Employers are responsible for what their staff do during the course of their employment. This is known as ‘vicarious liability’. However, individuals who are responsible for discrimination, harassment or retaliating against whistleblowers can also be held personally liable for their actions, and, in extreme cases, could be sued personally alongside their employer. Even junior members of staff could be personally liable.
Previously, most employment law practitioners thought that in whistleblowing claims, an individual could only be held personally liable for financial losses relating to ‘detriments’ (ie negative retaliatory acts against an individual that stop short of dismissal) but not dismissal of an individual. It is usually the dismissal of the whistleblower that causes the main part of the individual’s financial loss. It was therefore thought that the potential financial liability of individuals in whistleblowing claims was quite low. However, in the 2018 case of Timis v Osipov the Court of Appeal found that an individual who instructed the business to dismiss a whistleblower could be held personally liable for the losses resulting from his instruction and therefore for the large dismissal related losses. This decision has significantly increased the scope for the personal liability of senior executives.
The courts are also increasingly willing to look behind the reasons purportedly relied upon by an employer on a dismissal and at the motives of individual managers. Traditionally, courts had been reluctant to look beyond the mindset of the dismissing officer when evaluating the fairness of a dismissal. However, the Supreme Court in Jhuti v Royal Mail recently found that if a senior member of staff provides information to the dismissing officer which is tainted in some way (eg because they are motivated to drive a whistle blower out of the business), the court can take that information into account.
In the regulatory context, the Senior Managers and Certification Regime (SMCR) puts significant regulatory focus on individual accountability of senior individuals within Financial Services and Insurance. Subjecting an individual to retaliation because they have blown the whistle could also be a potential regulatory matter that impacts on the individual retaliator’s fitness and propriety. In extreme cases, breaches of conduct rules can result in the FCA issuing fines to offending individuals. By way of example, Jes Staley, the CEO of Barclays was fined over £600,000 in 2018 when he attempted to identify an anonymous whistleblower. The FCA handbook makes it clear that any member of staff who acts to the detriment of a whistleblower may not be considered fit and proper. A finding that an individual lacks fitness and propriety could negatively impact not just an individual’s job but also their future career in financial services.
What can employers do to protect against these risks?
Prudent employers will often have insurance packages in place to mitigate some of these risks. Employment Practices Liability Insurance packages can protect employers and senior staff from the damages and costs of litigation brought by former employees.
Additionally, directors and officers insurance policies can cover the legal costs and awards of damages associated with defending proceedings against individuals and shrewd managers and directors should check that an adequate D&O policy is place.
The interests of businesses and their senior management team will not necessarily always align. For example, employers will have a defence in discrimination and harassment claims if they can successfully demonstrate that they took all reasonable courses of action to prevent the discriminatory actions from occurring, for example by providing training or having policies against harassment. However, this can have the effect of exposing the individual manager in question. This is a notoriously difficult defence to run and, in practice, many businesses will not run it and will stand behind their senior staff. Prudent employers should put in place training to prevent harassment and discrimination (including subconscious bias training) and appropriate policies and procedures to address equal opportunities and whistleblower protection.
The scope for personal liability to increase, in both the regulatory and employment law spheres, is a trend that looks set to continue.
Nick Wilcox is a partner and Rolleen McDonnell is a senior associate at specialist employment law firm Brahams Dutt Badrick French LLP