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Whistle-blowers have a direct remedy for dismissal against individual co-workers

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Whistle-blowers have a direct remedy for dismissal against individual co-workers - Schona Jolly QC and Chris Milsom act for whistleblower charity Protect in Osipov v Timis & Sage

Background to the appeal

Alexander Osipov was CEO of International Petroleum Ltd (‘IPL’) until he was dismissed for blowing the whistle about wrongdoing in relation to contracts in the Republic of Niger. Two directors of IPL, Frank Timis and Anthony Sage, were instrumental in his dismissal.

Mr Osipov brought successful claims in the Employment Tribunal for whistle-blowing detriment and automatically unfair dismissal. However, IPL had become insolvent. In order to obtain full compensation for the losses flowing from his dismissal, Mr Osipov needed to show that Mr Timis and Mr Sage (who happened to have directors’ insurance) were personally liable to compensate him.

Mr Timis and Mr Sage argued that, under the whistleblowing provisions in the Employment Rights Act 1996 (‘ERA’), they could be ordered to pay Mr Osipov compensation for detriments short of dismissal, but not for losses flowing from the dismissal itself.

The legislation

The ERA contains prohibitions against unfair dismissal in Part X. If an employer dismisses an employee because they have made a protected disclosure (i.e., blown the whistle) that is automatically an unfair dismissal (s.103A ERA). Only employees have the right not to be unfairly dismissed.

Part V of the ERA contains separate prohibitions against subjecting workers to unlawful detriments. Under s.47B ERA, a worker has the right not to be subjected to a detriment on the ground that s/he has made a protected disclosure. This right applies to all workers, not just employees.

In order to prevent an overlap between the unfair dismissal and detriment provisions, s.47B(2) contains this proviso:

“(2) This section does not apply where—

(a) the worker is an employee, and

(b) the detriment in question amounts to dismissal (within the meaning of Part X).”

The effect is that dismissal of an employee is dealt with under s.103 ERA whereas terminating the contract of a worker is dealt with as a ‘detriment’ under s.47B.

There are some differences between the Part V and Part X protections. As the case law currently stands, damages for injury to feelings can be claimed under s.47B but not s.103A1. The test for causation is also different: the protected disclosure must be the ‘sole or principal’ reason for dismissal to give rise to a s.103A claim, whereas it need only be a ‘material influence’ on a s.47B detriment.2

Prior to the Enterprise and Regulatory Reform Act 2013 (‘ERRA’), whistleblowing claims could only be brought against employers and not against individual co-workers. The ERRA inserted new provisions into the ERA, including new subsections 47B(1A) & (1B) ERA which provide:

(1A) A worker (“W”) has the right not to be subjected to any detriment by any act, or any deliberate failure to act, done—

(a) by another worker of W's employer in the course of that other worker's employment, or

(b) by an agent of W's employer with the employer's authority, on the ground that W has made a protected disclosure.

(1B) Where a worker is subjected to detriment by anything done as mentioned in subsection (1A), that thing is treated as also done by the worker's employer.”

The effect of subsection (1A) is that individual co-workers are now made personally liable for acts of whistleblower detriment done by them, for which the employer is in turn (by subsection (1B)) made vicariously liable.

The issue

The question that arose in Osipov, was whether this new liability for co-workers was limited by s.47B(2) ERA to detriments short of dismissal?

The parties’ arguments

Mr Timis and Mr Sage argued that the words “This section does not apply where… the detriment in question amounts to dismissal” in s.47B(2) ERA meant that section 47B, including the new co-worker liability provision, did not apply to a dismissal. Therefore, Mr Osipov’s loss of earnings since being dismissed could only be claimed from the company IPL, and not from them directly.

Mr Osipov, supported by the whistleblower charity Protect, argued that the limitation at s.47B(2) had to be interpreted consistently with the purpose of the legislation, namely affording protection to whistleblowers. On their reading, the limitation only applied to “dismissal (within the meaning of Part X)”, i.e. where a remedy for unfair dismissal was available under Part X. In relation to individual co-workers, who cannot be liable under Part X, there should be no restriction.

The parties also disagreed as to whether compensation for a s.47B detriment could in principle include financial losses arising from a subsequent dismissal caused by the detriment.3

Judgments in the courts below

The Employment Tribunal found that Mr Timis and Mr Sage were liable for all of Mr Osipov’s losses because these were caused by “instructions or recommendations” given by them which culminated in the dismissal – i.e., a pre-dismissal detriment. This side-stepped the question of whether individual co-workers can be liable for a dismissal.

The Employment Appeal Tribunal (‘EAT’) held that co-workers can be directly liable under s.47B ERA for the act of dismissal.

Mr Timis and Mr Sage appealed to the Court of Appeal.

Judgment in the Court of Appeal

The Court of Appeal dismissed the appeal and upheld the “masterly” reasoning of Simler P in the EAT. Underhill LJ gave the leading judgment, with which Rafferty and Sales LJJ agreed.

