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Lessons in Liability

16 May 2019 by Lydia Newman

Lessons in Liability

Directors and company secretaries may be held personally liable in some circumstances

Personal Liability for Directors

Ordinarily, directors and company secretaries are not liable personally for breach of contract. This is as long as they are acting in the interests of the company in good faith. However, this is not to say that they can never be held personally liable. If there is a statutory breach involved this raises the implication of failure to comply with their duties and therefore the risk of a claim for breach of contract from employees. One must also remember that directors can be held liable in respect of certain criminal acts.

In the case of Antuzis v DJ Houghton, decided in April 2019, it was held that
a director and company secretary of a limited company were, as a result of the specific facts of that case, liable for employment contract breaches in relation to the Agricultural Wages Act 1948 and related legislation.

The Claimants were employed by DJ Houghton Catching Services to catch chickens in farms across the UK for distribution to a number of chicken and egg companies. It was found that the Claimants had been poorly treated, in breach of contract, as they had been required to work excessive hours, been given falsified wage slips, been forced to sleep in a mini bus between farms, received punitive deductions from wages for minor misdemeanours (such as leaving mugs in sinks) and were forced to live in appalling conditions.

There were also outstanding criminal charges relating to slave labour and human trafficking.
Notwithstanding the potentially very serious criminal aspect to this case the High Court found that the director and company secretary had failed to comply with their duties. It was held that they did not believe that they were complying with their legal duties towards their employees as they knew that they were not paying the national minimum wages, overtime payments and holiday pay. As a consequence of this they were held personally liable for the breaches, the level of which has yet to be decided.

This case, although extreme on the facts, highlights the fact that directors and company secretaries are not immune from liability and brings to the fore the importance of always upholding their legal duties in respect of their company and in addition the company employees. It is a salutary reminder to those involved in the running of a business at senior levels of management that if that should not ignore wrong-doing and the close they are to being complicit in such wrong-doing, the greater the likelihood that they might be held liable.

Pimlico Plumbers Case

At the end of March 2019 one of the long-running case relating to employment status, that of Pimlico plumbers and Charlie Mullins v Gary Smith, was heard in the Employment Tribunal (ET) having been remitted by the Supreme Court for consideration of holiday pay and unlawful deduction from wages, on basis (some might say controversially) that the Claimant was a worker rather than a self-employed contractor.

As you may recall the crucial question of employment status is important as workers are entitled to employment rights such as holiday pay and the national minimum wage whereas self-employed contractors are not. This worker status can therefore sometimes be hard fought for and readers will remember press coverage involving a number of high profile cases involving the likes of Uber and Deliveroo.

The claim was originally lodged in August 2011, over three months outside the limitation period for bringing the claims. The Claimant alleged that as he was not aware of his employment status prior to seeking advice he did not bring a tribunal claim within time. Whilst the question of employment status was dealt with as a preliminary issue this secondary preliminary issue may bring an end to the action.
The Claimant is appealing the ET’s decision and the Respondent is considering pursuing the Claimant for costs and ‘reputational’ damages. After five hearings this case is far from over.
The issue of limitation is one which should be considered for any type of claim in the ET or elsewhere as, in many instances claims lodged outside a time limit, particularly where the Claimant is legally represented, will not be allowed to proceed.

There are different rules which apply to different types of cases but the most common time limit in the employment tribunals is three months from the date of the alleged unlawful act, such as an unlawful deduction of wages or an unfair dismissal. The time limit is not always the end of the matter, as argued by the Claimant in this case. Tribunals can decide to allow claims to proceed if they are lodged ‘out of time’, with more scope to do so in claims involved unlawful discrimination where it is ‘just and equitable’ to do so.

Reasonable Contact

When employees are on maternity leave employers they have an entitlement
to have reasonable contact with employees. Depending on what is agreed with
an employee ‘reasonable’ contact may include work related matters, including job opportunities, redundancy and social activities.

However, if employees do not communicate adequately with employees during maternity leave (or adoption/parental leave) this may be give rise to claims for discrimination on the basis of less favourable treatment.

In the recent case of SW Yorkshire Partnership NHS Foundation Trust v Jackson it was found by the ET that the employer had treated the Claimant less favourably; she did not receive an email relating to alternative opportunities during redundancy as a result of the fact that she was on maternity leave at the time.

The EAT has subsequently remitted the case back to the ET to reconsider the basis of their assessment and in particular to consider the reason why the email was sent to the Claimant’s work email address rather than her personal email address.

This case is similar to that of Visa International Service Association plc v Paul in which an employer failed to ensure adequate communication with an employee on maternity leave in relation to an internal job vacancy.

In this case the Claimant was successful in relation to a claim for discrimination and breach of the duty of trust and confidence.

Although the final outcome in the Jackson case has yet to be decided these cases serve as a useful reminder that employers should aim to agree with employees prior to maternity leave in relation to the type of communications they would like to receive and how they should be communicated with during maternity leave.

Matters crucial to employment such as job opportunities, redundancy or pay related issues should always be communicated, particularly given the enhanced protection afforded to employees on maternity leave in the context of redundancy.

Updated Injury to Feelings Awards

As regular readers will be aware there is a yearly review and uplift in the Vento Guidelines which govern payments made to successful claimants when it is found that Injury to Feelings have occurred in claims of discrimination.

The new bands for claims presented on or after 6 April 2019 are as follows:

lower band (less serious cases): £900 to £8,000
middle band (cases that do not merit an award in the upper band): £8,000 to £26,300
upper band (serious cases): £26,300 to £44,000.

Remember that the above are guidelines. It is possible for awards to be higher. 

Lydia Newman is an employment solicitor

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