In a significant landmark case that will send shockwaves through boardrooms across the country, two non-executive directors have been held personally liable for the unfair sacking of a whistleblower resulting in a record-breaking £2m award to the former chief executive of International Petroleum, Alexander Osipov, who was sacked in October 2014.
His dismissal came in the aftermath of a series of disagreements between Osipov and two non-executive directors of the company over International Petroleum’s operations and the award of contracts in Niger, during which Osipov had become omitted from decision-making.
Osipov had raised concerns regarding poor corporate governance and the need to avoid accusations of bribery and corruption, which had plagued businesses in Niger. He was then dismissed without a notice period. International Petroleum advised that as their HR department was small it was incapable of following the correct dismissal procedures.
Protection for whistleblowers such as Osipov is enshrined in UK whistleblowing legislation. The Public Interest Disclosure Act 1998 is seen as a vital piece of new legislation that should encourage workers to report serious wrongdoing and provides two key protections to workers who raise genuine whistleblowing concerns.
- Automatic unfair dismissal. Dismissing a whistleblower is classed as automatically unfair if the reason for dismissal is that a whistleblower has made a protected disclosure.
- Unlawful detriment – Subjecting a whistleblower to detrimental treatment on the grounds of making a protected disclosure is illegal.
The law was enhanced in 2013 when the Enterprise Regulatory and Reform Act introduced vicarious liability on an employer for the act of subjecting a whistleblower to detrimental treatment when a whistleblower has made a protected disclosure. Likewise, whistleblowers, can also pursue individuals personally for liability arising from such detrimental treatment.
Osipov decided to pursue his two non-executive directors for personal liability and was awarded compensation in 2016 by an employment tribunal for unfair dismissal, injury to feelings and unpaid salary. The two directors took this ruling to the Court of Appeal, which has upheld the original tribunal and Employment Appeal tribunal decisions to award Osipov £2 million in damages.
This ruling should send out a clear message to business owners that individual directors taking the decision to dismiss someone for making a protected disclosure can, under whistleblowing legislation, be held personally liable. This ruling may see many other whistleblowers making similar such claims in the future.
Defence
Employers will have a defence against claims for vicarious or personal liability if they have taken all reasonable steps to prevent the detrimental treatment of their employees. Steps should include
- Having a robust whistleblowing policy in place that should include reassurance to staff that they should be able to raise genuine concerns without fear of reprisals, even if they turn out to be mistaken.
- Providing training for all staff including senior managers and executives who take decisions in respect of those who have raised a protected disclosure.
- Putting effective mechanisms in place (such as a whistleblowing hotline) to identify any potential whistleblower complaints at the earliest stage.
If you would like information about implementation of an independent external whistleblowing service to provide your organisation with adequate protection and compliance with whistleblowing laws, please click here to visit our website or contact our sales team by dialing direct on +44 (0) 1224 625111
