In Timis v Osipov [2018] EWCA Civ 2321, the Court of Appeal confirmed that employees who have been dismissed for making a protected disclosure can bring a claim against an individual co-worker for the detriment of dismissal, and a claim for vicarious liability against the employer, in addition to an unfair dismissal claim.
While it is difficult to argue against the Court of Appeal’s reasoning, the decision creates some anomalies, and will raise interesting tactical questions for claimants and respondents alike.
Facts
Mr Osipov was dismissed from his role as CEO of International Petroleum Ltd after he made a series of protected disclosures. His dismissal was carried out by a non-executive director (NED), Mr Timis, on the instruction of another NED, Mr Sage. He successfully claimed automatically unfair dismissal against the company. He also sought to claim that, by their conduct in relation to his dismissal, the two NEDs had subjected him to a detriment, contrary to section 47B of the Employment Rights Act 1996 (ERA 1996), and that the company should be vicariously liable for their conduct.
The employment tribunal and EAT upheld his claims, holding that both the two NEDs and the company were jointly and severally liable for the losses flowing from Mr Osipov’s dismissal (which totalled approximately £1.75 million).
The NEDs appealed the decision to the Court of Appeal. One of their grounds of appeal was that since the detriment in question amounted to a dismissal, section 47B did not apply and Mr Osipov’s only redress was against the company for unfair dismissal under Part X of the ERA 1996.
Court of Appeal decision
The Court of Appeal upheld the EAT’s decision, finding that once the decision had been taken to make co-workers personably liable for whistleblower detriment, it would be “incoherent and unsatisfactory” if they were not similarly liable where the detriment amounted to dismissal. This has the consequence that the employer will be vicariously liable for the detriment leading to dismissal under section 47B(1B). All that is excluded by section 47B(2) is a claim against the employer in respect of its own act of dismissal.
Consequences
The decision confirms that liability in whistleblowing claims is similar to that for unlawful discrimination under the Equality Act 2010, namely that individuals are not protected from liability for the consequences of the most serious detriments to which they subject others. Accordingly, claimants will consider whether they should be pursuing claims against individuals as well as the employer in cases where dismissal is the issue. Generally, the employer will have more financial resources. However there could be occasions where the directors may have deeper pockets, such as where the employer is insolvent (as in this case), or in the case of a start-up company.
From a tactical point of view, claimants may wish to pursue a claim for detriment rather than (or in addition to) an unfair dismissal claim, as the former can give rise to compensation for injury to feelings and the employer may therefore be vicariously liable for a higher sum than it would be in an unfair dismissal claim alone. There may also be occasions where an unfair dismissal claim would fail, for example where the dismissing manager can persuade the tribunal that the principal reason for dismissal was not the disclosure, whereas a detriment claim may still succeed.
This decision will also have significant implications for individuals who are involved in disciplinary processes. Where an employee alleges that their dismissal was as a result of having blown the whistle, they will be able to claim for all losses flowing from the dismissal not only from the employer but also from the individuals involved in the decision-making process. In this case the NEDs were covered by the company’s D&O liability insurance. Employers may wish to check whether their own policies cover non-executive directors as well as executive directors, and will need to consider how those who are not officers should be protected. Training is essential, and employers will want to ensure that all employees and office holders responsible for decision making are supported with HR and legal advice when making decisions which could give rise to a substantial financial risk, both to the employer and to themselves.
When facing whistleblowing claims, employers will also need to consider whether employees will need to take their own legal advice as there may be a conflict of interest; will the employer ever be able to argue that they are not vicariously liable and the employee was effectively “on a frolic”?
We wait to hear whether the case will be appealed to the Supreme Court.
