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10 December 2018

134: Managers could face personal liability in whistleblowing detriment dismissal cases

Under the Employment Rights Act 1996 (ERA), workers have the right not to be subjected to detriment by their employer or co-workers on the grounds that they have made a protected disclosure (section 47(B)(1) ERA). The employer will also be vicariously liable for any acts of whistleblower detriment by co-workers. In Timis and another v Osipov, the Court of Appeal has confirmed that two directors who were instrumental in dismissing a whistleblower were personally, and jointly and severally, liable along with the employer not just for pre-dismissal detriments, but also for losses flowing from the dismissal. The employee in this case, Mr Osipov, was awarded over £2 million in compensation.

Mr Osipov was briefly employed by an oil exploration company as its CEO before two directors, Mr Timis and Mr Sage, decided that he should be dismissed. The Employment Tribunal held that the principal reason for Mr Osipov’s dismissal was that he had made protected disclosures concerning corporate governance and compliance with Nigerian law, and that he had therefore been automatically unfairly dismissed under the whistleblowing provisions of the ERA. The Tribunal also held that Mr Osipov’s losses were caused by the actions of Mr Timis and Mr Sage which had culminated in his dismissal. They were therefore jointly and severally liable with the company for the losses suffered as a result of his dismissal. This decision was upheld by the Employment Appeal Tribunal (EAT), which went further by ruling that, under the whistleblowing detriment provisions, co-workers can be directly liable for a dismissal.

In the Court of Appeal, the directors agreed that they could be personally liable for whistleblowing detriments short of dismissal, but not for the losses arising from a subsequent dismissal. They argued that the ERA prohibits an employee from bringing a whistleblowing detriment claim where the detriment in question amounts to dismissal (section 47B(2)). However, the Court of Appeal confirmed that this provision only prevents employees from bringing both an automatic unfair dismissal claim and a whistleblowing detriment claim against their employer in relation to the same dismissal. There is nothing in the legislation which prevents an employee from bringing a claim against a co-worker based on the detriment of dismissal.

In this case, Mr Osipov claimed against the two directors individually because they had directors’ liability insurance and the company was practically insolvent. Since this decision confirms that losses flowing from pre-dismissal whistleblowing detriments can include the subsequent dismissal, it is likely that more claimants will be advised to claim against co-workers, with accompanying vicarious liability claims against the employer. It is also important to note that detriment claims have a lower standard of causation than unfair dismissal claims and compensation for injury to feelings may be recoverable. In order to reduce the potential risks, employers are advised to ensure that directors and senior managers understand the extent of their personal liability and are able to identify and deal appropriately with possible protected disclosures.

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