It Wasn’t Me, It Was My Employee: What You Need To Know About Employers’ Liability

When you run a business in Australia, you don’t just wear the owner’s hat - you also carry legal responsibility for what happens in your workplace.

That responsibility can extend to things your employees do on the job, even if you didn’t authorise it or know about it.

This is where employer liability comes in. Understanding when you could be on the hook, and how to reduce your risk, is essential to protecting your business, your reputation and your bottom line.

In this guide, we break down when employers are liable for staff conduct, common risk areas, and practical steps to safeguard your business with the right contracts, policies and training.

What Is Employer Liability (Vicarious Liability) In Australia?

In many situations, Australian law can hold an employer legally responsible for the wrongful acts of an employee, if those acts are sufficiently connected to their employment. This is often called vicarious liability.

In simple terms, if an employee causes loss or harm in the course of doing their job, the person or business that employs them can be liable to compensate the affected party.

Courts look at whether the conduct was connected to the employee’s role, not just whether it happened at the workplace. There’s nuance to how this works, and it’s important to get tailored advice if something happens in your business. For a plain-English overview, you can read more about vicarious liability.

When Are You Responsible For An Employee’s Actions?

There isn’t a single rule that covers every situation, but these principles are a useful guide.

Within The “Course Of Employment”

Employers are typically liable for acts that occur while the employee is performing their job or doing tasks reasonably incidental to their employment.

For example, if a sales assistant misrepresents a product to a customer while serving them, that could expose the employer to liability under consumer law. If a delivery driver negligently damages property while on a delivery, the business may be responsible for that damage.

Unauthorised Or Deliberate Acts

You may still be liable even if you didn’t authorise the conduct. The question is about connection, not permission. If the wrongful act is closely linked to what the employee was engaged to do, liability can still arise.

On the other hand, if an employee does something entirely personal or far outside their role (a “frolic of their own”), you’re less likely to be liable. Each case turns on its facts.

Negligence vs. Statutory Breaches

Employer liability can arise under different areas of law. Negligence claims focus on whether your business owed a duty of care and breached it. Statutory claims look at specific obligations under legislation (for example, discrimination laws, the Australian Consumer Law or privacy law) that may be breached by staff conduct.

Are You Liable For Contractors, Volunteers Or Franchisees?

This is a common area of confusion. You generally have more control over employees than over other workers - and the law reflects that.

Independent Contractors

As a starting point, you are less likely to be vicariously liable for independent contractors. However, you can still be liable if you’ve been negligent in how you engaged or supervised them, or if the law imposes non-delegable duties (for example, certain safety obligations).

If you use contractors regularly, it’s smart to put a clear Services or Sub-Contractor Agreement in place that sets expectations, liability and insurance responsibilities.

Volunteers And Interns

Volunteers can create legal exposure too, especially if they’re performing work under your direction. Good policies, training and supervision are essential.

Franchisees

If you operate a franchise model, franchisees are usually independent businesses. That said, franchisors can still face liability in certain circumstances, including under workplace laws where a franchisor has significant influence over the franchisee’s affairs. The right documentation, training and compliance systems are key in franchise networks.

Common Risk Areas For Employers

Most employer liability claims arise from a handful of recurring scenarios. Here are the big ones to watch.

Harassment, Discrimination And Bullying

Unlawful workplace behaviour can trigger multiple risks - from Fair Work proceedings to human rights or safety breaches, and reputational harm. If the conduct happens “at work” (including work-related events or online platforms used for work), employers can be liable.

Have clear policies, regular training and a robust complaint process. If an allegation arises, act quickly and fairly. For a deeper dive into managing these matters, see workplace harassment and discrimination claims.

Safety And Negligence

Work health and safety (WHS) duties require you to take reasonably practicable steps to keep people safe. If an employee’s unsafe act injures someone, you may face claims and regulator action.

Build a safety culture, do risk assessments, and train staff for their roles. Our overview of an employer’s duty of care explains the practical steps businesses should take to manage risks.

Misleading Or Deceptive Conduct

The Australian Consumer Law (ACL) prohibits misleading or deceptive conduct. If a staff member makes a misleading claim about your product or service, your business can be liable - even if you didn’t know about it.

Train staff on compliant advertising and sales practices, and keep scripts/materials up-to-date. This guide to the elements of misleading or deceptive conduct outlines what to avoid.

