Directors personally liable for whistleblowing dismissal

Timis v Osipov

Two company directors were personally liable for their part in dismissing an employee on whistleblowing grounds.

It is well understood that employers may be liable for whistleblowing-related dismissals either in their own right or vicariously for the actions of their workers where they cannot put forward a defence that they have taken all reasonable steps to prevent the actions of their co-workers. Since changes to the legislation in 2013 individual workers have also been at risk of personal liability for their own actions, where those actions are taken in response to a protected disclosure by a co-worker, which causes their co-workers to suffer some form of detriment.

However, the question has always been whether that detriment can include dismissal. This case has confirmed that although a claim against an employer for detriment cannot include dismissal, a worker can bring a claim against an individual co-worker for subjecting him or her to the detriment of dismissal, i.e. for being a party to the decision to dismiss; as well as bringing a claim of vicarious liability for that act against the employer. Any such claim for detriment against a co-worker which results in the claimant’s dismissal can include losses flowing from the dismissal.

Background

Mr Osipov was CEO of International Petroleum Ltd (IPL) until he was dismissed for blowing the whistle about wrongdoing in relation to contracts in Niger. Two directors of IPL, Mr Timis (the largest individual shareholder) and Mr Sage, were instrumental in his dismissal.

Mr Osipov (supported by the whistleblowing charity Protect) brought successful tribunal claims for whistleblowing detriment and automatically unfair dismissal against IPL, Mr Timis and Mr Sage. The tribunal held that by their conduct in relation to Mr Osipov’s dismissal Mr Timis and Mr Sage had subjected him to detriments that ultimately led to his dismissal and that they were jointly and severally liable. He was awarded over £1.7m in compensation (recalculated to £2 million), to be paid by IPL, Mr Timis and Mr Sage on a joint and several basis. However, IPL had become insolvent and so, on a joint and several basis, Mr Timis and Mr Sage were personally liable and had the benefit of director’s insurance which would pay the compensation if necessary.

Mr Timis and Mr Sage appealed unsuccessfully to the EAT and they then appealed to the Court of Appeal. They argued that the whistleblowing provisions in the Employment Rights Act do not permit an employee to bring a detrimental treatment claim where the detriment relied on is dismissal. Instead the employee can only bring an unfair dismissal claim against the employer.

Court of Appeal decision

The Court of Appeal dismissed their appeal.

An individual worker can be liable for an employee’s dismissal via a detrimental treatment claim. The court analysed the complex statutory language and held that a construction which prevented a claimant from bringing a claim against an individual co-worker based on the detriment of dismissal would produce an incoherent and unsatisfactory result, which was not what Parliament intended.

The Court of Appeal distinguished between the dismissal itself and the ‘recommendation for dismissal’, which was itself a detriment leading directly to the unfair dismissal of Mr Osipov. As a result, Mr Timis and Mr Sage were held to be liable for the loss of earnings sustained by Mr Osipov because of their recommendation (which exceeded £2m). The Court of Appeal was keen to point out that the extent of the personal liability of individuals for their actions, which cause co-workers to suffer a detriment, is not limited to actions short of dismissal.

Link to judgment: https://www.bailii.org/ew/cases/EWCA/Civ/2018/2321.html

Comment

This is a welcome clarification of the law, especially given the case law currently developing that when considering if an employer is liable for dismissal as a result of whistleblowing, the knowledge of the dismissing officer is key. Therefore, if the dismissing officer does not know that the worker has blown the whistle, then the employer escapes liability. This case appears to close that particular loophole because if the individual co-workers are liable then unless the employer can show it took all reasonable steps to prevent the detriment occurring, the company is still vicariously liable for their actions and compensation including losses flowing from dismissal.