Directors of a limited company can be personally liable for breaches of an employment contract
The High Court has held in the case of Antuzis & others v DJ Houghton Catching Services Ltd & others that directors of a limited company can be personally liable for its breaches of an employment contract.
The claimants were employed by DJ Houghton Catching Services Ltd (DJ Houghton) to work at various farms to catch chickens, which were then transported for slaughter and subsequent human consumption. They claimed that they were employed in an exploitative manner, working very long hours and being paid less than the statutory minimum prescribed by the Agricultural Wages Act. They also claimed that the sums which were recorded as being due to them on their pay slips were often not paid, and that payments were frequently withheld as a form of punishment for alleged transgressions. In addition they alleged that there was no attempt on the part of DJ Houghton to pay them holiday pay, or overtime at the prescribed rates, and unlawful deductions were made in respect of rent in excess of the maximum permitted under legislation.
The Court concluded that the nature of the breach of contract which occurs between the company and a third party may directly inform whether the officer of the company has breached his or her duties towards the company. Here the breaches of contract involved breaches of statutory duties imposed by Parliament in order to protect vulnerable workers from exploitative employers. The question the Court posed was whether or not the directors were acting bona fide vis a vis DJ Houghton. It found that they were not as neither of them honestly believed that they were paying the minimum wage, the required overtime and holiday pay. They were therefore personally liable for the breaches of contract that they had induced. In the Court's view they acted in this way because they were concerned to maximise the profits of DJ Houghton "which they – and only they - enjoyed". The Court found that at all material times the directors knew what they were doing and that the breaches they occasioned were central to DJ Houghton's modus operandi.
One of the directors found jointly and severally liable to the claimants for inducing the breach of contract of DJ Houghton has sole ownership of the company, while the other, as company secretary, was found to have "a comparable common law fiduciary duty to act bona fide in what she considers is in the interest of the company".
Take note: Following the decision in Antuzis directors need to be aware that they can be liable for any knowing breach of a statutory right contained in an employee's employment contract. It's also worth noting that directors can be liable for discrimination if, when carrying out the discriminatory act, they are exercising control conferred by the company. The Court of Appeal's decision last year in Timis v Osipov also shows that directors can be personally liable for the detriment of dismissal on grounds of whistleblowing.
This article is taken from HR Law - May 2019.