Employment Law Speed Read – 15/04/19

Facts

The Claimants were employed by DJ Houghton (Houghton) as chicken catchers, in an “exploitive manner”. They worked extremely long hours and were paid less than statutory minimum wage. The Claimants claimed that they were often not paid what was due to them, payments were often withheld as a form of punishment, no attempt was made to pay holiday or overtime pay, and deductions were made for “employment fees” and rent. The workers claimed they were trafficked to the UK and the court heard evidence that an “enforcer” was used to keep workers under control, and those who complained were evicted from the premises.

High Court

The High Court upheld the Claimants’ summary judgment application and found that there was no realistic prospect of Houghton succeeding at trial. Houghton were liable for a number of contractual and statutory breaches including the unlawful charging of “employment fees”, failure to pay minimum wage, the withholding of wages and failure to pay holiday pay.

In addition, the company’s sole Director and Company Secretary were held personally liable for the breaches of contract they had adduced, with the court finding that they had ruined the reputation of the company, as well as causing it to lose the Gangmasters’ licence required to employ the workers.

The High Court held that the directors were not acting in good faith in relation to the company as there was no doubt whatsoever that both of them “actually realised” what they were doing caused the company to breach its contractual obligations towards the Claimants.

In addition, the Court found that there was no credible evidence that either of the directors possessed an honest belief that what they were doing would not involve such a breach – at all material times each knew exactly what he or she was doing. They were therefore personally liable for the breaches of contract they had induced.

The quantification of loss will be determined at an assessment of damages hearing.

Comment

Whilst the directors in this case were found to be personally liable for inducing a breach of contract, the general principle is that a director will not be liable personally for inducing a breach of contract where they are acting in good faith within the scope of their authority. This case is a reminder, however, that officers of a company may be liable where a breach of contract or a regulatory requirement causes serious damage to a company’s reputation.

If you have any questions on the above and how it will affect you, please do not hesitate to get in touch with a member of our employment team.