One of the main benefits of trading as a limited company as opposed to a sole trader is that you can take advantage of the concept of “limited liability” – in other words, your personal assets will not be at risk if you are sued.
There are notable exceptions to this well-established rule, as shown in the recent case of Antuzis v DJ Houghton Catching Services Ltd.
The company provided staff who would be transported to work at various farms to catch chickens which were then sent off for slaughter.
Not only was the work physically demanding and unpleasant, but the working conditions were also appalling. The claimants were forced to work long hours without adequate breaks or holidays, no accurate records of hours worked were kept, and anyone who spoke up was threatened by a sinister individual who was used as the company’s “enforcer”.
The Claimants eventually brought various claims, including claims for unpaid wages, unlawful deductions from wages and holiday pay against not only the company officers (the director and company secretary) as individuals.
The court had to consider a very technical point of law which was whether the company officers had knowingly induced the company to breach its statutory obligations to the employees. If they did not and were acting in good faith and within the scope of their authority, they would be entitled to be protected by the “shield” of the limited company.
The court found that the evidence of the Director and Company Secretary was almost entirely fabricated and concluded that they must have known that what they were doing was illegal. The court found that the motive for this was to maximise the company’s profits and benefit themselves, even though the employees were forced to live and work in terrible conditions.
The outcome was that the Director and Company Secretary were found to be personally liable, along with the Company, and will now have to pay substantial damages to the employees.
What do Employers need to know?
What this case demonstrates is that Directors and Company Secretaries can be personally liable if they knowingly disregard statutory rights.
Commenting on the case, employment law specialist Gwyn Edwards said “Thankfully it is rare to hear of such an appalling case where the employer completely disrespected its employees’ rights. Employers need to take notice of this case as although it may be tempting to cut corners to reduce staffing costs, the outcome can be disastrous”.