The Employment Appeal Tribunal (EAT) has recently found two directors jointly and severally liable with their company to pay damages to two employees for discrimination on the grounds of religious faith.
In Bungay v Saini, two employees succeeded in claims of unfair dismissal and for discrimination under the Employment Equality (Religion or Belief) Regulations 2003. The Employment Tribunal awarded pay in lieu of notice, arrears of holiday pay and wages and compensation for unfair dismissal to be paid by the company. In addition, it ordered damages in relation to the discrimination which were payable jointly and severally by the company and two of its directors. The directors appealed to the EAT.
Under the 2003 Regulations, a principal is responsible for discriminatory acts by its agents, and the agents are also personally liable. The directors' first ground of appeal to the EAT was that they were acting in their capacity as directors of the company, not as its agents, and that the company alone should therefore be liable. This argument was rejected. Applying the normal rules of agency, the directors, in exercising their authority under the company's articles of association to manage its business, were acting as its agents.
Although the 2003 Regulations have now been repealed, similar rules apply to principals and agents under the Equality Act 2010.
The directors also appealed on the ground that it was wrong to make them jointly and severally liable for the damages awarded, which meant that the employees could seek payment of the entire award from one or other of the directors. That director would then have to take action against the company or the other director if it wanted them to make a contribution. In this particular case, the company itself was not in a position to make any payment as it had gone into compulsory liquidation.
The directors argued that damages should be apportioned between all responsible persons, including other directors of the company who had not been included in the employee's claim. The EAT rejected this argument. It held that the ordinary rules should apply, that where two or more people are responsible for wrongfully causing loss to another, they should be equally liable. The relative responsibility of the wrongdoers may be relevant to contribution as between themselves, but it is not relevant to their liability to the claimant.
This case highlights the potential personal liability of directors in discrimination claims and reinforces the need for directors to foster a non-discriminatory culture in their companies.
For further information, please contact:
0131 228 7134
0141 271 5715
Professional Support Lawyer
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