The claimants were employed at various farms and suffered exploitative conditions. They worked extremely long hours, were paid less than minimum wage and no attempt was ever made to pay them holiday pay or overtime.

The central issue in the case centred on a director’s liability for inducing a breach of contract by the company. The long-established principle states that directors attract no liability if acting bona fide within the scope of their authority. However, where a breach involves what the court termed a ‘statutory element’ then this may suggest a failure to comply with duties owed to the company and, by extension, to employees.

In the present case the court was satisfied that the directors of the company “actually realised” that the employees were not receiving minimum wage, holiday pay and overtime payments as they were legally entitled to. As a consequence, they were in breach of s.172 of the Companies Act 2006 which requires directors to act “in good faith so as to promote the success of the Company” which includes having regard to the likely consequences of decisions on employees.

Practical lessons

The key point here was that the directors’ liability could be tied to failings stemming from the National Minimum Wage Act 1998, the Working Time Regulations 1998 and also to the “good faith” requirements of the Companies Act 2006.

This ‘statutory element’ elevated the seriousness of the directors’ actions to a degree where it was appropriate to hold them personally liable. Yet, this decision certainly does not open the door to personal exposure for directors for all breaches of employment contracts.

This case involved “deliberate and systematic” action on behalf of the directors to the detriment of the employees and so should be regarded as quite an extreme example. The judgment is, however, a stark warning to directors that they could be held personally liable for exploitation of their workers.
https://www.bailii.org/ew/cases/EWHC/QB/2019/843.html

Subsequent High Court judgement on assessment of damages is available here.