The Court of Appeal has held that an employee was not prohibited from bringing a claim against his co-workers based on pre-dismissal detriment actions which had caused his dismissal. 


Further, the employee was entitled to recover compensation for losses flowing from the dismissal which had been caused by the pre-termination detriment, subject to the usual rules on the remoteness of loss.  As a result of this decision, employers need to ensure they have appropriate policies, training and insurance cover in place ((1) Timis (2) Sage v Osipov).

Background law

Where a whistleblower is dismissed for having blown the whistle, they can bring one of the following claims against their former employer seeking uncapped compensation for their post-dismissal losses:   

  • if whistleblower is an employee, they can bring a claim for automatic unfair dismissal under s.103A of the Employment Rights Act 1996 (ERA); or
  • if the whistleblower is a worker, they can bring claim for detriment by the employer, citing the dismissal as the detrimental action, under s.47B(1) of the ERA.

In addition, if a whistleblower (whether an employee or a worker) is subjected to any pre-dismissal detriment as a result of having blown the whistle, they can bring a detriment claim against the employer and/or a co-worker and/or an agent of the employer (and the employer is potentially vicariously liable for the actions of the co-worker and/or the agent).  The Employment Tribunal can award such compensation as it considers to be "just and equitable" having regard to the act in question and the loss flowing from it.  It can also make an award for injury to feelings.

If an employee brings both a detriment and an unfair dismissal claim, he takes the benefit of the detriment protection up to the point of dismissal (as against the employer and/or a co-worker and/or the employer's agent).  From the point of dismissal, he takes the benefit of the automatic unfair dismissal protection (as against the employer only).

In this case, the Claimant employee succeeded in: (i) a detriment claim against his co-workers in respect of their detrimental actions which brought about his dismissal; and (ii) an automatic unfair dismissal claim against his former employer.  The co-workers and the employer were held by the Tribunal to be jointly and severally liable for the entire amount of post-dismissal losses, in the sum of approximately £2 million.  The co-workers appealed to the Court of Appeal, arguing that post-dismissal losses could only be awarded as compensation for unfair dismissal, for which only the employer could be liable.  

Facts

The Claimant was employed by International Petroleum Limited (IPL) as its CEO.  Mr Timis was a director and majority shareholder of IPL.  Mr Sage was a director and Chairman of IPL.

The Claimant made a number of protected disclosures.  Shortly thereafter, Mr Timis decided that the Claimant should be dismissed.  Mr Sage agreed with Mr Timis and sent the dismissal email to the Claimant.

The Claimant brought a claim for automatic unfair dismissal against IPL.  He also brought a detriment claim against Mr Timis and Mr Sage in respect of a number of alleged detriments, one of which was the instructions and recommendations they had made which had led to the dismissal.

Decisions of the Employment Tribunal and EAT

The Employment Tribunal found that the Claimant had been automatically unfair dismissed by the company by reason of the protected disclosures.  This decision was not part of the appeal before the Court of Appeal.  

The Tribunal also found that Mr Timis and Mr Sage (and IPL) had subjected the Claimant to a detriment by their conduct in relation to his dismissal.  It held that Mr Timis and Mr Sage were jointly and severally liable with IPL for the whole amount of compensation for the dismissal and detriment totalling approximately £1.74 million (since recalculated to approximately £2 million).  There was no apportionment of compensation between the detriment and unfair dismissal claims.  The consequence was that Mr Timis and Mr Sage were held to liable for all the post-dismissal losses suffered in consequence of the pre-termination detriments.  

The EAT substantially upheld the decision of the Tribunal, save that it was held that Mr Timis and Mr Sage could not be liable for the basic award for unfair dismissal (totalling £2088).  

Court of Appeal decision

Mr Timis and Mr Sage appealed, arguing that under a detriment claim they could not be liable for an instruction to dismiss, nor for the losses which flowed from the dismissal.  They argued that if an employee was entitled to recover dismissal losses against a co-worker via the detriment route, this would render the unfair dismissal route a "dead letter" because:

  • the employer – with deeper pockets - could be vicariously liable for the co-worker's detriment; 
  • detriment claims have a lower causation threshold, meaning they are potentially easier claims to win; and
  • the detriment route allowed the recovery of additional compensation (i.e. an injury to feelings award)

However, the Court dismissed the appeal, holding that an employee was not prohibited from bringing a claim against a co-worker based on pre-dismissal detriment which caused the dismissal. The only prohibition was that they could not bring such a claim against the employer (this would have to be framed as an unfair dismissal claim under s.103A of the ERA).  They disagreed that this interpretation rendered the unfair dismissal route defunct since it offered remedies which are not available under the detriment route (i.e. reinstatement, re-engagement and a basic award of compensation).

The Court recognised that this meant an employee dismissed for whistleblowing had separate causes of action with different causation thresholds and remedies.  However, the purpose of the whistleblowing legislation was to protect whistleblowers and these anomalies were not enough to justify an interpretation which offered less protection.  That being the case, such an employee would be entitled to recover compensation for losses flowing from the dismissal which had been caused by their pre-termination detriment.  However, the usual rules of remoteness would apply.

Comment 

Could this decision herald a rise in senior individuals being sued for whistleblowing detriment, alongside the dismissal claim faced by the employer?  Where the facts allow, it would seem that a well-advised claimant would bring both claims.  It maximises their chances of recovering post-dismissal losses given the lower causation threshold in detriment claims and it also opens up the possibility of recovering a sizeable injury to feelings award.  Perhaps more importantly, this strategy significantly raises the profile of the case and adds pressure onto the employer.  Does the employer shield the named individual and defend both claims? Or does it cut the individual loose to avoid vicarious liability for the alleged detriment (particularly where the employer is confident that it can successfully defend the unfair dismissal claim)?

The key practical take away point for employers is that they must take the utmost care to ensure that whistleblowers are not subjected to detriments as a result of having made a protected disclosure.  The starting point is to make sure there is a whistleblowing policy in place which explains the consequences of victimising a whistleblower (i.e. disciplinary action).  Furthermore, appropriate training should be given to managers and cascaded down to all employees.   These steps should help avoid detriments occurring, and, if they do, should help the employer avoid vicariously liability for them.

Another practical step for employers is to ensure that appropriate directors' and officers' liability insurance is in place, extending to the right group of individuals and providing an appropriate level of cover for their personal liability in whistleblowing detriment claims.  However, it's worth remembering that an insurer may not pay out in circumstances where a director intentionally fails to comply with the law.  Therefore, if a director has had training on whistleblowing law, including victimisation, and knowingly decides to take detrimental action against a whistleblower, the director could find that the insurer will refuse to cover any resultant liability.

An application for permission to appeal to the Supreme Court was rejected by the Court of Appeal, however, this application may be made to the Supreme Court itself.

(1) Timis (2) Sage v Osipov

Key contact

Amanda Steadman

Amanda Steadman

Principal Knowledge Lawyer, Employment
London

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