Employment Cases Update

Liability and compensation - Case Round-Up: December 2018

Date published: 05/12/2018

In this month's case round-up, Mark Shulman, consultant solicitor with Keystone Law, looks at recent cases covering compensation for whistleblowing detriment, reasonable foreseeability and psychiatric injury, and the principles for establishing for vicarious liability.


   
Mark Shulman, Consultant Solicitor at Keystone Law

COMPENSATION
Whistleblowing

In most discrimination cases the issue of the individual liability of a co-worker (used here in the sense of another employee, not necessarily of the same seniority) is of limited practical significance - the employer usually pays any compensation award. But that is not always so. In Timis & Anor v Osipov & Anor [2018] EWCA Civ 2321 the employer was insolvent and the Claimant was looking to recover from the individual co-workers personally. For those readers who wish to delve more deeply into the legislative history of the whistleblowing provisions contained in the ERA 1996, the judgment includes a comprehensive analysis.

Section 47B of the ERA 1996
For present purposes, section 47B of the ERA 1996 (insofar as material) provides that:

(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.



(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).

Background
Two directors of the company which employed the Claimant decided that he should be summarily dismissed.

An ET upheld the Claimant's claim against the employer for unfair dismissal (on grounds of whistleblowing under section 103A of the ERA 1996). The ET also upheld a claim of whistleblower detriments in relation to the two directors who were held liable on the basis that they had caused losses which flowed from the pre-dismissal detriments (the instruction to dismiss the Claimant), which the ET regarded as distinct from the dismissal itself. The employer and the two director co-workers were held by the ET as jointly and severally liable to pay compensation (eventually calculated at over £2m).

Effect of section 47B
The Court of Appeal ("CA") had to consider the question of law as to the effect of section 47B(2) which states that "This section does not apply where … the detriment in question amounts to dismissal (within the meaning of Part X)".

Firstly, there was the question as to whether the detriment relied on by a Claimant "amounts to dismissal". The Claimant contended that there could still be a claim against the two directors as individuals (rather than a claim against the company). That was essentially the case accepted by the EAT when Simler J had said that:

"The provision does not seek to exclude all claims for detriment amounting to dismissal as it could have done. Rather, Parliament has chosen to limit the disapplication to those detriments amounting to dismissal within the meaning of Part X; in other words, to detriments amounting to unfair dismissal claims necessarily against the employer…There was no principled reason for making fellow-workers personally liable for losses caused by detriments short of dismissal but relieving them from individual liability for the consequences of what are likely to be the most serious detriments".

Underhill LJ, in giving the leading judgment in the CA, indicated that he had "not found this point straightforward", but he came to the conclusion that the decision of the EAT was right.

A construction of section 47B(2) 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". Once the legislation made co-workers personally liable for whistleblower detriment, it was hard to see any reason in principle why they should not be liable in a case where the detriment amounted to dismissal. Therefore, Parliament must have intended to exclude liability under section 47B, only where the identical remedy was available under section 103A (automatic unfair dismissal by the employer for whistleblowing). Section 47B would not exclude a co-worker's individual liability for the detriment of dismissal under subsection 47B(1A) (or any vicarious liability of the employer under section 47B(1B)).

On that basis, a Claimant could say in relation to "the detriment in question": "I am not complaining of an act done by the employer but of an act done by my co-worker". Underhill LJ said that such a construction produced a more "rational and coherent statutory scheme" and conformed better with the purpose of section 47B(2). It also eliminated the need to undertake the exercise of drawing a line between those acts of a co-worker which amounted to dismissal and those that constituted distinct prior acts.

Compensation
As the Claimant could recover against the co-workers for the dismissal itself (as opposed to a separate previous detriment), it was not necessary to decide in the present case whether in principle the Claimant could recover compensation for losses flowing from the dismissal consequent on a prior detriment. But the CA said that the point might arise in other cases and so wanted to deal with the issue. It gave the example of an employee who developed a serious long-term mental illness as a result of being victimised by his or her colleagues for having made a protected disclosure. If the employer eventually dismissed the employee on ill-health grounds, then (assuming that the decision-maker had no improper motivation), the dismissal was likely to be fair. But it would be extraordinary if the Claimant was not entitled to claim against the individuals who had carried out the victimisation.

It therefore followed that section 47B(2) placed no barrier to recovery of compensation for losses flowing from a dismissal which was itself caused by a prior act of whistleblower detriment. The CA emphasised that such compensation would still be subject to the usual rules about remoteness and discounting for contingencies (including the contingency that the employment might have terminated in any event).

