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Julie Dunane CG Professional

Directors – Could You Be Personally Liable For Failing To Pay The National Minimum Wage?

Julie Duane, Legal Counsel at CG Professional.

In Antuzis v DJ Houghton Catching Services Ltd [2019] EWHC 843, the Court held that Company Directors could be held personally liable for failing to pay workers in line with the minimum wage in respect of the agricultural industry.

The Facts

The Claimants were chicken catchers working for DJ Houghton Catching Services at a variety of farms across the country.  During their employment, the Claimants alleged that they were treated in an exploitative manner by the Directors due to excessive hours resulting in a breach of the National Minimum Wage. 

Previous case law determined that a Director of a Company would not be liable for inducing a breach of contract by a company, so long as the director was acting in the best interest of that company and within their scope of authority.  As such it is unusual for a director to be held accountable for any breaches sustained by the company.  In order to shift the burden to the director, the following must be shown:

  1. The director was not acting in a bona fide manner;
  2. The director was acting outside the scope of their authority; and
  3. The director knowingly induced the breach of contract. 

Due to the treatment sustained, the individuals pursued an action in the High Court for inducing a breach of contract and applied for summary judgement.  The Court held that the Defendants’ had conducted an exploited work by forcing the Claimants to work longer hours than they were being paid for. 

It was also noted that the Directors had failed to keep appropriate records which were a blatant disregard of the minimum payment requirements.  The Directors had also failed to take into consideration any entitlement to overtime and were found to be holding between £50 and £350 from employees for work finding fees.  It was also noted that the accommodation offset was routinely deducted, and which was likely to be in excess of the statutory limit. Some of the directors would also withhold wages as a form of punishment where they felt that the Claimants’ behaviour was inappropriate and at times as a form of leverage.

The Court was therefore required to consider the principals as previously set out in case law and address whether the Defendants’ were acting bona fide within the scope of the director’s authority.  The Court had to ask itself the question as to the nature of the breach and whether the director had complied with its duties under section 170 of the Companies Act.

In doing so the Court concluded that where a breach of contract had a statutory element to it then there could be an inference that this would place a potential failure on the director for their failure to comply with the duties to act in the Company’s best interest.

The Court would also need to ask itself whether the directors knowingly induced a breach and that they must have realised that their actions would have this necessary effect.  It was held in this case that the actions of the directors were intrinsically linked and therefore they were all held to be jointly and severally liable for the induced breaches of contract. 

Conclusion

Whilst this particular case relates to the Agricultural Wages Act 1948 and Gangmasters Licences Act 2004, there is a reason to suggest that the Court’s rationale would apply to scenarios where the employer is in deliberate and systematic breach of the National Minimum Wage Act and or Working Time Regulations, regardless of their sector. 

Considering the director’s duties, this could include things such as negatively affecting the reputation of a business and not acting in the best interest of the company which could be reasons for the Court to consider in terms of personal liability.  Irrespective of matters of this nature the jurisdiction will be held in the civil courts as opposed to employment tribunals mainly because the claim being pursued would be that of the tort of inducement of a breach of contract. Bearing in mind that a Judge had provided a summary judgment in favour of the Claimants, in this case, directors who are potentially in breach should be aware of fighting such matters to trial. 

Some potential concerns with the decision are that where the breach may not be considered to be in the public and thereby has not caused actual reputational damage, then there is the possibility that inducing such a breach may not be in the interest of the company and as such the directors then may not be held personally liable in respect of this possibility. 

Although the case provides an attractive remedy against directors evidently any breach induced by the director must do more than simply disadvantage the company employees.  Whilst there are hurdles for Claimants to overcome in pursuing such a case the uncertainty of directors being held personally liable could be an attractive prospect for Claimants.  

If you have any questions regarding this article, please do not hesitate to contact a member of the CG Team who will be happy to assist.