We are pleased to provide you with the Herrington Carmichael LLP employment law update for May 2019.

This is a key note summary of the main developments in employment law in the last month.

1. Directors Liability

In the case of Antuzis v DJ Houghton, the High Court held that directors of a limited company can be personally liable for breaches of an individual’s employment contract.

The Claimants were employed by Houghton working long hours and being paid less than the statutory minimum levels. The Claimants were frequently not paid the sums due to them.

As a general principle, a director is not liable for inducing a breach of contract where they are acting within the scope of their authority. If, however, the breach of contract has an element a breach of a statutory duty (i.e. the obligation to pay minimum wage), this may indicate that the director has failed to comply with their own statutory duties. Where there has been a breach of director’s duties, the director may be personally liable to the third party (i.e. the employees).

In this case, the High Court concluded that the directors were not acting within the scope of their authority and, therefore, they were personally liable for the breaches of contract that they had induced.

This case is an important reminder of the duties which directors owe to a company, and in turn its employees. This may be a case that is a useful tool to employees, who are underpaid and want to apply pressure to their employers to make payment of statutory required levels.

2. Bonuses

In the case of Bluestones Medical Recruitment Ltd v Swinnerton, the Employment Appeals Tribunal (“EAT”) held that a discretionary bonus can become a contractual entitlement.

Here, the Claimant worked for Bluestone in a number of different roles, latterly as a General Manager. In the Claimant’s earlier roles his contract referred to him receiving a discretionary bonus. When he was promoted to General Manager, it was agreed that he would, instead, receive a monthly bonus. Although it was not that simple, in this case the bonus was to be paid as a loan as it was intended that the Claimant would become a shareholder, the bonus would be paid as dividends and the loan subsequently repaid. There was, therefore, a sufficient degree of uncertainty as to when and how the contract was changed.

When this case reached the EAT, the bonus payment (despite being phrased as discretionary) was found to have a contractual entitlement.

While the outcome in this case is quite specific, it is important to note that the EAT has confirmed that discretionary bonuses can become contractual. It is therefore important to be mindful of how bonus schemes are operated, if these are truly intended to be discretionary. In practice, employers should take care as to how bonuses are operated.

3. PHI Benefits

The case of ICTS Limited v Visram deals with the entitlements to receive Permanent Health Insurance (“PHI”) benefits. In this case, the EAT has held that the Claimant should have been entitled to receive his PHI benefit until retirement or death, where the wording of the terms of the benefit were unclear.

To give some background, the Claimant was dismissed from his employment by reason of his incapacity. The Claimant suffered with depression and work place stress. There did not appear to be any prospect of the Claimant being able to return to the role in which he had been employed prior to his sick leave. The Claimant had the benefit of PHI and this was payable until the Claimant was able to “return to work”. The EAT had to interpret what this meant and held that it meant returning to the role which he was in prior to his sick leave. As this was not going to be possible, the EAT found that PHI was payable until retirement or death. In turn, the EAT found that the Claimant’s dismissal unfair.

This case further highlights the need for care when dealing with employees who are entitled to PHI benefits. The potential exposure here for companies is relatively large and so appropriate advice should be sought in order to understand and mitigate risks.

4. Injury to Feelings Awards

The annual increase to the compensation bands for injury to feelings has now been published. These bands are used to assess the injury to feelings compensation in discrimination claims as awarded by Employment Tribunals. The new bands are:

  • Lower band (less serious cases): £900 to £8,800
  • Middle band (cases that do not merit an award in the upper band): £8,800 to £26,300
  • Upper band (the most serious cases): £26,000 to £44,000
  • In exceptional cases, awards may exceed £44,000.

These updated figures apply to cases presented to an Employment Tribunal on or after 6 April 2019 (claims issued prior to this date will still be calculated on the basis of the previous levels).