Therefore, in summary:

(1) It is open to an employee to bring a claim under section 47B(1A) against an individual co-worker for subjecting him or her to the detriment of dismissal (i.e. for being a party to the decision to dismiss) and to bring a claim of vicarious liability for that act against the employer under section 47B(1B). All that section 47B(2) excludes is a claim against the employer in respect of its own act of dismissal.

(2) As regards a claim based on a distinct prior detrimental act done by a co-worker which results in the claimant's dismissal, section 47B(2) does not preclude recovery in respect of losses flowing from the dismissal, though the usual rules about remoteness and the quantification of such losses will apply.

Psychiatric injury
In Piepenbrock v LSE [2018] EWHC 2572 (QB) the issue arose as to whether the employer's action or inaction created a foreseeable risk of injury to the Claimant against which it should have protected him.

Background
In brief, the facts were that one of the Claimant's colleagues (Miss D), made sexual advances towards the Claimant which were rejected. She then went on to circulate allegations of the Claimant's alleged sexual impropriety to members of the faculty, some of the Claimant's former students, Duke University and The Economist. On 11 December 2012 Miss D instigated a formal complaint against the Claimant who was informed about this by the university on 12 December 2012. He then felt unable to continue to teach, became ill and his GP diagnosed an acute stress reaction. The Claimant never returned to work at the LSE. (The factual background in the judgment runs to 201 paragraphs if any readers wish to look at further details).

After an investigation, the LSE found that Miss D's claim was not proven. Mr P then brought claims in the High Court ("HC") against the LSE alleging that it was (i) was vicariously liable for the harassing actions of Miss D by making numerous false and malicious allegations against him, (ii) in breach of contract by failing to follow the university's Harassment Policy, and (iii) negligent in its handling of Miss D's complaint.

The judge found that there had were various failures by the LSE, each of which represented a breach of the duty of care.

Foreseeability
Had the LSE's action or inaction created a foreseeable risk of injury to the Claimant against which it should have protected him?

In Hatton v Sutherland [2002] EWCA Civ 76 the CA had stated that:

"…
(3) Foreseeability depends upon what the employer knows (or ought reasonably to know) about the individual employee. Because of the nature of mental disorder, it is harder to foresee than physical injury, but may be easier to foresee in a known individual than in the population at large (para 23). An employer is usually entitled to assume that the employee can withstand the normal pressures of the job unless he knows of some particular problem or vulnerability (para 29).

(14) The claimant must show that that breach of duty has caused or materially contributed to the harm suffered. It is not enough to show that occupational stress has caused the harm (para 35)."

Psychiatric illness and foreseeability
In the present case here were two expert witnesses, (Professor F and Professor M) who gave evidence about the Claimant's medical condition and the issue of foreseeability. Both agreed that the Claimant had a significant history of psychological vulnerability prior to 2012 (people with personality problems have a heightened risk of a major depressive order).

Professor F gave evidence that prior to the events at LSE the Claimant had a psychological vulnerability most likely to be exposed if he experienced significant workplace problems. His opinion was that the Claimant had developed a major depressive disorder, the trigger being the serving of the complaint against the Claimant on 12 December.

As to foreseeability, Professor F originally stated that the development of the illness was foreseeable, although he subsequently changed his views during the course of the hearing. But the judge pointed out that the court was not bound by Professor F's original views and it was for the court to make its own judgment as to the foreseeability of the psychiatric illness.

Professor M diagnosed "an adjustment disorder". He was unequivocal that the development of the Claimant's alleged illness was not foreseeable - he did not believe that the Claimant's sudden and extreme reaction on 12 December to the stresses he faced was foreseeable.

The court concluded that the Claimant suffered from a depressive illness, but were the various failures by the LSE such as to give rise to a reasonably foreseeable risk of a psychiatric injury?

The court decided that the development of the Claimant's illness was not reasonably foreseeable by the LSE. Whilst the relevant events would have caused foreseeable "stress and anxiety", the nature of the various breaches of duty were not of themselves sufficient to create a foreseeable risk of psychiatric injury. There was nothing in the Claimant's conduct prior to his reaction on the night of 12 December 2012 which provided any basis for finding that the LSE should have foreseen such a reaction, still less the development of a depressive illness. On the contrary, the Claimant had travelled to India in early 2013 for a lecture tour, was communicating with one of the Heads of Department regarding his future work and he was generally getting on with his job. The severity of the Claimant's reaction on 12 December was a reflection of his personality and the LSE had no relevant information as to the Claimant's personality or past medical history which would have rendered the development of his illness reasonably foreseeable.

