Employment Rights of Non-Executive Directors

Please note that this News item is not maintained, and reflects the law as at the date of publication or update.

The employment team at Gaby Hardwicke have recently acted in a whistleblowing appeal against a high profile sporting body, which raises the novel question of whether non-executive directors might have certain employment rights.

Mr Catt was appointed as a NED of Table Tennis England for a four-year term. He had been nominated under the terms of a Role Description and Person Specification which offered an honorarium plus expenses in return for a time commitment of 10-15 days per year. The role description spelled out what was expected of Mr Catt, ranging from attending Board meetings, serving on a committee, through to representing the organisation at events.

After raising a series of concerns, Mr Catt was faced with a vote of no confidence by the Board and was expelled from office. He therefore brought a claim to the Employment Tribunal against TTE and a number of its key figures, alleging that they had subjected him to unlawful detriments from which workers are protected under the whistleblower provisions of the Employment Rights Act 1996.

The first issue in this case was whether Mr Catt qualified as worker despite being a NED. The Employment Tribunal failed to grapple with whether Mr Catt had any kind of contract with TTE,  holding simply that Mr Catt could not be a worker because “his position was not one that could be described in any sense of a person who was a vulnerable individual in a position of subordination and dependence”.

On appeal, the Employment Appeal Tribunal found that the Judge had taken completely the wrong approach and returned the case for a fresh decision:

“The Employment Tribunal’s focus ought properly to have been on the question whether there was a contract between the claimant and the first respondent whereby the former undertook to perform work or services for the latter. The ET’s reasoning suggests, however, that it lost sight of this point, focusing instead on questions of vulnerability, subordination and dependency. Those may well be very relevant issues in many cases – in particular where the standard form documentation provided by the more powerful party does not reflect the reality of the relationship – but they were unlikely to provide material assistance in the circumstances of the present case”.

The EAT also acknowledged:

“The particular obligations undertaken by a non-executive director in one context may be very different to those of a non-executive director in another context. There is no “one-size fits all” route to the answer in such cases: each situation must be judged against the statutory language and a determination reached on the particular facts of the case in question”.

The effect of the judgment is that many NEDs might well gain the level of protection afforded to workers provided there is some kind of agreement in place (which might take the form of a letter of appointment, for example) and the NED receives payment that goes beyond expenses. The true position is likely to depend on whether the company was akin to a customer of the NED.

Until the Tribunal re-considers whether NEDs are workers, this case should serve as a cautionary tale to companies and organisations appointing NEDs since they might well fall foul of the key statutory obligations that all employers owe to workers, including:

– a duty to provide a compliant statement of terms

– national minimum wage

– statutory rest breaks and monitoring of working time

– holiday pay

– protection from whistleblowing

– protection from discrimination

– certain protections under TUPE

Those buying or selling businesses should extend their due diligence to NEDs where any of the above liabilities might exist. Likewise, in cases where NEDs are leaving as part of a business sale, buyers might well wish to insist on Settlement Agreements

Gaby Hardwicke instructed Daniel Matovu of 12 Old Square.

Catt v English Table Tennis Association Limited (Table Tennis England) & Ors [2022] EAT 125.

For more information on this topic, contact Paul Maynard.

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