It is more common than most people might think for companies to appoint external consultants to carry out investigations. For example, if a grievance is submitted against a member of the Board, or it's a small organisation and most of the employees in the company are involved in the allegations in one way or the other.
In the recent case of Handa v Station (Newcastle) Ltd and others, the Employment Appeal Tribunal (EAT) has provided important clarification setting out the circumstances in which external consultants can become liable for the decisions they make when acting as agents of the companies that instruct them.
Background
The Station Hotel (Newcastle) is a family run hotels business, and Mr Handa was an employee who became a director in May 2022. Following his appointment as a director, Mr Handa made several contested allegations of financial impropriety within the business, which he claimed amounted to whistleblowing. At the same time, several staff members raised grievances accusing Mr Handa of bullying and harassment.
The company appointed two external HR consultants. The first was appointed to investigate the grievances, and he decided to uphold two of the grievances and recommended that the matter proceed to a disciplinary hearing. A second HR consultant was appointed to conduct a disciplinary hearing, and after the hearing she sent a report to The Station Hotel saying that the company would be justified in dismissing Mr Handa for gross misconduct.
Mr Handa was eventually dismissed and he brought an unfair dismissal claim against The Station Hotel. However, he also brought claims against the two external HR consultants complaining of detrimental treatment because of whistleblowing. He argued that the HR consultants acted as agents of The Station Hotel and were therefore personally liable for the detriments they subjected him to (including their roles in dismissing him).
Employment Tribunal
Mr Handa argued that the external HR consultants were acting as agents of his employer, the whistleblowing protection in the Employment Rights Act 1996 protected him from being subjected to any detriment from their actions as agents of his employer, and they were personally liable for their actions.
The Employment Tribunal disagreed, and struck out the claims against the HR consultants. The Tribunal concluded that it was not reasonably arguable that the HR consultants were acting as the employer's agents in a way that could make them liable for the detrimental treatment and dismissal.
Mr Handa appealed to the EAT.
EAT
The EAT held that the Tribunal was wrong that it wasn't arguable that the external HR consultants had acted as agents of The Station Hotel.
The EAT confirmed that external investigators and consultants can, in some cases, act as agents of an employer and be personally liable. The key question is whether their services relate to a significant aspect of the employment relationship, and the EAT concluded that it did "not see why a person 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".
Whilst external investigators and consultants can act as agents of the employer and be personally liable for their actions when it comes to whistleblowing and discrimination, the two HR Consultants were not found liable on the facts of this case, because ultimately they didn't make any decisions (only recommendations) and the employer didn't have any control over their external processes.
Comment
This is an important ruling that should make external investigators and HR consultants take note – as agents of the employer, in certain circumstances they can become personally liable for acts of discrimination and whistleblowing detriment. At the same time, the EAT's decision offers the same consultants some reassurance – if they make recommendations rather than decisions, they are not liable for the decisions of the employer subsequently takes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