Privacy And Data Breaches

Employees often handle personal information. If data is mishandled or breached, you could face legal obligations (including notifying affected individuals and the OAIC) and reputational damage.

Have a compliant Privacy Policy, limit access to data, and train staff on secure handling. It’s also wise to prepare a Data Breach Response Plan so your team knows exactly what to do if something goes wrong.

IP Infringement And Social Media

If a staff member uploads a copyrighted image, uses a competitor’s logo, or posts defamatory content from your business account, that can create legal exposure.

Set clear content rules, approvals and escalation steps. Use NDAs when sharing sensitive information with third parties or collaborators. A tailored Non-Disclosure Agreement helps protect confidential information in and around your business.

Vehicles And Off-Site Conduct

Accidents in company vehicles, careless damage on client sites, or poor conduct at work functions can all lead to claims. Make sure your policies and training cover off-site work, driving standards, and behaviour at work-related events.

How To Reduce Your Liability: Practical Steps

You can’t remove all risk, but you can dramatically reduce it with smart systems, documentation and training.

1) Get The Right Employment Contracts In Place

Clear contracts help set expectations and allocate risk. Use tailored terms for each engagement type (full-time, part-time, casual, contractor). Include duties, standards of conduct, confidentiality, IP ownership, and disciplinary processes. Start with a strong Employment Contract as your baseline for staff.

2) Introduce Policies That People Actually Use

Policies translate legal obligations into practical rules. Focus on core areas first: code of conduct, anti-bullying and harassment, WHS, privacy and data handling, social media and devices, and incident reporting.

Keep them short, clear and accessible. It helps to store and update them centrally and require acknowledgement from staff. If you don’t have a starting point, a tailored Workplace Policy suite can set you up quickly.

3) Train, Supervise And Keep Records

Training is what turns policies into behaviour. Schedule regular sessions, and refresh training after any incident or legal change. Supervise higher-risk activities and keep training and incident records - they can be crucial evidence if a claim arises.

4) Have A Fair Complaints And Investigation Process

Encourage early reporting, triage issues quickly, and investigate in a procedurally fair way. Depending on the matter, you may need to stand someone down while you assess the facts. Here’s a practical guide to suspending an employee pending investigation and what to consider.

5) Use Insurance And Indemnities Wisely

Insurance is a key layer of protection for negligence and other claims. Speak with your broker about cover for your specific risks.

In your contracts with suppliers and contractors, consider appropriate indemnities and liability limits. Always balance risk transfer with what’s commercially reasonable for your relationships.

What Legal Documents Should You Have?

The right documents make it easier to prevent issues - and to respond quickly if something happens.

• Employment Contract: Sets out roles, responsibilities, confidentiality, IP ownership and conduct expectations for employees. A solid Employment Contract is your first line of defence.
• Workplace Policies: A clear, accessible suite (code of conduct, anti-bullying/harassment, WHS, social media, privacy and data handling) helps guide day-to-day behaviour. A tailored Workplace Policy package keeps everyone on the same page.
• Privacy Policy: Explains how you collect, use and store personal information, and signals your compliance with privacy law. Most businesses that handle personal data should have a compliant Privacy Policy.
• Non-Disclosure Agreement (NDA): Protects confidential information when you share it with employees, contractors or partners. A tailored Non-Disclosure Agreement is useful across many scenarios.
• Contractor Agreement: Clarifies the relationship, deliverables, IP and risk allocation with independent contractors. A comprehensive Sub-Contractor Agreement is important if you outsource work.
• Incident And Complaints Procedures: Not a single document, but an essential set of steps and templates to ensure consistent, fair and timely responses.

Not every business needs everything from day one, but getting the foundations right early will save time, stress and cost if an incident occurs.

Key Takeaways

• Employer liability (vicarious liability) can make you responsible for wrongful acts by employees if they’re connected to their work.
• Common risk areas include harassment and discrimination, safety incidents, misleading sales claims, privacy and data breaches, and IP or social media misuse.
• Reduce risk with strong Employment Contracts, practical policies, regular training, proper supervision, and fair complaints and investigation processes.
• Have core documents in place - Employment Contract, Workplace Policies, Privacy Policy, NDAs and Contractor Agreements - and keep them up-to-date.
• Proactive systems and records not only prevent problems but also put you in a stronger position if a claim arises.
• Get tailored legal guidance early, especially if an incident has occurred or you’re setting up your risk framework for the first time.

If you’d like a consultation on employer liability and setting up the right contracts and policies for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.