Directors and senior managers and their employers should consider the recent Court of Appeal decision in the Osipov whistleblowing case very carefully. Briefly, by way of scene-setting, Osipov had made a series of protected disclosures and he was ultimately dismissed as CEO of the employer company pursuant to a decision of two non-executive directors (NEDS) of the company. He brought a  whistleblowing claim (for approx. £1.7m) against the company.  He also added the two NEDS as respondents on the basis that they had subjected him to a detriment for (amongst other allegations) their part in the decision to dismiss him.

A worker has the right not to be subjected to detriment on the ground that they have made a protected disclosure (e.g. a disclosure of some wrongdoing). This protection applies to detriments caused by the employer as well as a detriment by the worker’s colleagues or an agent of the employer. Since 2013, in the case of detriment by a colleague, it will be treated as also having been done by the employer (vicarious liability).

A worker who is also an employee will have a claim for automatically unfair dismissal (no cap on compensation) if they are dismissed by the employer for the sole or principal reason that they have made a protected disclosure.

An employee cannot bring a claim for detriment where “the detriment in question amounts to dismissal” (within the meaning of the unfair dismissal provisions of the relevant statute).  The employee would need to bring a claim for unfair dismissal instead. However, a worker who is not an employee (and so who is not eligible to claim unfair dismissal) can bring a detriment claim in respect of termination of the engagement.

The question posed in Osipov was whether, although the only claim for Osipov against the employer arising out of the dismissal would be unfair dismissal, the claims against the NEDs could include a detriment claim where the detriment was the dismissal itself?  The answer was yes, it could. This made the NEDS jointly and severally liable with the employer for the full amount of the £1.7m.

Naming individuals as respondents to claims is common in discrimination cases and has been for quite some time. There is a psychological and practical advantage to the claimant in doing this. The individual respondent is made to feel uncomfortable by the personal nature of the accusation and, in some cases, financially vulnerable too.  Naming an individual respondent also offers a practical advantage to the claimant if the employer is subject to solvency issues. Adding individuals in whistleblowing cases will I think increase as a result of cases such as Osipov.

In the majority of cases the employer will indemnify the individual employee or officer (the NEDS had the benefit of D&O insurance in Osipov) for any liabilities in relation to such a claim (which would otherwise be joint and several). However, there may be instances where the culpability of an individual becomes more apparent as the evidence develops through an investigation or trial and the employer’s appetite for indemnifying the individual may change. I doubt whether such a potential liability is in the contemplation of many senior managers when they take decisions to dismiss.

Osipov also highlights why employers should think through carefully who is involved in decisions to dismiss. Each person who has a part to play in the dismissal is likely to be called as a witness and may also be named as an individual respondent. It might be, for example, that a “c-suite” director who only had a cursory input to a decision to dismiss, would nevertheless have to give evidence in determining what the “sole or principal reason” for the dismissal was. Most employers would want to avoid their senior executives having to give evidence in such cases and therefore they should give some thought to how such decisions might be contained. If a decision to dismiss is escalated – as good governance might dictate in some circumstances – it should only be done in the full  knowledge of this possible outcome. For their part managers involved in decisions to dismiss might want to think about their potential personal liability.

Another reason why this decision is significant is that a detriment claim (not available to an employee against the employer when a dismissal has occurred and the claim is about the dismissal itself) may be more attractive to a claimant because of the lower burden of proof. For whistleblowing dismissal claims it must be shown that the sole or principal reason for the dismissal is the protected disclosure, whereas for a detriment claim it need only be established that the protected disclosure was a materially influential cause of the detriment.

 

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