Accordingly, the claim failed.

Vicarious liability
In Bellman v Northampton Recruitment Ltd [2018] EWCA Civ 2214, the issue arose as to whether a company had vicarious liability for the actions of its MD at an incident which took place after an office Christmas party.

During late night drinks after the office Christmas party, there was a conversation about work matters between the Respondent's MD (Mr M) and other staff. When Mr M felt his authority was being challenged, he "summoned" the company employees remaining at the event and began to lecture them on how he owned the company, that he was in charge and that he would do what he wanted to do. The "probably significantly inebriated" Mr M then physically attacked one of his employees (Mr B), leaving him severely disabled.

Was the company vicariously liable for the actions of the MD? Yes, on the facts said the CA. In the present case there was s sufficient connection between the MD's field of activities and the assault to render it just that the company should be vicariously liable.

A frolic of their own
The High Court judge, in dismissing the claim against the company, ruled that the company was not vicariously liable. There was, in his view, an insufficient connection between Mr M's position as MD and his wrongful conduct such that would render the company liable. The judge said that "It was, or without any doubt became, an entirely independent, voluntary, and discreet early hours drinking session of a very different nature to the Christmas party and unconnected with the Defendant's business. To use a hackneyed expression akin to "a frolic" of their own".

Authoritative legal principles
The CA stated that the most recent and authoritative distillation of the relevant legal principles to be applied was the Supreme Court decision in Mohamud v W M Morrison Supermarkets PLC [2016] AC 677. In that case, Lord Toulson said there were two questions:

1. what functions or "field of activities" have been entrusted by the employer to the employee (or, in everyday language, what was the nature of his job)?; and

2. was there sufficient connection between the position in which the wrongdoer was employed and their wrongful conduct to make it right for the employer to be held liable under the principle of "social justice"?

In coming to a conclusion, the court had to conduct an evaluative judgment - it is a question of law based upon the primary facts as found. Mr M's functions were widely drawn. The judge found that Mr M was the directing mind and will of the company, had a wide remit, was in overall charge of all aspects of the business, did not have set hours and had the authority to control his own methods of work.

But was he acting within the field of his activities assigned to him as the MD when the assault took place, or was he present in the hotel lobby of the hotel merely as a fellow reveller? The mere opportunity of being present at a particular time or place did not mean that the act is within the relevant "field of activities". And in answering the question "what is the nature of the job?", it was not simply a matter of what the employee was expressly authorised to do; that was too narrow an approach.

In terms of answering Lord Toulson's second question, the cases on "sufficient connection" are those where an employee has "used or misused the position entrusted to him in a way which injured the third party".

Not just an impromptu drinks party
Looking at the matter objectively, on the facts as found by the judge, both Mr M's remit and his authority were very wide. But the judge had been wrong to conclude that there was insufficient connection between Mr M's field of activities and the assault in the hotel in the early hours of the morning. There was not just an impromptu drinks party between work colleagues which might happen on any night of the week after work. The drinks occurred on the same evening as the work event which had been paid for and orchestrated by Mr M on the company's behalf.

Despite the time and the place, Mr M was purporting to act as managing director - he took it upon himself to seek to exercise authority over his subordinate employees. He had chosen to wear his metaphorical MD's hat and to deliver a lecture to his subordinates. He was purporting to use his position and drive home his managerial authority with the use of blows. It was not merely a discussion leading to an altercation between hotel guests and visitors. Even if Mr M "had taken off his managerial hat when he first arrived at the hotel, he had chosen 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.

Therefore, in the circumstances there was a sufficient connection between Mr M's "field of activities" and the assault to render it just that the company should be vicariously liable.

Comment
Although all three judges in the CA agreed on the outcome, Irwin LJ wished to emphasise "how unusual are these facts, and how limited will be the parallels to this case". This was because the "field of activity" of Mr M was almost unrestricted in relation to the affairs of the company and exercised at almost any time.

He added that "…this combination of circumstances will arise very rarely. Liability will not arise merely because there is an argument about work matters between colleagues, which leads to an assault, even when one colleague is markedly more senior than another. This case is emphatically not authority for the proposition that employers became insurers for violent or other tortious acts by their employees".

Mark Shulman is a Consultant Solicitor with Keystone Law and an accredited workplace and employment mediator.