Workplace elevator injury: Who's responsible?

Workplace accident and corporate structure

The incident occurred on 4 July 2018 at an aged care facility where the worker was employed as an Assistant in Nursing.

While descending in a lift with two co-workers, it stopped abruptly due to a planned power outage test, causing injury to the worker. The power outage was part of a test of an emergency power supply from a backup generator, conducted by two employees without prior notice to staff.

The facility's operations involved three related companies:

1. A company that owned the land and buildings
2. A parent company that operated the business under a brand name
3. A subsidiary company that employed the staff, including the injured worker

The worker chose to sue the landowner company and the parent company, rather than her direct employer. According to the Court, this decision was influenced by section 151H of the Workers Compensation Act 1987 (NSW), which prevents claims for modified common law damages unless the worker's permanent impairment is at least 15%. The worker's impairment was assessed at 8%.

Who was responsible?

The central issue in the case was determining which entity bore responsibility for the negligent acts that led to the worker's injury. The Court had to consider:

• Whether the landowner or parent company could be held liable as occupiers of the premises
• The extent to which the companies owed a duty of care to the worker
• How to attribute the actions of individual employees to the correct corporate entity

The Court emphasised the importance of clearly establishing which company employed the individuals directly involved in the incident. As stated in the decision:

"The persons who omitted to warn staff and residents that the power was about to be tested were [two employees]. In omitting to do so, they failed to take a reasonable step which would have avoided a not insignificant risk of harm, and for which their employer is vicariously liable."

Corporate structure and employment relationships

The case highlighted the complexities that can arise when multiple related companies are involved in operating a business. The Court had to carefully consider:

• The ownership of business names and assets
• The formal employment relationships between staff and the various companies
• How responsibilities for safety and operations were divided among the entities

For instance, the subsidiary company owned the business name of the specific facility and employed the worker, while the parent company operated the broader aged care business.

This underscores the importance for HR professionals to maintain clear records of employment relationships and organisational structures, especially in complex corporate groups.

Duty of care and vicarious liability

The Court's analysis focused heavily on determining which entity owed a duty of care to the worker and could be held vicariously liable for the negligent acts. Some key points emerged:

• Mere ownership of premises or equipment does not necessarily create liability
• The actions of employees are generally attributed to their direct employer for the purposes of vicarious liability
• Companies cannot easily distance themselves from the actions of employees simply by creating complex corporate structures

The Court emphasised:

"The breach of duty which caused the worker's injury was not some failure to repair or maintain the lift, or the failure of electricity to the building because of a poorly maintained power supply. It was the positive act of [the employer's] employees of turning off the power without warning, for which [the employer] is vicariously liable."

HR and workplace safety

This case offers several important lessons for HR professionals and those responsible for workplace safety:

1. Clear documentation of employment relationships is crucial, especially in complex corporate structures.
2. Safety procedures should clearly identify which entity is responsible for specific tasks and precautions.
3. Companies cannot easily avoid liability by creating separate entities for employment and operations.
4. The actions of individual employees can have significant legal implications for their employing entity.

In concluding its decision, the Court emphasised several key points that have broad implications for workplace safety and corporate liability:

"Once it is concluded, as it must be on the evidence adduced at trial, that [the two employees] were employed by [the subsidiary company] (no differently from the worker), none of this reasoning can stand. The acts and omissions were those of [the two employees] for which [the subsidiary company] was vicariously liable."

This highlights the critical importance of clearly establishing employment relationships and properly attributing responsibility for workplace actions.

The Court also noted:

"I do not accept that the worker can have it both ways, on the one hand maintaining that [the subsidiary company] was her true employer, but that other companies were the employer of [the two employees] so as to avoid the disentitling effect of s 151H."

This statement underscores the need for consistency in how employment relationships are characterised and the potential pitfalls of attempting to selectively attribute employment to different entities.

Finally, the Court concluded:

"Ultimately the worker's allegations of breach require imputing conduct to one of the companies sued, and the only conduct that is relevant is that of [the two employees], and in this country the only vicarious liability that is available based on their conduct is the vicarious liability of their employer."

This serves as a reminder that, ultimately, the actions of employees will generally be attributed to their direct employer for the purposes of liability, regardless of complex corporate structures.

The Court of Appeal allowed the appeal brought by the two companies that were sued. It set aside the lower court's judgment in favour of the worker and instead entered judgment in favour of the defendant companies.

The Court found that no case of breach of duty had been made out against either of the companies sued, as the negligent acts were attributable to the worker's direct employer, which was not a party to the lawsuit.