Directors beware!

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Posted in:Corporate and Commercial, HR and Employment|December 7, 2011 | Join the mailing list

A recent ruling from the Employment Appeals Tribunal held that directors were personally liable to pay compensation for a discrimination.

In the case of Bungay and Paul -v- Chandel and Others, a claim was brought under the Employment Equality (Religion or Belief) Regulations 2003. Those Regulations, which have since been replaced by similar provisions in the Equality Act 2010, made an employer
vicariously liable for its employees committing acts of discrimination. In order to defend the claim, the employer had to demonstrate that it had taken all reasonable steps to prevent discriminatory acts.

The two directors, Mr Bungay and Mr Paul, had been involved in a series of discriminatory acts which resulted in the dismissal of two employees, Mr Chandel and Mr Saini. Subsequently, the directors made various malicious complaints to the authorities, which
resulted in Mr Chandel and Mr Saini being arrested.

The Employment Tribunal ruled that the directors were jointly and severally liable, and ordered them to pay a total of £37,000 for direct discrimination, injury to feelings and aggravated damages.

Following that ruling, the employer went into compulsory liquidation and the two directors appealed to the Employment Appeals Tribunal ("EAT"). As part of their appeal they argued that if they were to be held jointly and severally liable for damages for discrimination
as agents of the company, then the other directors ought to have been included also.

On appeal, the EAT held that the directors were acting as the agents of the employer, notwithstanding that they were not authorised by the employer to pursue their series of discriminatory acts. The EAT ruled that the directors had carried out their campaign
under the company’s name as its board members and dismissed the argument that all of the directors ought to have been liable for the damages; it was held that Mr Bungay and Mr Paul had been the "prime movers", who had caused the dismissal of Mr Chandel and
Mr Saini. The EAT noted that the conduct of the two directors towards the two employees after they had been dismissed should be taken into account when calculating the level of damages.

As a consequence of this ruling, claimants who are considering bringing discrimination claims may now consider making claims against directors, as well as their employer, particularly if the employer is in liquidation or experiencing financial difficulties.
It remains to be seen how directors will respond to this case, as the heightened level of exposure in discrimination cases is compounded by the fact that damages in such cases are uncapped.

For further information or advice, please contact any member of Berg’s Employment or Corporate Departments on 0161 833 9211.

The information and opinions contained in this article are not intended to be comprehensive or to provide legal advice. No responsibility for article’s accuracy or correctness is assumed by Berg or any of its partners or employees.
Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of the contents of this article.

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