In the UK, a limited company is its own legal entity. This means that any claims that are made will generally be the responsibility of the company alone and not its directors.
There are however situations where directors of a company can be held jointly liable, as demonstrated by a recent case decided by the High Court.
In this case, the company employed a number of Lithuanian nationals as chicken catchers. The employees claimed that the company had required them to work in terrible conditions and had failed to comply with the law in several areas including failing to pay minimum wage, not allowing sufficient rest breaks and requiring the employees to work hours over the maximum weekly limit.
The court agreed that payslips issued by the company were not an accurate representation of the hours worked and as such, the Company had failed to comply with its statutory obligations.
The court also ruled that the Company’s secretary and sole director were personally liable for the Company’s breaches of the law. When coming to this decision, the court considered that directors have a duty to act in good faith towards the company and confirmed that, if a director had acted in good faith but had caused the company to act in breach regulations then they would not be liable for any resulting claims. However, in this case, the court found that neither the director nor secretary had acted in good faith as both must have been aware that the employees’ rights were being breached.
What this means for you
This case is a reminder that directors will not always be protected from liability in employment claims. It is not however necessarily cause for panic as it is likely that directors will only ever find themselves liable with there is deliberate unlawful action on their part.
If you would like further advice in relation to any employment law issues then please contact a member of the team on 01274 864999.