Under most construction contracts, the contractor takes on the ground conditions risk. However, a recent case has demonstrated that the risk can fall on the employer.
Under UK legislation, a worker has the right not to be subjected to detriment on the ground that they have made a protected disclosure. This protection applies not only to detriment by the employer but also detriment by the worker’s colleagues (s47B (1B)/(1D) ERA 1996). In cases of detriments by co-workers, it will be treated as also having been done by the employer, subject to a reasonable steps defence. Employees are prevented from bringing detriment claims where the detriment in question amounts to dismissal and are instead required to bring an unfair dismissal claim (s47B(2)). However, a worker (who is not an employee and therefore not eligible to claim unfair dismissal) can bring a detriment claim in respect of their termination. Employees can also claim automatic unfair dismissal if the “sole or principal reason” for dismissal is that they have made a protected disclosure (s103A ERA 1996).
In the Osipov case, the EAT had to consider whether an instruction to dismiss and a decision to dismiss a whistleblowing employee by two individuals could constitute a detriment, notwithstanding that the claim against the employer had to be brought as an unfair dismissal claim. The EAT also considered whether individuals could be liable for post-dismissal losses on a joint and several liability basis with the employer.
Before his dismissal, Mr Osipov was employed by International Petroleum Ltd (IPL), an oil and gas exploration company, as the CEO. He claimed that he had been automatically and unfairly dismissed by IPL because he was a whistleblower, having made four protected disclosures relating to the company's business in the Republic of Niger. He also claimed that he had suffered detriments at the hands of two non-executive directors (NEDs) and two external contractors. These detriments included being sidelined from negotiations, excluded from participation in the company's work in Niger and being instructed not to visit Niger. Mr Osipov was also mistakenly sent an email by one of the NEDs, instructing the other NED to dismiss him, which the other NED did. This email was a further detriment and provided evidence that Mr Osipov’s dismissal was on the grounds that he had made protected disclosures.
Mr Osipov brought his detriment claims against his employer and the NEDs/external contractors as individual respondents. His reason for doing so was that IPL was practically insolvent; therefore, there was a risk that without the NEDs being found individually liable, Mr Osipov would be left with no effective remedy.
The Tribunal upheld the claims, holding that the two NEDs were jointly and severally liable with IPL for approximately £1.7 million compensation for the losses that flowed from Mr Osipov's dismissal. The Tribunal also found that the dismissal of Mr Osipov was automatic and unfair by IPL.
IPL appealed this decision on a large number of grounds; however, the most significant ground was on the question of whether or not there could be joint and several liability in respect of the NEDs for losses which flowed from the dismissal or dismissal-related detriment.
Both IPL and the NEDs unsuccessfully appealed to the EAT. One of the main grounds of appeal was that the NEDs should not be liable for losses flowing from the dismissal because the wording of the legislation meant that the liability of individuals is restricted to pre-dismissal detriments only. They also sought to argue that parliament had intended there to be a complete distinction between the pre-dismissal detriment regime under s47B ERA (Part V) and the dismissal regime under s103A ERA (Part X).
The EAT concluded that as dismissal-related detriment claims by “workers” can be pursued against individuals within Part V, there was no reason why “employees”, such as Mr Osipov, should be in a different position. The EAT also found that there was no principled reason for making workers personally liable for losses caused by detriments short of dismissal, but then relieving them of liability in respect of the most serious detriments, such as those likely to lead to dismissal. It held that to construe the legislation otherwise would create unjust results.
The EAT confirmed that claims for detriment amounting to unfair dismissal (against employers) could only be brought under Part X. Claims by employees against co-workers for detriment amounting to dismissal (in this case the NEDs instructing to dismiss and carrying it out) which were not within Part X, continued to be capable of being brought against individuals under Part V. The EAT acknowledged however that its decision would mean different causation thresholds apply for claims about dismissal. Against the employer, the claim will be for unfair dismissal where claimants must show the “sole or principal reason” for dismissal was the protected disclosure. Against the fellow worker, the claim will be for detriment for which claimants need only show that the protected disclosure “materially influenced” their colleague’s treatment of them.
The EAT also found that as the compensation awarded to Mr Osipov related to losses that flowed directly from his dismissal and the detriments to which the NEDs subjected him, it was recoverable from IPL and the NEDs on a joint and several basis.
This is the first case in which the EAT has held that individuals can be liable for dismissal-related damages in claims brought under section 47B ERA. The decision also ensures that employees are on an equal footing with workers, who can bring claims against co-workers for detriments amounting to termination.
The EAT commented that “It is likely to be an unusual case where an employee will wish to pursue a claim and seek a remedy against a fellow worker for a whistleblowing detriment amounting to dismissal, rather than pursuing the claim against the employer…”.
It is of course not unusual for individuals to be named as Respondents, together with the employer, in discrimination claims. Following this case, as a tactical measure, we now expect to see an increase in Claimants naming individual dismissing managers in whistleblowing cases, particularly where the employer may be insolvent, or there is a high risk that they will be unable to pay any damages awarded. Claimants will now be able to pursue co-workers and look for compensation from individual decision makers for losses flowing from dismissals, as well as from detriment. Importantly, awards for injury to feelings may also be made against individual decision makers. In circumstances where the employer is solvent, but the co-worker is not, liability would still attach to the employer under the vicarious liability rule, which treats the act of the co-worker as the act of the employer, subject only to the “reasonable steps” defence.
Given the potential increased risks of claims against managers in whistleblowing cases, employers should consider training them on the rights of whistleblowers, including how to spot and deal with whistleblowing allegations, to mitigate those risks.
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