Whistleblowing Protection Pierces the Corporate Veil Court of Appeal Rules

In a warning shot across employers’ bows, the Court of Appeal has ruled that the protection afforded to whistleblowers penetrates the corporate veil and that individual managers can be held personally liable for detrimental treatment.

The case concerned the former CEO of an oil exploration company who succeeded in an unfair dismissal claim against the company that had employed him. His claim that two of the company’s directors had subjected him to detriments for making protected disclosures was also upheld by an Employment Tribunal (ET).

That ruling was later confirmed by the Employment Appeal Tribunal and the company, together with the two directors, were found jointly and severally liable to pay the man more than £2 million in damages. In challenging that decision, the two directors argued that it had not been open to the ET to award compensation against them, as individuals, for the losses occasioned by the man’s dismissal.

In ruling on their appeal, the Court noted that the issue had real importance beyond the facts of the particular case and that whistleblower charity, Protect, had been permitted to put forward arguments as intervener. Because the company was insolvent, a finding of personal liability on the directors’ part was critical to the man’s case. Although the directors had the benefit of insurance, which would cover the full amount of the man’s claim, that would not be so in every case.

In dismissing the appeal, the Court found that it is open to an employee to bring a claim under Section 47B (1A) of the Employment Rights Act 1996 against an individual co-worker for subjecting him or her to the detriment of dismissal. As the directors had been party to the decision to subject him to that detriment, their personal liability was established. The Court also found that, if a whistleblower is subjected to a detrimental act by a co-worker, and that act results in dismissal, then losses arising can be recovered from the co-worker personally.

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