EAT confirms HR consultants were not liable for employer’s decision to dismiss

External HR professionals are often retained by employers to investigate workplace matters, such as staff grievance and disciplinary issues.

In Handa v Station Hotel (Newcastle) Ltd, the EAT considered who is liable for whistleblowing detriments where HR consultants are engaged to undertake investigations on an employer’s behalf. 

In this article, we look at the Handa case and its implications for employers and external HR consultants when workplace issues are outsourced. 

Whistleblowing 

Section 47B of the Employment Rights Act 1996 protects workers who make protected disclosures about issues at work – otherwise known as whistleblowing, from being subjected to any detriment for doing so. This protection covers acts (or deliberate failures to act) by:

• their employer; or

• by an agent of their employer, with the employer's authority.

In essence, this means that employers can be held responsible for detrimental treatment related to whistleblowing, not only when they act directly, but also where such actions are carried out by others with their authority. 

Background 

Mr Handa was an employee and latterly a director of Station Hotel (Newcastle) Limited (“SHNL”), the holding company of a family hotel business. Following his appointment as a director in May 2022, he made allegations of financial impropriety relating to the running of the business, which were disputed by the company. 

Subsequently, several employees raised grievances against Mr Handa. It was alleged that he had bullied and harassed staff.  

In January 2023, SHNL instructed solicitors to manage the grievance process and engaged an external HR consultant with his own HR consultancy company (“SD”), to investigate the grievances.  

Having met with the grievants and with Mr Handa, SD found two of the grievances substantiated and recommended disciplinary proceedings as a result.  

A separate external HR consultant (“HM”) was engaged by SHNL to hold a disciplinary hearing, which took place on 3 April.  Following the hearing, a draft report was sent to SHNL’s solicitors and following their comments, a final version was produced by HM which stated that SHNL would be justified in dismissing Mr Handa with immediate effect.  

Mr Handa was subsequently suspended and removed as a director of SHNL and on 17 April 2023, he was summarily dismissed.  An external solicitor was engaged to hear Mr Handa’s appeal, which was not successful.  

Employment Tribunal 

Mr Handa submitted an Employment Tribunal claim against 5 separate respondents, including, SHNL and the two external HR consultants engaged in the grievance and disciplinary processes. His complaints against SD and HM were limited to whistleblowing detriments, which he expressed as his suspension, his removal as a director and his dismissal. He asserted that SD and HM were acting as SHNL’s agents. 

In December 2023 at a preliminary hearing in the claim, the Tribunal struck out the Mr Handa’s complaints against SD and HM.  

The Tribunal found that in the absence of a statutory definition of agency, the common law principle applied.  The Tribunal determined that for an agency relationship to exist, there was a need for a fiduciary relationship between the agent and the principal.  This required recognition that SD and HM were authorised to act on SHNL’s behalf, putting the company’s interests above their own, not simply that they were providing their services for its benefit. 

In view of the facts, the Tribunal found that SD and HM were both independent contractors each engaged by SHNL via a contract for services. Both were engaged to undertake a specific HR function. Both made recommendations at the end of their investigations which SHNL was free to accept or reject.  

Whilst there had been some initial instruction from SHNL about the tasks to be performed, thereafter SD and HM had performed their roles in accordance with the remit of the services they were contracted to provide. As such, Mr Handa’s whistleblowing detriment complaints against SD and HM had no reasonable prospect of success. 

EAT 

Mr Handa appealed to the EAT. At the same time, he withdrew two of his whistleblowing detriment complaints against SD and HM, instead maintaining solely that his dismissal was a detriment for which SD and HM were liable. 

The EAT dismissed Mr Handa’s appeal.  

In the EAT’s view, whilst a fiduciary relationship could indicate the existence of an agency relationship between two parties, it was not a necessary condition. Nor was it essential for every agency relationship to establish that one party has the power to affect the other’s legal relations with third parties. 

The employment context was different from other commercial contexts, and Tribunals needed to apply the concept of agency to the dynamic nature of employment relationships, in view of the underlying purpose of whistleblowing legislation.  

In the circumstances, the salient point was whether the services provided related to a significant aspect of the employment relationship.  The EAT found that in principle, it was possible that a person retained by an employer to carry out an employment-related procedure, such as a grievance or disciplinary investigation, could be regarded as the employer’s agent whilst carrying out that function. 

The EAT disagreed with the Tribunal’s finding that because SD and HM were external to the SHNL, carrying out their functions independently who could speak as they found, this meant they could not be SHNL’s agents.    

Mr Handa’s appeal was, however, unsuccessful. 

The EAT noted that agency as a legal concept was often advanced where an employer disputed liability.  In this case, SHNL had accepted that all 3 detrimental acts complained of, including Mr Handa’s dismissal, had been carried out on its behalf and that it would be liable in respect of them, should they succeed. 

Whilst the particulars of claim asserted that SD and HM had acted as agents whilst carrying out their respective grievance and disciplinary investigation procedures, it was not alleged that SD or HM had carried out Mr Handa’s dismissal.  Whilst Mr Handa had asserted that SD and HM were liable as SHNL’s agents for his dismissal, his pleaded case contained no legal or factual basis to support this contention.    

SD and HM had made clear that the decision to dismiss was not taken by them, nor was it within either of their remits.  Whilst SHNL had relied upon the investigations carried out by SD and HM in support of its submission at Tribunal that Mr Handa had been fairly dismissed, this did not mean that they could be co-liable as agents for the dismissal itself. 

Even if the reports produced by SD and HM ultimately resulted in the decision to dismiss Mr Handa, this did not mean that they were liable for that subsequent decision on the basis of agency. 

Had Mr Handa asserted, and it was found at a final hearing that, despite appearances, HM had been involved in the decision to dismiss him, the position would have been different. But this was not how Mr Handa’s claim was pleaded. 

The EAT also noted that Mr Handa had not pleaded any specific detrimental treatment relating to either SD or HM’s conduct during their respective processes or relating to the reports they produced.  

As a result, whilst the Tribunal erred in its approach to the legal concept agency, its decision that SD and HM were not liable for Mr Handa’s dismissal was nevertheless upheld. 

Implications for employers and HR consultants

The Handa case provides helpful clarification and comfort to external HR consultants as to the extent of their liability when undertaking investigations and providing recommendations. It affirms that they will not be co-liable as agents in whistleblowing detriment claims for decisions subsequently taken by the employer, even where such decisions are often heavily influenced by their findings and recommendations.  

The case also serves as a reminder to employers and external consultants to clearly define the remit and extent of the services to be provided. In particular, it should be made clear who will act as the decision maker on behalf of the employer in respect of any recommendations made. 

In Handa, the pleaded detriments related to acts and/or decisions which were not within the HR consultants’ remit. However, in principle, Handa leaves room for external HR consultants to be found liable as agents for whistleblowing detriments which occur whilst they perform their agreed functions, for example, due to the way they behave during any grievance or disciplinary investigation.  

HR consultants should therefore ensure that they undertake their remits carefully and thoughtfully to avoid any such complaints whilst providing their services to employers. 

If you would like to discuss any aspect of this article further, please contact our employment team on 0113 244 6100. 

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The information in this article is necessarily of a general nature. The law stated is correct at the date (stated above) this article was first posted to our website.

Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.