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Liability for whistleblowing detriment extends to dismissals confirms the Court of Appeal

In a judgment recently handed down on the case of Timis, Sage -v- Osipov, the Court of Appeal has confirmed the EAT's view that personal liability for whistleblowing detriment extends to dismissals and the losses that result.

What is the significance?

The decision is significant since it means that colleagues of a dismissed worker who are involved in a decision to dismiss, and not merely those that make the decision, could be on the hook for the potentially significant losses that flow from the dismissal.

This depends on whether the dismissed worker can show that they were dismissed "on the ground that" they made a disclosure of information that benefits from whistleblowing protection (i.e. a "protected disclosure").

Interestingly the decision also provides a route for employees to bring detriment claims against their employers where they consider that they were dismissed on the ground of a whistleblowing disclosure. They can do so by bringing a whistleblowing detriment claim against the dismissing manager and then relying on provisions of the Employment Rights Act 1996 (the 1996 Act) which make employers vicariously liable for actions of their employees. The employer will have a defence against a vicarious liability claim if they can show they took "reasonable steps" to prevent such a detriment from occurring. 

Facts

Mr Osipov was employed as CEO of International Petroleum Limited (IPL) whilst Mr Timis and Mr Sage were two of its non-executive directors. Mr Timis was also IPL's largest individual shareholder. Both Mr Timis and Mr Sage are high profile individuals: Mr Timis owns extensive mining and oil extraction interests and was previously estimated to be the richest Romanian, whilst Mr Sage is a well-known Australian businessmen and owner of the Perth Glory football team.

In October 2014, Mr Sage dismissed Mr Osipov on Mr Timis's instruction. The courts later found that Mr Osipov was dismissed because of protected disclosures Mr Osipov had made regarding corporate governance and Nigerian law.

Arguments and judgment

Mr Timis and Mr Sage argued before the Court of Appeal that they could not be held personally liable for their respective roles in dismissing Mr Osipov (and the losses flowing from the dismissal) because section 47B(2) of the 1996 Act states that an "employee" cannot bring a claim for whistleblowing detriment where:

"the detriment in question amounts to dismissal (within the meaning of Part X)"

The Court of Appeal disagreed. Lord Justice Underhill observed that the wording "within the meaning of Part X" was key since Part X referred exclusively to detriments caused by the employer. He held that the purpose of s.47B(2) (and Parliament's intention in including it) was to prevent employees from bringing both an automatic unfair dismissal claim and a whistleblowing detriment claim against an employer in relation to the same dismissal.

Thankfully for Mr Timis and Mr Sage, their actions are covered by director's insurance. They will surely be relieved this policy was in place since the Court of Appeal has confirmed that they now owe Mr Osipov just over £2 million by way of compensation. International Petroleum Limited is insolvent so the burden of paying this sum falls squarely on them (or, more accurately, their insurers).

Big picture

This decision has a lot to recommend it. It ensures that employees now have the same right as workers to bring whistleblowing detriment claims against co-workers. However, the decision does lead to the following anomalies:

  • Parliament appears to have intended that Section 47B(2) of the 1996 Act would prevent employees from bringing the same claim as both an unfair dismissal and a detriment claim. However, when combined with the vicarious liability provisions, it provides a path for employees to do precisely this.
  • It is easier to establish a whistleblowing detriment claim than a whistleblowing dismissal claim as the causation test is less strict.  This decision therefore makes it easier for whistleblowers to bring successful claims.
  • Employees can seek payment of compensation for injury to feelings in respect of their detriment claim. This head of loss is not available for unfair dismissal claims.

It is yet to be seen whether Mr Timis and Mr Sage will appeal to the Supreme Court. This judgment should put senior executives on notice that they could face substantial personal liability if they play a role in dismissals which are, at least partly, motivated by an employee's protected disclosure. It also makes a strong case that executives should look to ensure they have comprehensive director's insurance in place.

If you have any questions regarding the legal protections for whistleblowing and the risks that can arise for employers and their decision makers, please contact Stuart McBride.

Contributor: Alistair Hayes 

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2018. Specific advice should be sought for specific cases. For more information see our terms & conditions

 

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