Can external HR consultants be personally liable for employee detriment claims under whistleblowing legislation?

If an employer engages an agent who subjects a worker to a detriment because they've raised a protected disclosure, both the agent and the employer can be held liable. In Handa v The Station Hotel Newcastle Ltd the EAT had to consider whether two external HR consultants who had investigated complaints against a senior employee and had produced reports which the employer used to dismiss him, were acting as its agents and were therefore, personally liable. 

The law on whistleblowing detriments

A protected disclosure occurs when a worker discloses information with a particular person (usually their employer) which, in their reasonable belief, is made in the public interest and shows one or more of the following types of wrongdoing: criminal offence, breach of any legal obligation, miscarriage of justice, danger to the health and safety of any individual, damage to the environment, or the deliberate concealing of information about any of these.

Under section 47B (1) of the Employment Rights Act 1996, a worker who has made a protected disclosure has the right not to be subjected to any detriment by any act, or any deliberate failure to act, by their employer. 

A worker also has the right under section 47B(1A), not to be subjected to any detriment by any act, or any deliberate failure to act, done by an agent of their employer with the employer's authority, on the ground that the worker has made a protected disclosure. Both the agent and the employer can potentially, be liable. 

But who is an agent? And can external HR consultants fall into this category?

Facts

Mr Handa, who first joined the Station Hotel Newcastle Ltd ('Station Hotel') as an employee, was subsequently appointed to director. After his appointment, he raised several allegations of financial impropriety about the running of the business. 

When a number of staff members raised grievances about Mr Handa, alleging bullying and harassment, an external HR consultant was retained to investigate. The HR consultant found two of the grievances were substantiated and recommended that those matters proceed to a disciplinary hearing. 

A different external HR consultant conducted the disciplinary hearing. Following the hearing, the HR consultant sent a report to the Station Hotel which included a statement to the effect that they would be justified in dismissing Mr Handa for gross misconduct. 

Meanwhile a notice was sent to Companies House removing him as a director. 

Mr Handa was dismissed with immediate effect. He appealed and an external solicitor was appointed to hear his appeal, which was dismissed.

Mr Handa claimed ordinary and automatic unfair dismissal against his employer, Station Hotel. He argued that the allegations he had made about financial impropriety amounted to a protected disclosure and that he had been dismissed because of it. 

He also brought claims against the two external HR consultants, asserting that they were liable as his employer's agents for detriments he allegedly suffered because of his protected disclosure. He relied on three detriments: the suspension, the filings with Companies House terminating his directorship, and the dismissal. 

The first task of the tribunal was to decide if the HR consultants were agents of the Station Hotel. 

Employment Tribunal

The tribunal stated that if the external HR consultants were simply performing tasks for Station Hotel under a contract for services - tasks it could have done itself - that would not establish an agency relationship. However, if they were acting under authority granted by Station Hotel, an agency relationship would exist. 

In this case, the tribunal concluded that the external consultants were operating under a contract for services to undertake a specific HR function. They acted for the benefit of Station Hotel, rather than on behalf of it or under its authority. The tribunal noted, for example, that both HR consultants made recommendations which Station Hotel was at liberty to accept or reject.

Therefore, the tribunal decided to strike out the complaints against the two external HR consultants. 

Mr Handa appealed to the EAT. 

Employment Appeal Tribunal 

The EAT explained that in an employment context, where the complaint relates to someone acting on behalf of an external provider, the material issue is whether the services that they are contracted to provide relate to a significant aspect of the employment relationship, rather than the employer's business or activities. 

The EAT stated that it does not see why a third party who is retained to carry out an employment-related procedure, such as a grievance or disciplinary investigation, could not be regarded as the employer's agent in the course of carrying out those functions. 

Consequently, the EAT disagreed with the tribunal and instead held that it was arguable that the external HR consultants were acting as agents when carrying out their role of investigating, reporting, and making recommendations. However, it agreed with the tribunal that in this case, the two HR consultants were not agents of the Station Hotel. They weren't contracted to make a decision about whether to dismiss Mr Handa, nor did they do so. And, the fact that the employer had relied on their work which led to Mr Handa's dismissal didn't make them responsible for it or liable for the detriments he had suffered. 

What does this mean?

Many organisations use external consultants to investigate complaints and conduct grievance and disciplinary hearings - particularly if they don't have a HR function or the allegations are against a senior member of staff and the employer is keen to reduce the appearance of bias. This decision should help to reassure external consultants that they will not normally be liable for any claims made by disgruntled employees, provided there is clear blue water between their role and the outcome reached by the employer.  

In this instance, the EAT noted that if it had been alleged and subsequently proven at the employment tribunal that the external HR consultant who conducted the disciplinary hearing had, despite the contents of the report and the dismissal letter signed by the Station Hotel, participated in the decision to dismiss, the outcome would have been different. 

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