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Can the directors of a limited company be personally liable for its breaches of an employment contract?
The High Court in the case of Antuzis & Ors v DJ Houghton Catching Services Ltd & Ors [2019] EWHC 843 (QB) has held that, in certain circumstances, yes they can.
A company director is not generally liable for inducing a breach of contract where they are acting legitimately in the scope of their authority for the business.
Antuzis & Ors v DJ Houghton Catching Services Ltd & Ors
Case Details
In the above case, the Claimants worked for the Respondent company as chicken catchers. They worked extremely long hours in unpleasant conditions, receiving less than the national minimum wage. They did not receive holiday pay and had payments withheld from them as a form of punishment by their employer.
The Claimants brought various claims against the Respondent, which included compensation for unpaid wages, distress, personal injuries and consequential losses as a result of its unlawful actions.
One issue for the High Court to consider was whether the Respondent’s sole shareholder and director, and the company secretary, could be personally liable for inducing the company to breach the claimants’ employment contracts.
It was held that the director and company secretary were not acting bona fides vis-à-vis the company because they did not honestly believe that they were paying the minimum wage, overtime and holiday pay nor that they were entitled to withhold payments. By inducing the company to knowingly commit statutory breaches of employment law, the director and company secretary had ruined the reputation of the company, as well as causing it to lose the gangmasters’ licence it needed to employ the workers. They were therefore personally liable for the breaches of contract that they had induced.
Personal Liability Of Company Directors – Comment
Whilst this is an unusual case it is one that company directors should bear in mind. The ‘protection’ of trading under a limited company is capable of challenge and personal liability (particularly where a breach of a statutory duty is concerned) is a risk.
How Nelsons Can Help
For further information or to comment on this article, please contact a member of our Employment Law team in Derby, Leicester and Nottingham on 0800 024 1976 or via our online form.