A recent EAT ruling will give some comfort to HR consultants who are engaged to undertake grievance and disciplinary processes on behalf of an employer, as the case confirmed that they will not be co-liable for decisions subsequently taken by the employer. However, HR consultants should not rest on their laurels, as the case also potentially widens the scope of personal liability for them in certain scenarios (which will be fact-specific).
Handa v The Station Hotel (Newcastle) Limited & Ors [2025]
Background
The case concerned Mr Handa, who was a director in a family business: The Station Hotel (Newcastle) Limited.
Mr Handa made several (disputed) allegations of financial impropriety relating to the running of the business. Mr Handa believed the allegations were protected disclosures. Thereafter, several employees raised harassment and bullying allegations against Mr Handa.
The employer instructed solicitors to deal with the grievances against Mr Handa. As a result of this, two independent HR consultants were subsequently instructed to:
- Conduct a grievance investigation. Mr Duncan was instructed and, after carrying out the investigation, recommended disciplinary action against Mr Handa; and
- A second consultant (Ms McDougall) conducted Mr Handa’s disciplinary hearing and wrote a report suggesting dismissal on the grounds of gross misconduct would be justified (without explicitly recommending it).
Mr Handa was subsequently dismissed, and he brought claims for unfair dismissal and detrimental treatment on the grounds of whistleblowing against multiple parties:
- The employer itself
- Two other directors/shareholders
- Both external HR consultants (Duncan and McDougall) who had respectively conducted the grievance investigation and disciplinary hearing. (on the basis that they were “agents” of the employer).
The external HR consultants applied to have the claims against them struck out, arguing they had not acted as “agents” of the employer under s.47B(1A)(b) of the Employment Rights Act 1996.
The Employment Tribunal struck out the claims against the HR consultants, and Mr Handa appealed to the EAT. The EAT dismissed the claims against the HR consultants in the specific circumstances of this case.
The EAT’s guidance on “agency”
The EAT held that it in principle HR consultants could act as “agents” of the employer when carrying out their roles; however, the key consideration is whether the services provided “relate to a significant aspect of the employment relationship, rather than some other aspect of the employer’s business or activities”.
Implications for employers and service providers
The EAT judgment raises important considerations for:
External HR consultants and service providers
Those conducting independent investigations, disciplinary, or grievance processes may potentially be exposed to personal liability claims for whistleblowing detriment or discrimination. This is particularly relevant for sensitive cases involving allegations of sexual harassment, bullying, or discrimination.
Employers
Organisations that outsource HR processes should carefully consider their appointment and engagement processes, ensuring clear terms of reference and appropriate insurance arrangements.
Legal representatives
When advising clients on external appointments, it’s important to consider potential liability issues and mitigation strategies.
What remains unclear
The EAT has not definitively clarified what constitutes a “significant aspect of the employment relationship.” This ambiguity will likely be addressed in future cases, but meanwhile creates uncertainty for those providing outsourced services to employers.
Comment
This case highlights the evolving nature of employment law in relation to modern working practices and outsourcing arrangements. While the HR consultants in this case avoided liability, the EAT’s broader interpretation of “agency” suggests that in some instances, those who provide employment-related services could potentially be considered agents and face personal liability.
At Nelsons, we recommend that external consultants review their contractual arrangements, insurance provisions, and decision-making processes in light of this judgment. For employers, this case underscores the importance of carefully defining the roles and responsibilities of external service providers.
How Nelsons Can Help
Rachel Hatton is a Partner in our expert Employment Law team.
Rachel has a strong reputation in all aspects of employment law, including Employment Tribunal litigation, discipline and grievance issues, and unfair and constructive unfair dismissal claims, and has particular experience in developing HR support services for businesses.
At Nelsons, our employment law team in Derby, Leicester, or Nottingham can provide tailored advice on how this ruling might affect your business or professional practice. For more information or to discuss your specific circumstances, please call 0800 024 1976 or contact us via our online enquiry form.
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