Personal liability for whistleblowing dismissals
In a decision that could have consequences for managers involved in dismissing employees in whistleblowing cases, the Court of Appeal has upheld an employment tribunal decision that two non-executive directors were personally liable for their part in dismissing an employee on whistleblowing grounds.
After the Claimant made ‘whistle blowing’ complaints about corporate governance at the company for which he worked he was summarily dismissed from his role as CEO. The dismissal was carried out by Mr Sage, a non-executive director, who had been instructed to do so by Mr Timis, another non-executive director and the majority shareholder in the company.
The Claimant issued proceedings in the employment tribunal for whistle blowing.
The tribunal ruled that the Claimant had been unfairly dismissed by the company. The tribunal also went on to decide that, by their conduct in relation to his dismissal, the two non-executive directors (NEDs) had subjected the Claimant to whistle blower detriment and were therefore jointly and severally liable with the company to compensate the Claimant for his dismissal. The award against the NEDs was important to the Claimant because by the hearing the company was insolvent and was unlikely to pay the compensation awarded to the Claimant. There was therefore a risk that without the individual liability of Messrs Timis and Sage, who were both wealthy individuals, the Claimant would have had no effective remedy for his complaint of whistle blowing.
The NEDs appealed, arguing that the Claimant’s claim could only be pursued against the company. The Employment Appeal Tribunal, with whom the Court of Appeal agreed, dismissed the NEDs’ appeal, ruling that, although an employee who wishes to bring a claim against their employer relating to dismissal must do so by way of an unfair dismissal claim, there is nothing in the legislation which precludes him from bringing a separate claim against the individuals involved in the decision to dismiss. Similarly, the individuals could be held personally liable for losses arising from the dismissal.
The EAT stated that it is likely to be an “unusual case” where an employee will wish to pursue a claim against a fellow worker for a whistleblowing detriment amounting to dismissal, rather than pursuing the claim against the employer. However, in cases such as this where the former employer is insolvent, or in claims brought against smaller and start-up businesses, there is a greater risk that the employer will not be unable to pay the compensation award. In these circumstances, a claim against the relevant worker(s) may provide claimants with additional security that they will receive the compensation that they are awarded.
International Petroleum Ltd & Ors v Osipov & Ors
Warning – this bulletin is provided for information only and is not a substitute for legal advice. You should obtain specific, personal advice about your circumstances and not rely on the information or comments in this bulletin.