Personal liability for whistleblowing dismissals: implications for employers


4 mins

Posted on 17 Aug 2017

The Employment Appeal Tribunal has upheld an employment tribunal decision that two non-executive directors were personally liable for their part in dismissing an employee on whistleblowing grounds.

Speedread

The Employment Appeal Tribunal has upheld an employment tribunal decision that two non-executive directors were personally liable for their part in dismissing an employee on whistleblowing grounds and were jointly and severally liable with the employer for the employee’s losses arising from dismissal.  This decision could have significant personal ramifications for managers and those involved in dismissing employees in whistleblowing cases. As a result of the decision, dismissing managers and anyone else involved in a decision to dismiss an employee on whistleblowing grounds could be personally liable for the dismissal and for the employee’s resulting losses.  In addition, as a result of the vicarious liability provisions, employers could find themselves liable even where whistleblowing was not the reason or principal reason for dismissal (but played a part in the decision to dismiss) and could also have to pay compensation for injury to feelings.  

Now more than ever, employers need to demonstrate a firm commitment to preventing victimisation of whistleblowers and ensure that managers are trained to recognise potential whistleblowing issues.    

Facts

In International Petroleum Limited v Osipov, International Petroleum Limited (IPL) was involved in Oil and Gas exploration in Niger. Shortly after starting as CEO, Mr Osipov made a number of protected disclosures which he alleged led to a number of detriments, including Mr Timis instructing Mr Sage to dismiss him.  He brought claims against IPL, Mr Timis and Mr Sage alleging that he had been subjected to detriments and unfairly dismissed on whistleblowing grounds.  The employment tribunal upheld his claims and awarded over £1.7m in compensation against all three respondents on a joint and several basis, meaning that they were all personally liable to pay the full amount of compensation.    

Mr Timis and Mr Sage appealed.  They accepted that they could be personally liable for their detrimental treatment of Mr Osipov, but argued that the legislation does not permit an employee to bring a detriment claim where the detriment in question is dismissal.  They must instead bring an unfair dismissal claim, which can only be brought against the employer.  They also argued that compensation in detriment claims is limited to pre-dismissal losses and so they could not be liable for Mr Osipov’s post-dismissal losses.

Decision 

The Employment Appeal Tribunal (EAT) dismissed their appeals.  Whilst 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 them from bringing a separate detriment claim against the individuals involved in the decision to dismiss.  Similarly, the individuals could be held personally liable for losses arising from the dismissal.   

Implications

Whilst employees will tend to bring claims relating to dismissal against their employer, as they will generally have deeper pockets, there are tactical advantages to bringing a separate detriment claim against their former colleagues involved in their dismissal.   First, it is possible to obtain an injury to feelings award in a detriment claim, but not an unfair dismissal claim.  Second, the standard of proof is not as high in a detriment claim.  The employee only has to show that their whistleblowing disclosure materially influenced their colleague’s treatment of them, whereas in an unfair dismissal claim they have to show that their disclosure was the reason or principal reason for their dismissal.  Third, the employer is vicariously liable for detrimental treatment meted out by its employees and agents.  This means that the employer could be liable, via the back door, in cases where the employee is unable to show that the reason or principal reason for dismissal is whistleblowing and could also be on the hook for an injury to feelings award.  For all of these reasons, employers are increasingly likely to see detriment claims relating to whistleblowing dismissals being brought against individual employees involved in the decision to dismiss.  Similarly, dragging individuals into disputes could strengthen the employee's negotiating position.    

Employers have a defence and will not be vicariously liable if they can demonstrate that they took all reasonable steps to prevent the unlawful conduct.  Employers who can demonstrate a firm commitment (supported by senior management and backed up by effective whistleblowing policies and training) to preventing victimisation of whistleblowers will be best placed to succeed in such a defence.  

Directors and officers of companies may also want to consider if they are covered for such claims through their liability insurance cover.   

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