Analysis of the Tests Developed by the Courts in Determining the Existence of an Employee or an Independent Contractor Relationship in the Imposition of Vicarious Liability in Malaysia

Abstract

Employers are said to be vicariously liable for the torts of their employees which are committed during the course of employment. It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors. Employers or ‘masters’ will only be liable for the torts of their employees or ‘servants’ as they are called in law. They will not usually be liable for the torts of their independent contractors (subject to some exceptions). It is, therefore, necessary to establish the status of the person who committed the wrongful act. The task of the court is to interpret the contract of employment. In order to make such a distinction, the courts have adopted certain tests. However, the courts have been unable to formulate a concise definition of the terms ‘employee’ and ‘independent contractor’ that will furnish an accurate test to be applied in determining whether one is acting for another as servant or as an independent contractor. In Malaysia, the courts generally favour the control test. While the control test may have been persuasive in the past, in modern industrial society, with its increasingly sophisticated division of labour, the test is not always effective. In many cases employees may have technical skills and knowledge not shared by their employers. The purpose of this article is to examine these tests and the problems posed by the tests used by the Malaysian courts in an attempt to draw a distinction between an employee and an independent contractor in the context of vicarious liability.