Are external HR consultants liable as “agents”?

The recent case of Handa v The Station Hotel and others examined whether external HR consultants could be considered agents of an employer, potentially making them personally liable for claims arising from their input.

Background

Mr Handa, (C), a director and employee of The Station Hotel (R), raised allegations of financial impropriety against the hotel. Additionally, other employees raised grievances against C, citing instances of bullying and harassment.

The hotel hired an independent HR consultant to investigate the grievances against C. Some allegations were upheld, so a second independent HR consultant was brought in to oversee the disciplinary process. The second consultant’s report justified dismissal for gross misconduct, leading to R summarily dismissing C.

In his claims to the Employment Tribunal (ET), C argued that the HR consultants acted as R’s “agents”, making them personally liable for the alleged detriments, including his dismissal under the whistleblowing provisions of the Employment Rights Act. The HR consultants were therefore added as co-respondents in his claims.

ET Decision 

In a preliminary hearing, the ET struck out the claims against the HR consultants, determining that there no reasonable prospects of success. The ET concluded that the two HR consultants served as investigators and advisors, but did not act as agents of the employer, nor made the decision to dismiss on behalf of R.

Employment Appeal Tribunal (EAT) Decision 

The Claimant appealed the decision. The EAT ruled that, although the HR consultants were involved in the events leading to the dismissal, they had not made the decision to dismiss C, nor participated in the other alleged detriments. Thus, they were not liable. The decision to strike out the claims was upheld, and the appeal was dismissed.

Comment

Although the EAT concluded that the HR consultants were not liable in this case, it does not mean they cannot be “agents” of an employer. Each case depends on its own facts. Within their findings, the EAT stated that HR consultants could be considered agents if retained for employment procedures like grievance or disciplinary investigations.

Employers often use external HR consultants for various reasons. Therefore, it is crucial for both parties to clearly define the scope and the terms of engagement, ensuring alignment with actual practices. Decisions about dismissals should be made by employers, not the HR consultant. HR consultants should be careful to only recommend rather than pressure any decision.

For further advice on the use of external HR consultants, please get in touch with a member of the team.