23 January 2007
A recent Hong Kong Court of Appeal decision confirms that when an employer sends an employee to work for another entity, certain duties towards the employee remain with the employer. In determining whether there is a breach of the employer's duty of care towards the employee, the court will look at all the circumstances of the case.
In the modern work context, an employee is very often sent or seconded by his employer to work for another entity either in Hong Kong or outside Hong Kong. Consequently, the employer may cease to have control or supervision over the work of the employee.
However, if the employee incurs liability or is injured whilst working for the other entity, the Hong Kong Court of Appeal confirms in the case of Jerry Chen v Whirlpool (Hong Kong) Ltd that certain duties in respect of the employee may remain with the original employer.
The Facts Of The Case
Jerry Chen is a mainland Chinese who had worked for multi-national companies in both New Zealand and Hong Kong.
In September 1997, he entered into a contract with a Hong Kong company, Whirlpool (Hong Kong) Ltd ("Whirlpool"), which is a member of the Whirlpool Group of companies of the United States. His contract of employment provided that he was to be based in Shanghai with responsibilities to a joint venture company, Whirlpool Narcissus (Shanghai) Co Ltd ("WN").
As a result of the above arrangement, Jerry Chen never did any work for Whirlpool and was never asked to report to Whirlpool. He was an expatriate member of staff of Whirlpool with duties to work in WN. Whirlpool had no control or authority over WN nor any responsibility for it.
In October 1998, Jerry Chen flew from Shanghai to Beijing to attend a conference organized by WN. Under his contract with Whirlpool, Whirlpool was required to provide a car and a driver to him. Jerry Chen was met at the Beijing airport and was driven to the resort in a car of, and by a driver employed by, WN. During the journey, Jerry Chen was injured as the car had a head-on collision with another car. The accident was admitted to be caused by the negligence of WN's driver.
Jerry Chen consequently claimed employees' compensation from Whirlpool, but the parties reached a settlement by paying Jerry Chen approximately HK$2.29 million.
Jerry Chen subsequently issued a common law negligence action against Whirlpool for personal injuries suffered by him in the traffic accident. The judge in the first instance dismissed his claim for damages on the ground that WN was responsible for the safety of Jerry Chen instead of Whirlpool. Jerry Chen appealed against the decision to the Court of Appeal.
The Issues Before The Court Of Appeal
The issues before the Court of Appeal were:
Counsel for Jerry Chen argued before the Court of Appeal that it was Whirlpool that arranged for its contractual obligation of providing the car to be performed by WN on its behalf. The driver was an employee of WN. The driver's negligence was therefore attributable to WN. It was argued therefore that WN's negligence would be the negligence of Whirlpool.
The Court Of Appeal's Decision
The Court of Appeal was not persuaded by the employee's arguments, and it dismissed the appeal. In doing so, the Court of Appeal referred to a number of court decisions in England and stated the following:
(i) An employer has a personal duty to provide a safe system of work for its employees. An employer which sends its employee to work on the premises of others cannot renounce all responsibility for the employee's safety.
(ii) If the employer delegates its duty to take care of the safety of its employee to competent subordinates, its responsibility in respect of its primary common law duty generally ceases.
(iii) An employer is liable for the tortious act of another person if it directs that person to do such act or if that person acts as its agent and the act complained of is within the scope of the agent's authority.
(iv) In determining whether the employer's duty of care towards the employee has been breached, the court will look at all the circumstances of the case. The relevant factors may include the place where the work is to be done, the nature of the site to which the employee is sent, the experience of the employee who is so dispatched to work at such site, the nature of the work he is required to do and the degree of control that the employer can reasonably exercise in the circumstances.
In analysing the contractual arrangement for Jerry Chen to work for WN, the Court of Appeal held that the obligation to provide a safe system of work (including the provision of a reasonably safe car and a reasonably competent driver) was delegated by Whirlpool to WN. If WN did not breach this duty, Whirlpool would not be liable for the injuries sustained by Jerry Chen.
In this regard, the available evidence showed that WN's driver was a reasonably competent driver although he was negligent in this one-off instance. The car provided to Jerry Chen was also reasonably safe.
On this basis, the Court of Appeal concluded that WN was not in breach of the duty which it had undertaken on Whirlpool's behalf in providing a reasonably safe car and a reasonably competent driver to Jerry Chen. In other words, WN was not negligent in providing a safe system of work for Jerry Chen. It follows that Whirlpool was not negligent and could not be held liable for Jerry Chen's injuries.
The Court of Appeal also commented that if Jerry Chen was to sue WN for negligence, WN would be liable, but that would be because of the operation of vicarious liability. This was separate from the duty of care of WN or Whirlpool in providing a safe system of work for Jerry Chen.
This case is not authority to say that because an employee is working in a country or area outside the control of the employer, the employer can escape liability.
Quite the contrary, the Court of Appeal has expressly endorsed the principle that an employer still maintains an overriding duty to take reasonable care not to expose its employees to unnecessary risk. The employer must, for instance, take reasonable care to devise a safe system of work. If it knows or ought to know of any danger, say, on the premises to which it sends its employee, it ought to take reasonable care to safeguard its employee from it.
What is reasonable care depends, of course, on the circumstances.
Implications For Employers
When sending an employee to work for another entity, an employer would be well advised to set out in a contract or secondment agreement with the host institution the respective rights and obligations of each party vis-a-vis the employee. The employer should also take sufficient steps to safeguard its employee from known or foreseeable risk and danger.
For further information, please contact:
Name: Duncan A. W. Abate
Position: Partner, Head of Employment and Employee Benefits Group
Phone: +852 2843 2203
Fax: +852 2103 5066
Name: Anita W. C. Lam
Position: Senior Associate
Phone: +852 2843 4536
Fax: +852 2103 5158
Name: Hong Tran
Position: Senior Associate
Phone: +852 2843 4233
Fax: +852 2103 5070