04 October 2012
Employers should protect their employees from harm because it's the right thing to do, morally, legally – and, also, commercially. What if a third party's negligence injures or kills an employee? The employee or his or her family members can sue – but can an employer?
The High Court has confirmed that when an employee is injured or killed as a result of someone else's negligence, the employer has at least two ways to recover some of its losses from the negligent third party, in an important decision for companies which depend upon "key persons" (Barclay v Penberthy  HCA 40).
In this case, Nautronix hired an aeroplane and pilot to transport five employees to test some equipment designed to be used from an aeroplane. The right-hand engine failed during take-off; the aeroplane crashed, killing two and injuring three. The specialised equipment was also damaged or destroyed. The crash was the result of others' negligence – the pilot whose response was negligent, and the engineer who designed the part in the engine that failed.
What did the High Court decide on an employer's right to sue when an employee is injured?
The High Court confirmed:
When might an employer be owed a duty to avoid pure economic loss?
The pilot (and thus his employer) owed Nautronix a duty of care to avoid pure economic loss because:
When the duty of care is owed not to the employer but the employee: Actio per quod servitium amisit
Actio per quod servitium amisit is an ancient action at common law allowing employers to recover for losses caused by another's negligent or intentional harm to their employees.
The High Court confirmed that it still exists at common law (although somewhat modified by statute in NSW and Victoria) as a means of protecting the employer's interests arising from the employment contract it has with the employee. To use it, the employer has to show:
The damages that the employer can recover are not unlimited. The basic measure of damages is the market value of the services. This is generally calculated by the price of a substitute, less the wages which the employer no longer has to pay to the injured employee.
The employer won't be able to recover:
It also must take reasonable steps to mitigate the loss it suffers from the third party's interference with the injured employee's ability to do his or her work. If the employer can engage a substitute, at or as near as practicable to the level of skill of the injured employee, but does not do so, then the employer fails to mitigate the loss.