Company Director Found Personally Liable for Employment Law Breaches29/04/2019
Under the Companies Act 2006, company directors owe a duty to the company to act with reasonable skill and care and to ensure that they promote the success of the company.
Generally, where a company breaches the terms of a contract, the company director will not be found personally liable provided that they are acting in line with their duties as a director.
However, in Antuzis v DJ Houghton Catching Services Ltd & Ors the High Court ruled that the director and secretary of the limited company were both personally liable for breaching the employment contracts of the company’s employees.
The Claimants were employed as chicken catchers by DJ Houghton Catching Services Ltd.
The Claimants worked extremely long hours, were paid less than the National Minimum Wage (NMW) and often had their pay withheld as a form of punishment.
The Court found that both the company director and company secretary knowingly induced the company to commit breaches of the employment contracts and employment law. These breaches had a serious adverse effect on the company’s reputation and also led to the revocation of the company’s gangmasters’ licence.
Accordingly, the Court found that the company director and company secretary were personally liable.
In this case, the Court distinguished between a director knowingly instructing the company to pay a supplier late (in breach of contract) in order to ease the company’s cash flow and a director of a restaurant company knowingly instructing employees to serve horse meat rather than beef.
In the first example, the director would still be acting in the overall interests of the company even though they instructed the company to breach a contract.
However in the restaurant example, there would be a breach of statutory trading standards and a risk of serious reputational damage to the company. The statutory and reputational damage elements would suggest a failure of the company director to adhere to their duties to the company under the Companies Act 2006.
The key point is that a company director may be found personally liable where the company breaches a contract (including an employment contract) and in doing so has failed to act in the best interests of the company. The Court is more likely to find a director personally liable where the breach of contract also constituted a breach of statutory law.
While this case involved serious and sustained breaches of basic employment rights, it nevertheless serves as a warning to company directors, particularly as breaches of employment rights (such as failure to pay NMW) can often be highly publicised.