The three Claimants were employed by DJ Houghton Catching Services Ltd (D1) as chicken catchers. The Claimants contended that they were employed by D1 in an exploitative manner, regularly working extremely long hours, being paid less than the statutory minimum, and frequently not being paid sums recorded as due to them based on their pay slips, which were calculated on a fictional basis anyway.
In addition to the above, the Claimants contended that payments were often withheld as punishment for alleged transgressions and unlawful deductions were made for a so-called employment fee and for rent, above the statutory limit, in respect of a premises the claimants were essentially required to reside in. D1 also made no attempt to pay the claimants’ holiday pay, nor any overtime pay at the prescribed rates.
The Claimants brought pay claims against not only D1, but also against D2 who was the sole director and shareholder of D1, and against D2’s wife who was the company secretary (D3).
This was not the first time that D1, D2 and D3 faced proceedings from former employees engaged as chicken catchers. In 2016 a summary judgement was entered against all 3 defendants for failure to pay minimum wage, unlawfully charging fees and unlawful deductions from wages. In the 2016 case, D2 and D3 accepted that they were jointly responsible for D1, however they made no such concession in this case.
As a result, in this case, the High Court was asked to determine whether D2 and D3 could be held personally and jointly liable to the claimants for D1’s breaches of contract, which included any claims under statute.
Generally, a director is not liable for inducing a breach of contract where they are acting within the scope of their authority and if they are acting bona fide as regards the company. However, previous cases show that if the breach of contract includes a statutory element, for example failure to pay statutory minimum wage, that breach may be evidence of a director’s failure to comply with their statutory duties under the Companies Act 2006, potentially making them personally liable to third parties for inducing the breach of contract.
In this case, the accountant responsible for D1’s payroll agreed the hours recorded as worked by the chicken catchers were entirely fictional. The Court therefore concluded that there was no credible evidence that D2 or D3 honestly believed that they were paying minimum wage, paying the necessary overtime or holiday pay, or that they were entitled to withhold payments.
The Court held that D2 and D3 were not acting bona fide vis a vis the company and as such, were personally liable to the claimants for inducing the breaches of contract by D1.
Whether a director’s actions are sufficient to pass the threshold to be found personally liable will always depend on the facts of each case.
Although the facts in this case are quite extreme, this case is still an important reminder to company directors of the importance of complying with statute based employment laws (including national minimum wage legislation), not only to avoid enforcement action against the company, but also to protect themselves from the risk of being found personally liable for inducing breaches of contract.
To discuss any of the issues raised in this article or for specific employment law advice, including details of our training, please contact Joan Pettingill on 0114 228 3252 or any of our experienced employment law team.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.