liability.

Therefore, generally-speaking, employees need not fear being personally sued for their actions while working. They may fear losing their job if they make a mistake, but that is another matter.
A recent High Court decision has challenged this age old protection for employees. A company was sued for misleading and deceptive conduct under Victorian Fair Trading and Commonwealth Trade Practices law and two employees were found personally responsible along with their employer for giving bad and misleading advice that led to a substantial loss for the client.
A brief summary of this case is as follows:

A client of a website company was in the business of providing marketing services for small to medium independent wineries, directly to consumers. His profitability depended on paying a low rate of sales tax because of the way he sold through the website.The website company (the employer) was engaged to provide advice on the appropriate web site design, construction and administration.Two employees provided incorrect website advice that affected sales tax calculations and resulted in the client losing a substantial amount of money until the problem was corrected.The client in question won his claim against the company but the firm was in liquidation, so he asked the Court to make the employees personally responsible for their actions during the course of their employment, and therefore liable for the client's loss.

After several lower courts heard the case, on appeal the High Court said "Yes"!

This decision has important implications for both employers and employees and is particularly relevant to practices that employ doctors. A patient with a problem usually claims against a business entity first because the business can pay for damages. But if the practice has no assets and/or is in liquidation, a client may now look to employee doctors or other senior employees to be accountable.

However, the High Court did acknowledge that senior employees who exert a high level of control over the company (such as directors who have the authority to make decisions independently of the company's board) may be excluded from liability. The law says that the actions of these high level staff are inextricably the actions of the company itself and there is therefore no separate liability of such a senior employee. This is a very fine distinction indeed and one that will certainly see further comment by judges.

Adapted from Peter Townsend's Business Law Brief March 2007