Reasons for the judgment

Parliament can be taken to have intended to exclude liability for detriment under s.47B ERA only where the identical remedy was available under s.103A ERA (§75). Where a claimant complains of dismissal as an act done by a co-worker, as opposed to dismissal as an act done by an employer, the dismissal can be a ‘detriment’ for the purposes of s.47B.

Underhill LJ noted that a construction of s.47B(2) ERA which prevented a claimant from bringing a claim against an individual co-worker based on the detriment of dismissal would produce an “incoherent and unsatisfactory” result (§68). In particular:

  • a co-worker whose unlawful acts short of dismissal cause the claimant to be dismissed would be liable, whereas a co-worker who actually dismissed the claimant would get off scot-free; and
  • where the claimant is a worker not an employee, the co-worker would be liable for terminating their contract, but not for dismissing an employee.

The availability of individual liability for dismissal is also consistent with the similar (though not identical) protections against discrimination under the Equality Act 2010 (§69). It avoids the artificial and arbitrary exercise of distinguishing losses flowing from pre-dismissal detriments from losses flowing from dismissal itself (§76).

This analysis is not undermined by the anomalies between the protections under Part V and Part X ERA – namely, availability of injury to feelings damages and a less restrictive causation test in the detriment provisions (§64 & §72-73). Claimants will continue to make direct claims against employers for automatically unfair dismissal under s.103 ERA wherever possible, because additional remedies for unfair dismissal (re-employment orders and the basic award) are only available under Part X ERA (§74).

Underhill LJ explained this means a co-worker can be directly liable for an act of dismissal under subsection 47B(1A), and in turn the employer can be vicariously liable for the co-worker’s act of dismissal under subsection 47B(1B). All that s.47B(2) excludes is a claim against an employer for its own act of dismissal (§91).

Further, a claim for pre-dismissal detriment does not preclude recovery of consequential losses flowing from the dismissal, although the usual rules on remoteness and quantification of such losses apply (§79-84).

Comment

This is a welcome decision confirming that the ERRA introduced a coherent and comprehensive scheme for co-worker liability under the whistleblowing legislation. It mirrors the scheme for co-worker liability for discrimination under the Equality Act 2010. The result contended for by the Appellants would have undermined protection for whistle-blowers and introduced unwelcome complexity for employment tribunals (in constructive dismissal claims in particular).

The point regarding consequential losses is also important. Given that the Appellants are now liable for the dismissal itself in this case, it makes no difference to Mr Osipov. However, in other circumstances, it is crucial that losses flowing from an act of pre-dismissal detriment may include a subsequent dismissal. The decision is consistent with Underhill LJ’s reasoning in CLFIS (UK) Ltd v Reynolds [2015] EWCA Civ 439, [2015] ICR 1010, concerning pre-dismissal discriminatory acts.

Nonetheless, as noted by Underhill LJ at §78, the inclusive approach to the meaning of s.47B ERA “does not produce a particularly elegant result”. The availability of vicarious employer liability for whistle-blowing dismissals under s.47B ERA introduces just the element of overlap which s.47B(2) ERA was originally drafted to avoid.

A claimant who has been dismissed in circumstances where the dismissing officer was motivated by the claimant’s whistleblowing will, in light of the decision in Osipov, now be able to do the following:

  • Bring a claim for automatic unfair dismissal against the employer directly under s.103 ERA, and benefit from the more generous remedy provisions under Part X ERA including the basic award and possible reinstatement / reengagement; and
  • Bring a parallel claim for dismissal as an act of detriment done by a co-worker against the employer vicariously under s.47B ERA, and benefit from the wider test for causation under Part V ERA and claim damages for injury to feelings.

The Court of Appeal concluded that an overlap is preferable to a problematic lacuna in the statutory scheme. Could the legislation be construed to provide seamless protection without undesirable overlap? Perhaps by a reading of s.47B(2) ERA that permitted direct liability of a co-worker for the detriment of dismissal, but not vicarious liability of an employer in circumstances where an alternative remedy against the employer is available under s.103A ERA. However, this possibility does not appear to have been explored in argument, or perhaps was not considered to be available on the face of the legislation. In any event, this would only avoid conceptual overlap; in practice, no doubt lawyers would plead both types of claim.

By Rachel Barrett  

 

See the full judgment here and further coverage here.

1The Virgo Fidelis Senior School v Boyle [2004] UKEAT 0644/03, [2004] ICR 1210 line of authority provides that injury to feelings damages are available in whistleblowing detriment claims, whereas under Dunnachie v Kingston-upon-Hull Council [2004] UKHL 36, [2005] 1 AC 226 they are not available in unfair dismissal claims. As a result, injury to feeling damages are not available for whistleblowing dismissals, although they are for discriminatory dismissals under the Equality Act 2010.

2Fecitt v NHS Manchester  [2011] EWCA Civ 1190; [2012] ICR 372.

3See prior cases raising similar issues, CLFIS (UK) Ltd v Reynolds [2015] EWCA Civ 439, [2015] ICR 1010 and Royal Mail Ltd v Jhuti [2017] EWCA Civ 1632, [2018] ICR 982. Jhuti is under appeal to the Supreme Court.

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