Directors of companies can be personally liable for breaching employment contracts in certain circumstances

12 June 2019

The recent High Court case of Antuzis v D J Houghton Catching Services Ltd serves as a cautionary tale to directors of companies when considering the legal obligations owed to employees.

The case involved Eastern European agricultural workers, employed in the UK to catch chickens. The workers alleged that they were employed in an exploitative manner, being expected to work long hours in return for pay less than the statutory minimum. They made several further allegations including instances of pay being withheld as a form of punishment.

The court believed the workers. When considering the evidence of the directors of the company, it held that they were fully aware of the requirement to pay employees at the minimum rate and of the legal obligations of a gangmaster under the Gangmasters (Licensing) Act 2004. The court found that the directors had been operating the company in a “deliberate and systematic manner” expecting the workers to work for longer hours than reasonable and for less pay than they were entitled and “operated a system of withholding wages for entirely invalid reasons and trapped workers leaving them with little option but to remain”.

The High Court found that the directors were personally liable for the failings on the basis that the company committed the tort of inducing breach of contract at their direction. Neither director honestly believed they were paying minimum wage, complying with working time requirements or had grounds to withhold pay in the manner they did.

The directors would not have been personally liable if they had been acting in accordance with their duty under section 176 of the Companies Act 2006 to act in a bona fide manner in their duties towards the company (to be distinguished to any duties towards the third party). If, therefore, a director was acting in good faith in his duties towards the company and inadvertently breached an individual’s contract of employment, they would not be personally liable.

This case, therefore, demonstrates that if directors knowingly act in breach of legal obligations to employees and/or workers, they risk being found to be personally liable for any such failings.

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