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16 October 2017

70: Non-executive directors personally liable to CEO for losses arising from whistleblowing dismissal

In International Petroleum Ltd and others v Osipov and others, the Employment Appeal Tribunal (EAT) has upheld an Employment Tribunal’s finding that two non-executive directors were personally liable for their part in dismissing an employee on whistleblowing grounds.

Mr Osipov was the CEO of International Petroleum Ltd (IPL), a gas and oil exploration company. Mr Timis and Mr Sage were non-executive directors, but effectively exercised executive and managerial control. Mr Osipov alleged that he was dismissed by Mr Timis and Mr Sage for making a number of protected disclosures relating to the way IPL’s business was being conducted in the Republic of Niger. He also claimed that they had subjected him to various detriments, including being sidelined from negotiations and instructed not to visit Niger.

Mr Osipov brought a claim for automatically unfair dismissal against IPL. He also brought a detriment claim against Mr Timis and Mr Sage in their personal capacities as well as against IPL. The Employment Tribunal upheld these claims, concluding that Mr Osipov had been dismissed by IPL for making protected disclosures. The Tribunal also found that the non-executive directors were workers and had been responsible for the decision to dismiss Mr Osipov and its implementation. Mr Osipov was awarded around £1.7 million in compensation, payable on a joint and several basis by Mr Sage and Mr Timis personally as well as IPL.

The non-executive directors appealed to the EAT. They argued that the whistleblowing legislation does not allow employees to bring a detriment claim where the detriment in question is dismissal, so that compensation for dismissal could only be pursued against IPL. They also argued that compensation in detriment claims is limited to pre-dismissal losses, so that they could not be liable for Mr Osipov’s post-dismissal losses. However, the EAT rejected these arguments, finding that the instruction to dismiss Mr Osipov amounted to a detriment for which the non-executives were personally liable. There is nothing in the legislation which precludes an employee from bringing a separate detriment claim against managers involved in a decision to dismiss. In addition, those individuals can be held personally liable for losses arising from the dismissal.

This case illustrates that a dismissal can be actionable as a detriment claim against individuals, as well as being actionable as an unfair dismissal claim against the employer. A detriment claim may involve an injury to feelings award, which is not possible in an unfair dismissal claim. In addition, there is a lower standard of proof for a detriment claim. This case is therefore likely to encourage more claimants to seek compensation from individual decision-makers, which may also assist them tactically. Given this increased risk of claims, employers should ensure that managers are trained to recognise potential whistleblowing issues and to deal effectively with whistleblowing allegations.

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