Directors’ Personal Liability for Employment Breaches

One of the fundamental principles of a limited liability company is that the company has a distinct legal identity, separate from its shareholders and directors. In principle, only the company can be held liable for its lawful actions, shielding directors and shareholders from personal responsibility.

Exceptions to Limited Liability

Despite this protection, there are several general exceptions:

• Piercing the corporate veil: Courts may look behind the corporate structure in cases of fraud or sham arrangements.
• Wrongful trading: Directors can be personally liable if they allow a company to continue trading while insolvent.
• Health & Safety breaches: Statutory duties can impose personal liability on directors for safety offences.
• Personal guarantees: Directors often sign guarantees for company borrowings, creating direct obligations.
• Employment law claims: Individuals, including directors, can face claims for discrimination, whistleblowing detriments, unfair dismissal and breach of contract.

For more on directors’ personal liability for employment law breaches, see our detailed guide.

Personal Liability in the Employment Sphere

In the context of employment law, directors—like other employees—can be held personally accountable for certain workplace infringements:

• Discrimination: Tribunals can award compensation against individual discriminators as well as the employing company.
• Whistleblowing detriments: Decision-makers may be sued personally for detrimental treatment of whistleblowers.
• Unfair dismissals: Directors involved in termination decisions can be named in claims.
• Contractual breaches: Individuals who induce breaches of contract can be personally liable.

Case Summary: Antuzis v DJ Houghton Catching Services Ltd

In Antuzis v DJ Houghton Catching Services Ltd, foreign national employees engaged as chicken catchers worked under clearly exploitative conditions:

• Excessive working hours without overtime pay
• Failure to pay the minimum wage or holiday pay
• Frequent underpayments and disregard for Agricultural Wages legislation

Although the employer was a limited company, the employees sought to hold the directors personally liable for contractual and statutory breaches. The High Court agreed, finding that the directors had induced the company to breach its obligations.

Key Legal Issue: Duty of Good Faith

Directors owe a statutory duty to act in good faith in the interests of the company. The court found:

• The directors knew the company’s actions were unlawful.
• They had no genuine belief that the company was complying with its legal duties.
• By permitting unlawful conduct, they failed the duty of good faith.

As a result, they were personally liable for inducing the breaches. The fact that many obligations arose by statute made their conduct particularly inexcusable.

Implications for Directors

This case is a stark warning that directors cannot rely solely on the company’s limited liability. Key takeaways include:

• Ensure good faith compliance: Directors should have a reasonable basis to believe the company is meeting all employment law duties.
• Implement robust systems: Maintain effective policies, trained staff and regular audits.
• Access expert advice: Seek timely external legal or HR guidance to confirm compliance.
• Monitor statutory obligations: Stay informed about minimum wage, holiday pay, whistleblowing and discrimination laws.

Conclusion

The Antuzis decision reinforces that directors may face personal liability for encouraging a company to breach employment contracts and statutory duties. To mitigate risk, directors must actively oversee compliance, demonstrate a good faith belief in lawful conduct and ensure robust governance frameworks are in place.