Case law update – December 2018Print publication
Bellman v Northampton Recruitment Ltd – Employer held liable for managing director’s violent conduct
The Court of Appeal has found a company vicariously liable for the violent conduct of its managing director at a Christmas party where the attack left an employee severely disabled.
“Vicarious liability” is a legal concept under which employers can be found liable for the wrongful acts of their employees in the course of employment. The concept has developed and expanded over the years and recent cases have applied quite a broad test that renders an employer liable for an employee’s wrongs where there is a “sufficient connection with the employee’s employment, such that it would be fair to hold the employer vicariously liable”.
This test involves the court asking two questions as follows:
- What duties/activities were entrusted to the employee?
- Was there sufficient connection between the employee’s position and the wrongful conduct so as to make it just and reasonable for there to be vicarious liability?
In the recent case of Mohamud v WM Morrison Supermarkets plc, the Supreme Court said that the question of whether it is ‘just and reasonable for there to be vicarious liability’ should be considered in line with the principle that businesses should bear the loss caused by business related risks materialising, including the risk of an employee misusing his or her position. Overall and in recent years, the trend has been for the Courts to take a much wider approach to the question of vicarious liability.
In December 2011, Northampton Recruitment Ltd held its Christmas works party at a golf club. The party was attended by many staff including a sales manager called Mr Bellman and the company’s managing director, Mr Major.
The actual party ended at around midnight, but some staff took taxis to a hotel bar (paid for by Mr Major) and continued drinking. At around 3am tempers became flared as Mr Major and Mr Bellman became involved in an argument about work and how things should be done. Mr Major punched Mr Bellman twice which led to Mr Bellman falling and hitting his head on the ground, fracturing his skull. This injury led to severe brain damage.
Mr Bellman sued the company claiming that it was vicariously liable for the Mr Major’s actions and his resultant injuries.
Initially, the High Court dismissed the claim on the basis that there was insufficient connection between Mr Major’s employment and his violent conduct. It took the view that the attack happened well after the formal work party had finished and the fact that the argument leading up to the attack had been about work was not enough to create vicarious liability.
Mr Bellman appealed to the Court of Appeal.
Court of Appeal decision
The Court of Appeal upheld Mr Bellman’s appeal. It placed a lot of weight on the fact that Mr Major was the MD of the company and was very autonomous and dominant in this role. It was clear from the evidence that Mr Major took the view that maintaining his authority was a central part of his role.
The Court was also influenced by the following facts:
- The Christmas party had been paid for and organised by Mr Major.
- Mr Major had offered to pay for taxis to take staff to the nearby hotel bar after the formal party ended.
- At the hotel bar, the company paid for the majority of the drinks consumed.
- The attack occurred immediately after an altercation about work because Mr Major had become angry that his decisions were being questioned.
- Mr Major had made comments to the staff whilst at the bar that the company was ‘his business’, he paid their wages and he got to make the decisions.
Taking the above factors into account and looking at the overall context, the Court of Appeal found that there was sufficient connection between Mr Major’s job and the assault on Mr Bellman to enable the principle of ‘social justice’ to apply and make the company vicariously liable for Mr Major’s wrongful conduct. It held that even if Mr Major had “taken off his managerial hat” when he first arrived at the hotel bar, he “chose to don it once more and to re-engage his wide remit as managing director and to misuse his position when his managerial decisions were challenged”.
Conclusions and practical steps
This was a particularly unusual case of a Managing Director trying to assert his authority by using physical aggression outside of work. It does not set a precedent that vicarious liability will always arise from an assault after two colleagues get into a drunken argument about work because it will always depend on the specific facts of the case. To emphasise this point, the Court of Appeal stated that its decision was “not authority for the proposition that employers become insurers for violent acts by their employees”.
Nonetheless, this decision does make it clear that employers can be vicariously liable for wrongful acts outside of the normal employment environment and this could, in certain circumstances, include a senior employee trying to pull rank through the use of aggression or violence.
In the run up to the festive season and Christmas office parties, it is worth reminding staff that any harassment, verbal or physical aggression either at the party or at any ‘after-party’ could lead to disciplinary consequences including dismissal. It is well documented that excessive alcohol consumption is linked to violence so limiting the amount of free alcohol available or paid for by the company at the event is always advisable, unpopular as this may be!
Finally, we advise employers to check the terms of their insurance to ensure that the business is adequately protected against any vicarious liability claim.
Tabberer v Mears Limited – Is it possible to remove an employee allowance following a TUPE transfer?
