Non-executive directors liable for detriment of decision to dismiss whistleblower, and jointly and severally liable for post-dismissal losses

Timis and others v Osipov and others [2018] EWCA Civ 2321

Why care?

In this case, the EAT held that an employee could bring a detriment claim against an individual for the decision to dismiss, and that such an individual could be held with the employer jointly and severally liable for post-dismissal losses.

Workers are protected from detriment and employees from dismissal on the ground that they have made a protected disclosure.

Section 47B of the Employment Rights Act (in Part V of the Act) gives the right not to be subjected to a detriment by the employer, the worker's colleagues, or agents of the employer. The employer is vicariously liable for the action of a co-worker unless the employer can show it took reasonable steps to prevent it.

Section 103A (in Part X of the Act), gives employees only the right to claim automatically unfair dismissal if they are dismissed for the sole or principal reason that they have made a protected disclosure.

An employee cannot bring a claim for detriment where it amounts to a dismissal under Part X of the Act, and must bring a dismissal claim instead. However, a worker (who does not have the right to claim unfair dismissal) can bring a claim for the detriment of a termination.

The case

Mr Osipov became CEO of IPL (an oil and gas exploration company doing work in Niger) in June 2014, but within days discovered serious wrongdoing by senior employees. He made a number of protected disclosures about corporate governance and compliance with local law.

After doing so, he was excluded from a major part of his role, not given relevant information, and told not to travel to Niger. Finally, four months later, he was summarily dismissed by Mr Sage, a non-executive director, who had been told to do so by Mr Timis, another non-executive director and a shareholder in the company.

The Employment Tribunal found that Mr Timis and Mr Sage, as non-executive directors of IPL, were workers. Mr Osipov had suffered detriments by IPL, Mr Timis and Mr Sage, including his exclusion from foreign travel and business dealings, and the instruction or advice to dismiss him, because he had made protected disclosures. IPL had also automatically unfairly dismissed him because of his protected disclosures. In total, the tribunal awarded £1,745,000 compensation against all three respondents on a joint and several basis. IPL was almost insolvent, so claiming against Mr Sage and Mr Timis gave Mr Osipov some hope of compensation.

The EAT rejected an appeal by IPL, Mr Timis and Mr Sage, and the two non-executive directors appealed once again to the Court of Appeal.

The Court of Appeal dismissed the appeal.

While s47B(2) disapplied section 47B when the detriment was a dismissal, Underhill LJ said that there would be an incoherent and unsatisfactory result if an employee could not bring a claim against an individual co-worker based on the detriment of dismissal. This could not have been intended, since once Parliament had decided to make co-workers liable for detriment, there was no reason why this should not apply when the detriment was a dismissal.

If the non-executive directors' arguments were correct, whistleblowers would have less effective protection than those who suffered other kinds of discrimination at work. The differences between Part V and Part X of ERA 1996 reflect the development of unfair dismissal protection and do not indicate any intention to allocate different rights – the overall intention was that the rights under the different parts would be parallel, although those dismissed would have greater remedies.

If the law were construed in this way, it would avoid any need "to draw a line between those of a co-worker's acts which amount to dismissal and those that constitute distinct prior acts". An employee could bring a claim under s47B(1A) against an individual co-worker for the detriment of dismissal (being part of the decision) and then to bring a claim against the employer under (1B).

Section 47B(2) does not prevent recovery of compensation for losses flowing from a dismissal which was itself caused by a prior act of whistleblowing detriment, although this would be subject to the usual rules on remoteness of damages and discounts including that the employment might have terminated in any event.

Mr Timis had been the "prime mover" in the decision to dismiss, but he had discussed it with Mr Sage, who had agreed. On that basis, the tribunal was entitled to find that he was a party to the decision and jointly liable.

What to take away

This is believed to be the first case in which an individual has been held liable for dismissal related claims brought under s47B as a detriment claim.

Claims for detriment for having made protected disclosures can, like discrimination claims, be brought also against the workers who were responsible for the detriment. Like discrimination claims, detriment claims can also include an amount for injury to feelings.

Employers should consider workplace training to highlight the risk of personal liability to employees and managers.

In this case, IPL was almost insolvent, but by claiming against Mr Timis and Mr Sage, the Claimant had an effective remedy for his losses. Simler J called it "an unusual case" – but it may well be an attractive argument for employees seeking a remedy. Like discrimination claims, it might also put an extra layer of pressure on individual respondents for settlement purposes.

Section 47B allows the claimant to claim against individual co-workers, but treats their acts or omissions as being on behalf of the employer unless the employer has taken reasonable steps to prevent them. This also means that, where the detriment had a material impact on the dismissal, but was not the reason or principal reason for the dismissal, the employer might successfully defend a s103A claim for the dismissal itself, but find itself still liable under s47B. Is this really what was intended?

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