Can the directors of a limited company be personally liable for its breaches of an employment contract?
Yes, held the High Court in Antuzis v DJ Houghton.
The Claimants were employed by Houghton in an exploitative manner, working extremely long hours, being paid less than the statutory minimum and frequently not paid the sums due to them. Payments were often withheld and there was no attempt to pay them holiday pay or overtime.
A director is not generally liable for inducing a breach of contract where they are acting bona fides vis a vis the company. If, however, the breach of contract has a statutory element, that may suggest a failure on the part of the director to comply with their duties to the company, potentially making them liable to a third party (here their employees) for inducing the breach of contract.
In this case, the court concluded that the directors were not acting bona fides vis a vis the company because they did not honestly believe that they were paying the minimum wage, overtime and holiday pay nor that they were entitled to withhold payments. They were therefore personally liable for the breaches of contract that they had induced.
Thanks to Rad Kohanzad of 42 Bedford Row for preparing this case summary.