The Employment Appeal Tribunal has held that the removal of an “outdated and unjustified” contractual allowance was not contrary to TUPE.
As we all know, TUPE restricts an employer’s ability to change terms and conditions of employment by reason of the transfer. This can cause difficulties if employers wish to harmonise terms and conditions post-transfer or to make changes to roles to fit the demands of the business going forward.
Even if a transferred employee agrees to accept a change to their terms and conditions, it may still be void. This is because Regulation 4(4) of TUPE states that a change in terms is void where it is by reason of a transfer and there is no economic technical or organisational (ETO) reason for the change. This is the case regardless of whether the employee agrees to the change.
Birmingham City Council employed a number of electricians. They were entitled to an allowance known as the Electrician’s Travel Time Allowance (ETTA). This was a 60-year-old allowance, introduced because the electricians had historically lost out on a productivity bonus because they had to travel between many different depots. Over time, circumstances changed so that the original reasons giving rise to the allowance ceased to exist.
After a TUPE transfer, the new employer sought to remove the allowance and the electricians argued that this variation to their contract was void under Regulation 4(4) of TUPE.
The Employment Tribunal and, on appeal, the EAT (Employment Appeal Tribunal) both held that the removal of the allowance was not void under Regulation 4(4) of TUPE. The EAT applied a causal test to consider the real reason for the removal of the allowance and found that it was purely because the allowance was outdated and not because of the transfer itself. In this case, it was helpful that the employer was able to show that they had already reviewed the relevance of the allowance before the time of the transfer.
Conclusion and practical advice
Making a change to terms and conditions after a TUPE transfer is notoriously problematic for employers because of Regulation 4(4). This decision demonstrates that, if there is a specific and identifiable reason for a change to terms and conditions after a TUPE transfer which is not by reason of the transfer (for example, a desire to harmonise terms and conditions) it may be lawful. Remember that the usual procedural requirements must also be adhered to when making a change to terms and conditions.
TUPE states that the transfer must be the “sole or principal reason” for the change for it to be caught by its restrictions. The key is that there must be a reason for the contractual change which is entirely separate from the transfer. This will be a matter of fact for the Employment Tribunal to determine based on the evidence so professional advice should always be sought.
Dunn v The Secretary of State for Justice – Will a flawed ill health retirement procedure always be discriminatory?
In a helpful decision for employers, the Court of Appeal has confirmed that a procedurally flawed ill health retirement procedure did not amount to direct disability discrimination where the claimant was unable to show any underlying discriminatory motivation.
Mr Dunn was employed as a prison inspector from November 2010. He was diagnosed with a serious heart condition that resulted in him taking early retirement in February 2016.
Unfortunately, the ill health early retirement procedure adopted by Mr Dunn’s employer was flawed. There were long delays and errors partially caused by the number of legal entities involved in the retirement process. Mr Dunn was given an estimate setting out the benefits for his retirement in July 2015, but it was incorrect, and the process was not finally completed until December 2015.
Mr Dunn brought a claim to the Employment Tribunal (ET) for direct disability discrimination and unfavourable treatment. The way in which his claim was framed meant that he needed to be able to show that his treatment had been related to his disability. The ET upheld his claims and found that the employer had:
- failed to implement the recommendations of the occupation health report;
- failed to put into place any support mechanisms for a return to work interview;
- taken an unreasonably long time to consider the application; and
- failed to calculate the retirement estimate properly.
The employer appealed the decision and the case was ultimately heard by the Court of Appeal (CA).
The Court of Appeal decision
The Court of Appeal upheld the Employment Appeal Tribunal’s (EAT) finding that the Employment Tribunal “had given no consideration to the motive behind the relevant decision-makers”. The EAT and the CA both found that Mr Dunn’s disability had not been a factor in the decision-making process and it was also not a factor causing the unreasonable delay in finalising his retirement. The CA found that the delays and errors of the employer could not, in themselves, give rise to a finding that Mr Dunn was discriminated against because of his disability.
Conclusion and practical advice
In this case the court needed to find that Mr Dunn’s disability was a reason behind the bureaucratic and poorly-handled retirement process in order to uphold Mr Dunn’s claim. The fact that it could not find any evidence of a discriminatory motive based on his disability was therefore fatal to his claim.
