Employment Law Cases

Handa v Station Hotel (Newcastle) Ltd

While it was arguable that two HR consultants, appointed to investigate grievances and conduct a disciplinary hearing, were acting as an employer’s agents when undertaking those functions, it was not arguable that the employer’s reliance on their work when deciding to dismiss an employee meant that the consultants were co-liable as agents.

Background

Mr Handa worked in the family hotel business (Station Hotel), first as an employee and then as a director. He brought claims of whistleblowing detriment against Station Hotel, his uncle, a director and two others – external HR consultants. One had conducted an investigation, making findings of fact. The other had conducted the disciplinary hearing and had written a report in which she said that the employer would have been justified in dismissing Mr Handa, without recommending that it do so.

As a preliminary issue, the two external consultants successfully applied to strike out the claims against them on the basis that they had not acted as the agents of Station Hotel, so the tribunal had no jurisdiction. Mr Handa appealed.

EAT decision

The appeal was dismissed.

The EAT held that the tribunal had erred in concluding it was not arguable that the consultants acted as agents in carrying out their respective procedural roles. The fact that they were independent contractors did not preclude them from being treated as agents in law, insofar as they were authorised to perform grievance or disciplinary functions on the employer’s behalf.

However, the EAT upheld the application to strike out because, amongst other things:

• a decision in respect of dismissal was not within the remit of either of them
• allegations that Station Hotel had exerted control over their processes did not provide a basis for holding either of them liable as agents for the dismissal, and
• Mr Handa did not claim that either of them had subjected him to a detriment because of whistleblowing

Comment

Where employees are subject to investigations by third-party HR consultants, this decision confirms that unless those consultants directly take decisions or act under the employer’s authority to do so, they are unlikely to be held personally liable.

Reliance on external providers to undertake investigations and/or grievances does raise the potential of them being exposed to personal claims. However as long as the agreements with such providers clearly define their remit and confirm that final decisions rest with the employer, such providers should be safe from claims.

It is becoming an increasingly common tactic for employees who have raised grievances or claim to have blown the whistle to try and exert pressure on employers to settle or agree with them, by trying to implicate those who have made findings in an investigation with which they do not agree. Investigators should not be afraid of making adverse findings and this decision will strengthen their ability to be honest about what they have found as part of the investigation.