Beware of liability for theft by an employee!

Beware of liability for theft by an employee!

When is an employer liable to a customer for theft of goods by an employee? And how can this risk be minimised? CAROL HOLNESS explains…

The doctrine of vicarious liability means that an employer can be liable for loss or damage caused by its employees’ wrongful acts or omissions.

In the recent decision of Fujitsu Services Core (Pty) Limited v Schenker South Africa (Pty) Limited, the Gauteng High Court considered how an employee’s position and duties impacted upon his employer’s vicarious liability and whether or not such liability was limited in terms of the employer’s contract with their customer.

Fujitsu had imported a consignment of laptops and had engaged Schenker as its freight forwarder. The goods arrived in storage at the SAA cargo warehouse at OR Tambo International Airport and were ready to be delivered to Fujitsu. Schenker’s employee, a Mr Lerama, was responsible for uplifting and collecting the cargo. Lerama arrived at the cargo warehouse with the necessary cargo and customs documentation, loaded the cargo onto his own truck and disappeared. Fujitsu claimed against Schenker for the loss.

When determining whether an employer is vicariously liable for an employee’s conduct, the fundamental question is whether the employee’s wrongful act was sufficiently related to the conduct authorised by the employer to justify the imposition of vicarious liability. An employer’s creation or enhancement of risk is a relevant factor in establishing vicarious liability – in other words, has the employer given the employee the necessary tools to enable the employee to abuse the power given to him and to cause the harm?

The court took into account that Lerama:

• was employed as a cargo drawer and therefore had unfettered access to the SAA security cargo area to uplift and remove the goods;

• had gained access to the warehouse and the goods by relying on, and displaying, his Schenker issued security clearance;

• was in possession of the necessary customs and clearing documentation;

• had been instructed by Schenker to collect the cargo; and

• had followed his normal protocol in collecting the goods (obviously only up until the point that he stole the goods).

The court held that Lerama’s actions were sufficiently and so closely related to the functions he was required to perform that Schenker was vicariously liable to Fujitsu for the loss.

The court then considered whether or not Schenker’s liability to Fujitsu was expressly limited in terms of their agreement. The court held that the exemption clause in the agreement, as it was worded, only applied to acts or conduct performed in Schenker executing the contract. The intended purpose of the contract was for Schenker to undertake clearing and freight forwarding services. In stealing the cargo, Lerama was not executing the contract and accordingly the exemption clause did not apply.

Employers can be held vicariously liable to customers for theft by their employees. Employers should limit this risk by ensuring that their contractual terms, and any exemption clauses, expressly cover intentional misconduct by employees even if the conduct falls outside of the employer performing its contractual obligations to its customer.

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Carol Holness

Carol Holness is a senior associate in the Norton Rose Fulbright admiralty and transport team based in Durban. She focuses on shipping, admiralty and international trade issues as well as marine, transport and logistics insurance. Holness has represented local and international clients in many aspects of transport law, including questions of marine insurance cover and subrogated insurance recovery actions.
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