Case law updates

Non-executive directors held personally liable for whistleblower’s compensation award

In International Petroleum Limited and others v Osipov and others, the EAT found that two non-executive directors were jointly and severally liable with the employer company for £1.7m of compensation awarded to a whistleblower in respect of his dismissal because of the protected disclosures he had made.

Mr Osipov was CEO of International Petroleum, an oil and gas exploration company. Shortly after his appointment he made protected disclosures about the company’s corporate governance and legal irregularities in relation to proposed government contracts. Following the disclosures, he was subjected to detriment, including being cut out of key parts of his CEO role. Ultimately he was dismissed. Two non-executive directors, who were also significant shareholders, were effectively performing managerial and executive roles in the company, and Osipov sought to bring his claim of unfair dismissal on grounds of whistleblowing against those two individuals as well as his employer.

Since 2013, whistleblowers have had the right to bring a claim directly against fellow workers or agents of the employer if subjected to a detriment, as opposed to being dismissed, because of their whistleblowing. The employing company will be vicariously liable for that claim unless it can show it has taken reasonable steps to prevent the individuals acting as they did. Such steps might include providing appropriate training about how to treat whistleblowers.

The non-executive directors argued that, while they could be personally liable for any detriment to which the individual had been subjected before his dismissal, compensation relating to the employee’s dismissal could only be awarded as part of his unfair dismissal claim against the employing company. The EAT disagreed saying that  individuals whose decisions led to the individual’s dismissal could escape liability for what is likely to be the most serious detriment that a whistleblower might suffer – ie being dismissed from their job.