If Mr Dunn’s case had been framed as a ‘failure to make reasonable adjustments’ claim then he may well have succeeded because no discriminatory reason or motive would have been required. As always, employers should take care when dealing with ill health retirement cases and try to avoid unnecessary delays or mistakes. These cases are notoriously sensitive to deal with so good communication with the employee is essential. If there are administrative errors or delays, ensure that the employee knows what is going on and understands the reason for the delay. In our experience, good communication with an employee in an emotive situation such as ill-health retirement can make the difference between the matter escalating to an ET claim or not.
Timis v Osipov – Personal liability of individuals for whistleblowing detriment claims
Individuals can be personally liable for causing the dismissal of an employee if the dismissal is made in retaliation for the employee having raised a protected disclosure in the public interest.
Directors and managers of a business must make many decisions and the law generally allows them to do so, with some exceptions, without incurring personal liability. Key exceptions are the personal liability of directors in certain prescribed circumstances (for example, in relation to serious health and safety offences or corporate manslaughter) and the personal liability of an employee who does something which constitutes an act of unlawful discrimination for which their employer would be liable.
A recent Court of Appeal decision has held that individuals can also be personally liable for causing the dismissal of an employee if the dismissal is made in retaliation for the employee having raised a protected disclosure in the public interest.
Mr Osipov was CEO of an oil exploration company operating in Niger for a short period of time. Shortly after he commenced employment, Mr Osipov made a number of protected disclosures relating to the company’s corporate governance and compliance with foreign laws for which he was dismissed. He brought a claim for automatic unfair dismissal and whistle-blowing detriment under the whistle-blower legislation against the company and the two non-executive directors who had taken the decision to dismiss him.
The Employment Tribunal found that the primary reason for Mr Osipov’s dismissal was because he had made protected disclosures. It found Mr Osipov had suffered financial losses around £1.7 million. The key issue was whether the two directors could or ought to be personally liable for this loss. Mr Osipov had brought his claim against the two directors as the company was insolvent, whereas the directors had the benefit of directors’ and officers’ (D&O) insurance which covered any potential liability. He was able to do so as the law changed in 2013 so that individual employees could be personally liable for whistleblowing claim (in addition to the employer) if they had subjected the whistle-blower to a detriment for blowing the whistle.
This change was made to bring the whistle-blower protection regime into line with the discrimination regime so that those responsible for unlawful acts against whistle-blowers should face personal liability in the same way as those who commit acts of discrimination.
Mr Osipov argued that the two directors had subjected him to a detriment by resolving to dismiss him and therefore should be liable for the financial losses which flowed from his dismissal. Their D&O insurance provided a means for them to meet this liability. However, the directors argued Mr Osipov could not bring a claim for whistleblowing detriment where the detriment in question was, in fact, his dismissal, because the Employment Rights Act 1996 (ERA) only allows an individual to bring an unfair dismissal claim against a company and not individuals.
The Employment Tribunal and, on appeal, the Employment Appeal Tribunal held that the ERA only regulates which claims can be brought against the employer. It does not affect potential causes of action against respondents other than the employer which meant that Mr Osipov was able to bring a claim for dismissal-related detriment against the two directors.
The Court of Appeal agreed with this reasoning. It found that this must have been the intention of Parliament otherwise colleagues who victimised the whistle-blower in ways unrelated to dismissal (perhaps by excluding them from meetings or failing to give them a pay rise) would be liable whereas the person or persons who actually took the decision to dismiss would face no personal liability.
In this case, both directors were found jointly and severally liable for losses flowing from Mr Osipov’s dismissal because they had both been involved in and party to the decision to dismiss. As the company had become insolvent, this provided Mr Osipov with an alternative way of obtaining compensation and it is assumed that the directors D&O insurance policy would have been invoked.
Conclusion and practical advice
The Court of Appeal’s decision makes it very clear that any employee who works with a whistle-blower can be personally be liable for subjecting the whistle-blower to a detriment for blowing the whistle. As in this case, if that detriment results in the actual dismissal of the whistle-blower, the employee will be potentially liable for the whistle-blower’s financial losses flowing from the dismissal.
The decision means that where the dismissing officer was motivated by the claimant’s whistle-blowing, the claimant will be able to claim for:
- Automatic unfair dismissal against the employer directly under s.103 Employment Rights Act 1996 (ERA).
- Dismissal as an act of detriment done by a co-worker. This claim can be brought against the employer vicariously under s.47B ERA and/or directly against the employee, and can include a claim for damages for injury to feelings.
It is worth checking that D&O insurance cover provides adequate protection for the key decision makers in the business. Training for managers and directors on the whistleblowing regime should be given equal importance to training on anti-discrimination and equality especially for employers in financial and regulated sectors.