In this article, we examine the issue of the personal liability of directors in employment-related claims.
As a team we are seeing increasing numbers of employment related claims being brought by (ex) employees against not just the corporate employer but also against company directors in their personal capacity. As such, I thought it timely to remind clients of two recent decisions in this area.
Of course, it is long established that individuals can be held liable for discriminatory acts under the Equality Act 2010. However, the case of Antuzis v DJ Houghton [2019] EWHC 843 highlights that directors can also be held personally liable in respect of claims for breach of contract; and in the case of Timis and another v Osipov [2018] EWCA Civ 2321 that directors (and non-director employees) can also be personally liable for whistleblowing detriment claims brought by their employees/co-workers.
In Antuzis v DJ Houghton Lithuanian ‘chicken catchers’ were employed in an exploitative manner, working extremely long hours, being paid less than the statutory minimum wage, with payments often being withheld, and there was no attempt to pay holiday pay or overtime. Generally, a director is not liable for inducing a breach of contract where they are acting bona fides vis-à-vis the company. However, the High Court in this case held that the directors were personally liable for the breaches of employment contract that they had induced because they did not honestly believe that they were paying the minimum wage, overtime and holiday pay, nor that they were entitled to withhold payments. A significant point in this case was that the directors were found to have breached the Companies Act 2006 in knowingly failing to pay the national minimum wage, which was failing to promote the success of the company and failing to exercise reasonable care, skill and diligence.
In Timis and another v Osipov Mr Osipov, CEO of International Petroleum Ltd (the Company), made one of a number of protected disclosures, generally related to corporate governance and compliance with foreign law. There then followed a number of alleged detriments attributed to two non-executive directors (Mr Timis and Mr Sage) and two other external contractors. Mr Osipov issued employment tribunal proceedings alleging that he had been subjected to detriments and unfairly dismissed for having made protected disclosures. His detriment claims were made against the Company, the non-executive directors and the external contractors in their individual capacities pursuant to s. 47B(1A) of the Employment Rights Act 1996 (ERS 1996).
The tribunal found that the reason for Mr Osipov’s dismissal was that he had made protected disclosures and that, by their conduct in relation to the dismissal, the non-executive directors had subjected Mr Osipov to a detriment contrary to s. 47B(1A) ERA 1996. Mr Timis and Mr Sage were therefore held jointly and severally liable with the Company to compensate Mr Osipov £1,745,000 compensation for the detriments and dismissal against all three on a joint and several basis. That decision was upheld by the Employment Appeal Tribunal. Mr Timis’ and Mr Sage’s appeal to the Court of Appeal was dismissed.
Subject to any successful appeal to the Supreme Court, Timis and Ors v Osipov demonstrates that in addition to the employer, individuals may be personally, and therefore financially liable for their actions towards whistleblowers. Both Mr Timis and Mr Sage were protected by their directors’ and officers’ (D&O) liability insurance. However, whether or not directors enjoy the benefit of D&O insurance, care needs to be taken to protect against exposure to such liability.
If, as a director, you would like to understand the extent of your personal liability exposure please do not hesitate to contact a member the Brabners Employment and Pension team.
