In Handa v Station Hotel (Newcastle) Ltd and others, the EAT upheld the Tribunal’s decision to strike out whistleblowing detriment claims against two external HR consultants, finding that they were not ‘agents’ of the employer in respect of the decision to dismiss the Claimant. The two consultants had been engaged by the employer to carry out grievance and disciplinary investigations in relation to the Claimant. Whilst they were not agents in respect of the employer’s subsequent decision to dismiss the Claimant, the EAT found that they could be agents in respect of the investigations they were engaged to conduct.
Background
The Claimant was employed by (and a director of) the First Respondent – a company operating in the hotel business. Following the Claimant’s appointment as a director, he made a number of allegations of financial impropriety relating to the running of the First Respondent’s business, which he alleged amounted to protected disclosures.
A number of staff members subsequently raised grievances against the Claimant, alleging bullying and harassment. The First Respondent engaged Mr Duncan, an external HR consultant (the Fourth Respondent) to investigate the grievances. Mr Duncan upheld some (but not all) of the grievances and recommended that those matters proceed to a disciplinary hearing.
The First Respondent engaged another external HR consultant, Ms McDougall (the Fifth Respondent) to conduct the disciplinary hearing. Ms McDougall’s report included a statement that the First Respondent would be justified in dismissing the Claimant for gross misconduct, but did not include any recommendation as to whether the First Respondent should do so. The First Respondent subsequently took the decision to summarily dismiss the Claimant for gross misconduct.
The Claimant brought claims in the Employment Tribunal alleging that:
- He had been unfairly dismissed by the First Respondent, both on the grounds of ordinary unfair dismissal, as well as by reason of making protected disclosures; and
- He had been subject to whistleblowing detriments by several individuals, including Mr Duncan and Ms McDougall on the basis that they were ‘agents’ of the First Respondent and therefore liable for the detrimental treatment (i.e. his dismissal).
Mr Duncan and Ms McDougall applied to strike out the claims against them, on the basis that they were not agents of the First Respondent and therefore could not be liable in respect of the whistleblowing detriment claims. The application was successful, with the Employment Tribunal finding that the Claimant had no reasonable prospect of establishing that Mr Duncan and Ms McDougall were agents of the First Respondent. The Claimant appealed the Tribunal’s decision.
Decision
The EAT dismissed the Claimant’s appeal and upheld the Tribunal’s decision to strike out the claims against Mr Duncan and Ms McDougall.
While finding that the Tribunal had erred in concluding that Mr Duncan and Ms McDougall could not be agents of the First Respondent, the EAT ultimately held that Mr Duncan and Ms McDougall could not be agents of the First Respondent in relation to the Claimant’s dismissal. In reaching this decision, the EAT:
- Noted the term ‘agent’ in discrimination and whistleblowing legislation is a reference to the common law concept of agency. While the common law concept of agency typically requires the agent to have the power to affect the principal’s legal relations with third parties, the EAT considered that this does not have be an essential requirement in every type of case. Rather, in the context of an employment relationship where there is a complaint about the conduct of someone acting on behalf of an external provider, the key issue is whether the services the individual is contracted to provide relate to a significant aspect of the employment relationship, rather than some other aspect of the employer’s business or activities. Expanding on this, the EAT indicated that it is unlikely that someone who incidentally comes into contact with employees in the course of providing a service to the employer (which is itself unrelated to an employment relationship) is an agent of the employer. However, if the person is retained to carry out employment related procedures (including conducting a grievance or disciplinary investigation or process, as was the case for Mr Duncan and Ms McDougall), then the fact that the individual is an external appointee who carries out their duties independently does not preclude them from being deemed as the employer’s agent.
- Concluded that there was no basis for finding that Mr Duncan and Ms McDougall should be co-liable for the Claimant’s dismissal. In particular, the fact that Mr Duncan and Ms McDougall’s activities and reports were essential links in the chain of causation leading to the First Respondent’s decision to dismiss the Claimant did not automatically lead to a conclusion that they should be co-liable for the decision to dismiss on the basis of agency. They had not been involved in the decision to dismiss the Claimant, as this was not within their remit. However, the EAT commented that if in the case of Ms McDougall, it was found on the evidence that she had in fact been involved in the decision to dismiss, then the position on co-liability could potentially be different.
Key Takeaways
It is common practice for employers to instruct external third parties to carry out disciplinary and grievance investigations on its behalf, particularly where the allegations are sensitive in nature, or relate to a senior employee.
HR consultants will understandably be keen to avoid the risk of personal liability in relation to such engagements. This case provides helpful guidance on the concept of agency in this context, and the circumstances in which such liability may arise.
It also serves as a helpful reminder of some key considerations for both employers and HR consultants in this context:
- Employers should be clear about the scope of an HR consultant’s engagement in the terms of engagement. In particular, the terms of engagement should specify the specific role that the HR consultant has been engaged to do (e.g. conduct an investigation, write a report, conduct a hearing etc).
- To minimise potential liability of the HR consultant and to prevent any decision-making process from being regarded as tainted by the involvement of an external HR consultant, employers should:
- Ensure that the external HR consultant is acting independently in carrying out the duties that they have been engaged to provide;
- Ensure that the employer (rather than the external HR consultant) is the ultimate decision maker; and
- Be mindful of communications sent between the employer and the HR consultant, as these communications may be disclosable in subsequent litigation.
