Legal

Individual liability in whistleblowing cases

16 Oct 2017 By Charles Wynn-Evans

Charles Wynn-Evans reviews a recent EAT ruling in which non-executive directors were held personally liable for the compensation awarded to a whistleblower

In International Petroleum Limited and others v Osipov and others, the Employment Appeal Tribunal (EAT) found that two non-executive directors were jointly and severally liable with the employer company for £1.7m of compensation awarded to a whistleblower in respect of his dismissal because of the protected disclosures he had made.

Mr Osipov was CEO of International Petroleum, an oil and gas exploration company. Shortly after his appointment he made certain protected disclosures about the company’s corporate governance and legal irregularities in relation to proposed government contracts. Following Osipov’s disclosures, he was subjected to several detriments, including being cut out of key parts of his CEO role, and ultimately he was dismissed. Two non-executive directors, who were also significant shareholders, were effectively performing managerial and executive roles in the company, and Osipov sought to bring his claim of unfair dismissal on grounds of whistleblowing against those two individuals as well as his employer.

Since 2013, whistleblowers have had the right to bring a claim directly against fellow workers or agents of the employer if subjected to a detriment, as opposed to being dismissed, because of their whistleblowing. The employing company will be vicariously liable for that claim unless it can show it has taken reasonable steps to prevent the individuals acting as they did. Such steps might include providing appropriate training about how to treat whistleblowers.

In Osipov, the non-executive directors argued that, while they could be personally liable for any detriment to which the individual had been subjected before his dismissal, compensation relating to the employee’s dismissal could only be awarded as part of his unfair dismissal claim against the employing company.

The EAT disagreed on the basis that, otherwise, individuals whose decisions led to the individual’s dismissal could escape liability for what is likely to be the most serious detriment that a whistleblower might suffer – ie being dismissed from their job. Precluding dismissed employees from being able to include decision-makers in claims brought against the employer for unfair dismissal on grounds of whistleblowing would also put employees in a less advantageous position than workers.

Workers – who are not entitled to unfair dismissal rights – may bring a claim in respect of a detriment suffered by virtue of being the individual having made a protected disclosure within the scope of the whistleblowing legislation. This includes all detriments including the termination of the worker’s engagement. The compensation awarded to Osipov included losses flowing from his dismissal and there was no reason, in the EAT’s view, for the directors not to bear that liability. The EAT considered that to interpret the whistleblowing legislation in this way would achieve parliament’s aim in adopting the legislation – which was to protect whistleblowers from being subjected to unlawful treatment by fellow workers.

This decision reinforces the need for employers to put appropriate policies and training in place to reduce the risk of whistleblowing claims and to increase the chance of the employer being able to rely on the defence that it has taken all reasonable steps to ensure whistleblowers are treated appropriately.

Charles Wynn-Evans is a partner at Dechert

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