A recent landmark ruling means employers can now be liable for the negligence or misbehaviour of another company's workers, which could have serious repercussions for staffing and project management companies. Matthew Brown, managing director of giant group plc, looks at the implications for recruiters.

Back in October, a Court of Appeal case (Viasystems (Tyneside) Ltd v Thermal Transfer (Northern) Ltd), ruled that a project manager and its subcontractor were both jointly liable for a flood caused at a factory by one of the subcontractor's workers. Ordinarily, the subcontractor would be liable for the negligence of its own worker, but the court took the unprecedented view that the project manager should pay half the damages to the factory owner, establishing the principle of dual liability.

What does this ruling mean for the staffing industry?

* In future, if contractors are sued for negligence, courts may take the view that the liability should be shared with other parties involved on the project, reducing contractors' share of the damages to be paid out.

* The amount of control exercised over the negligent contractor by other parties will be a relevant factor in determining whether joint liability applies.

* If the project manager allows contractors to use its equipment, this may also make it partly responsible for contractors' negligent acts.

* In future, clients and their project management consultancies may be inclined to take a more 'hands-off' approach to how they manage contractors and ensure they are treated as separate and independent businesses.

What does the ruling mean for contractors?

* Rather than complicated claims involving multiple parties, in practice what we are likely to see is contractors being asked to indemnify other parties against the risk that they may be jointly liable for contractors' negligence.

* A knock-on effect of the ruling may be that contractors' claims to be outside IR35 are enhanced. This may help contractors from an IR35 point of view. By taking the risk of being sued on their own shoulders, contractors will be able to make a better case that they are legitimate businesses in their own right.

* What are the issues relating to contractors providing indemnities to other parties for negligence?

* Contractors should consult with their insurance provider before agreeing to contractual clauses that indemnify other parties for negligence.

* Insurers may re-evaluate their risks in the light of this ruling and any contractual exclusions that are agreed between parties, which could have implications for premiums.