Directors paying for corporate statutory breaches

04 May 2021

One of the key pillars of the Government’s Good Work Plan, coupled with its aims of fair and decent work for all and for greater clarity in employment relationships law was the fairer enforcement of workers’ rights.

On the topic of supporting employees’ enforcement of their statutory rights, often difficult if the corporate employer has failed, a new front was opened by the High Court in April 2019 for personnel who suffer egregious breaches of their working rights in the civil case of [Antuzis v DJ Houghton Catching Services, J Judge and D Houghton [2019] EWHC 843].

It was also a timely reminder of the impact of a breach by a company’s statutory officers, both directors and company secretary, of their Companies Act 2006 duty. In particular the duty in Section 172 Companies Act to act in good faith to promote the success of the company and to have regard to the interests of the company’s employees. In fact, now corporates with more than 250 employees are obliged to include in their directors’ report how they have done this.

This case decided that directors who were fully aware of several breaches by the corporate employer of minimum wage rate payment obligations, wrongful deductions from pay, wrongful accommodation charges to vulnerable agricultural workers, unpaid wages, and failures in holiday pay were personally liable to their corporate’s workers employed as chicken catchers.

In fact, breaching their duty to promote the interests of the company and its workforce will on its own not make officers personally liable to the aggrieved parties, although the officers can face a charge of breach of statutory duty from the company. Their personal liability stems from not acting in good faith and knowingly inducing the company to breach its contract with its staff. In this case the evidence was overwhelming that the directors well knew and orchestrated the abuse of the workers’ statutory rights by their employer. The directors and company secretary were decided to be personally liable because these were also statutory breaches of the workers’ rights by the company.

We are familiar with the enforcement of workers’ rights against their employers with statutory rights regularly being engaged. Therefore, we may well see more claims against individual directors who have wilfully orchestrated breaches of the statutory rights of their workforce for them to be found liable personally to the staff. The company’s directors’ and officers’ insurance policy may assist in the funding of the management of those claims against directors, especially where separate legal representation for directors is thought prudent to protect the employer.

More than ever, legal advice is needed when contentious workplace issues arise so that businesses and their leaders can manage their corporate, reputational and personal risk. 

If you have any concerns about these issues, please contact Carolyn Brown.