In this case, where acted for a Respondent, the EAT held that two HR consultants, engaged to conduct a grievance process and a disciplinary process, could arguably have been acting as the employer's agents in doing so. However, they could not be held co-liable as agents of the employer for its subsequent decision to dismiss the employee concerned.
Facts
Mr Handa was an employee and a director of The Station Hotel (Newcastle) Ltd (SHN Ltd), the holding company of a group of companies for a family-run hotels business. He made allegations of financial impropriety concerning the running of the business, which were disputed by SHN Ltd and its management, and which Mr Handa claimed amounted to protected disclosures.
When various staff members raised grievances complaining of bullying and harassment by Mr Handa, SHN Ltd instructed solicitors to manage the grievance process. This led to an HR consultant, Mr Duncan, being retained in January 2023 to investigate the grievances. Having met the complainants and Mr Handa, he found two of the grievances to be substantiated and recommended that those matters proceed to a disciplinary hearing.
Another HR consultant, Ms McDougall, was retained to conduct a disciplinary hearing, which took place on 3 April 2023. Ms McDougall's report (which had been amended from its initial draft following correspondence with SHN Ltd's solicitors) included a statement to the effect that SHN Ltd would be justified in dismissing Mr Handa for gross misconduct.
SHN Ltd suspended Mr Handa on 6 April 2023, notified Companies House to remove him as a director on 13 April 2023, and summarily dismissed him on 17 April 2023. His appeal was heard by an external solicitor but dismissed by SHN Ltd based on the solicitor's report.
Mr Handa brought employment tribunal claims against SHN Ltd for both ordinary unfair dismissal and automatically unfair dismissal for whistleblowing. He also brought claims against Mr Duncan and Ms McDougall, alleging that they were SHN Ltd's agents and that in that capacity they had subjected him to detrimental treatment (i.e. dismissal) for whistleblowing.
At a preliminary hearing, the tribunal struck out the claims against Mr Duncan and Ms McDougall as having no reasonable prospect of success. Mr Handa appealed.
EAT decision
The EAT dismissed Mr Handa's appeal.
It held that the tribunal had been wrong to conclude that Mr Duncan and Ms McDougall could not arguably be considered agents of SHN Ltd when carrying out their respective grievance and disciplinary processes, for the following reasons:
- The whistleblowing legislation imposes liability on third parties acting as the employer's agent in subjecting an employee to detrimental treatment. When determining who is an agent for these purposes, the dynamic nature of employment relationships and the underlying purpose of the legislation must be taken into account.
- In this context, the material issue is whether the services that the third party is contracted to provide relate to a significant aspect of the employment relationship, rather than some other aspect of the employer's business. Someone who comes into contact with employees only incidentally in the course of providing a contracted service to their employer, which is itself unrelated to an employment relationship, is unlikely to be an agent for these purposes. However, a person who is retained to carry out an employment-related procedure, such as a grievance or disciplinary investigation, could be regarded as the employer's agent in the course of carrying out those functions.
- The fact that such a person is an external appointee who carries out their duties independently would not preclude them from being regarded as the employer's agent in relation to their conduct when doing so.
However, in this case the EAT's view was that there was no arguable basis on which Mr Duncan and Ms McDougall could be held liable as SHN Ltd's agents for the alleged detriment – namely, Mr Handa's dismissal. Neither the fact that SHN Ltd had relied on the investigation processes carried out by Mr Duncan and Ms McDougall in support of its decision to dismiss Mr Handa and its case that his dismissal was fair, nor the fact that the activities of Mr Duncan and Ms McDougall were essential links in the chain of causation leading to the decision to dismiss could support a conclusion that Mr Duncan and Ms McDougall were therefore co-liable for the dismissal itself as SHN Ltd's agents.
What does this mean for employers?
It is quite common for employers (particularly small organisations, or those dealing with allegations against a very senior employee) to appoint external consultants to conduct independent grievance and disciplinary processes on their behalf. This decision is reassuring for those consultants, as it confirms that they will not generally be co-liable for decisions the employer takes in reliance on their recommendations. The EAT did note, however, that had Mr Handa successfully alleged that Ms McDougall herself had actually taken part in the decision to dismiss him, the position would have been different. This highlights the importance for employers of clearly delineating the role of any external consultants they may engage as part of internal processes, identifying whether and to what extent their remit extends to decision-making.
