Liability of directors – whistleblowing update

Most people know that I have a keen interest in whistleblowing cases and follow this area closely.

By way of an update then for those of you who share my interest is the case of Timis and another v Osipov [2018] EWCA Civ 2321

In this case the the Court of Appeal addressed the issue of whether individuals could be personally and jointly and severally liable with the employer for a whistle-blower’s post-dismissal losses.

To put this into context initially then a worker has the right not to be subjected to detriment on the ground that they have made a protected disclosure.

This protection applies to detriment by the employer as well as detriment by the worker’s colleagues or an agent of the employer.

In the case of detriment by a colleague, any detriment will be treated as also having been done by the employer, subject to any reasonable steps defence.

A worker who is also an employee will have a claim for automatically unfair dismissal if they are dismissed for the sole or principal reason that they have made a protected disclosure.

The dismissal of an employee therefore it not a detriment but an automatic unfair dismissal

As a worker cannot make this claim a worker can claim a dismissal is a detriment.

(if you need a refresher about status and the difference between an employee and a worker let us know as we have a great checklist to help you with this)

In this case the Court of Appeal considered whether the EAT was entitled to hold that an individual’s decision to dismiss a whistleblowing employee could constitute a detriment notwithstanding that the claim against the employer relating to dismissal had to be presented as an unfair dismissal claim.

The facts in brief were, The Claimant was briefly the CEO of International Petroleum Ltd

Within days of commencing his role, Mr Osipov made one of several protected disclosures, generally related to corporate governance and compliance with foreign law.

He was then subject to a number of alleged detriments by two non-executive directors (Mr Timis, who effectively exercised executive control, and Mr Sage, who exercised managerial functions) (NEDs) and two external contractors.

A claim was issued by the Claimant alleging that he had been subjected to detriments and unfairly dismissed for having made protected disclosures.

His detriment claims were made against his employer and against the individuals

The Company was insolvent at the time and the NED’s were covered by director’s liability insurance to put the claim into perspective

His claims succeeded and the tribunal held that, by their conduct in relation to his dismissal, the NEDs had subjected the Claimant to a detriment contrary to section 47B of the ERA 1996, which included “whistle-blower detriment” by individuals employed by the same employer as well as by the employer.

It held the NEDs were therefore held jointly and severally liable alongside the company to compensate the claimant and awarded circa £1,745,000 compensation for the detriments and dismissal against all three on a joint and several basis.

That decision was upheld by the EAT and the Individuals appealed to the Court of Appeal

The Court of Appeal dismissed the appeal.

By way of abbreviated rationale, it held that if the NEDs were right, the scheme of protection for whistle-blowers would be less effective than for victims of other kinds of discrimination at work.

You will be aware that in for example discrimination claims it is possible to name a co-worker as an individual respondent and therefore the claim against them personally.

Why shouldn’t this apply to whistle-blowers

Underhill LJ went on to say that the benefit of constructing the relevant disputed provisions in this way:

“eliminates the need to undertake the exercise of drawing a line between those of a co-worker’s acts which amount to dismissal and those that constitute distinct prior acts. Having to do so is likely to involve tribunals in arid and artificial disputes, with the risk of arbitrary outcomes.”

It was therefore open to the Claimant to bring a claim against an individual co-worker for subjecting him to the detriment of dismissal; that is, for being a party to the decision to dismiss, and to bring a claim of vicarious liability for that act against the employer

Regarding Mr Sage and Mr Timis, the Court held that it was not uncommon for more than one person to be party to a decision to dismiss.

Mr Timis had been the prime mover in the dismissal decision, but the tribunal found that he had discussed it with Mr Sage, who expressly agreed and did not disavow responsibility.

On that basis, the tribunal had been entitled to find that he was a party to the decision and shared Mr Timis’s motivation.

This may well be appealed to the Supreme Court but certainly gives food for thought. All of this, alongside the discrimination updates we provide highlight the need for a company to educate and train its employees

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