Court of Appeal rules training repayment clause unenforceable
The Court of Appeal has provided important guidance on the enforceability of training repayment clauses in employment contracts.
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Can external HR consultants be held liable for dismissal decisions? We review Handa v Station Hotel & Others for key lessons.
30 June 2025
Case Study
This is a really important case for clients who use external HR consultants for investigations that lead to dismissals.
In Handa v Station Hotel & Others, the employer engaged the services of two external HR consultants – one to deal with a grievance and the other to deal with the subsequent disciplinary which resulted in dismissal. The first consultant (Mr Duncan) partially upheld the grievances which led to disciplinary action.
The report of the second consultant (Ms McDougall) found that dismissal for gross misconduct would be justified. The employer duly went on to dismiss. However, Ms McDougall was not the person who made the decision or issued the notification of termination. The Claimant appealed but was unsuccessful.
Case Study
The Claimant then brought a claim for automatic unfair dismissal on the grounds of whistleblowing and resulting detriment.
He argued that both Mr Duncan and Ms McDougall had acted as agents of the employer and both were therefore liable for detriments (including the dismissal). The Employment Appeal Tribunal (EAT) held that the HR consultants were not agents and could not therefore be found liable, and this part of the Claimant’s claim was struck out.
There will be situations in which the case could have turned out differently. It is important to recognise that consultants can act as agents for the employer, but they would need to have conducted the act, eg of dismissal in this case. Conversely, compiling a report and indicating a possible outcome is not likely to be enough to establish liability. This can be distinguished from a consultant who decides to dismiss (eg at the disciplinary hearing) or who implements the dismissal (eg by handing down the decision or in whose name the letter of termination is written).
Employers will engage the services of HR consultants for several reasons- often impartiality or complexity, or where the organisation does not have a HR function. Whilst the EAT’s decision in this case is reassuring, it is limited in scope, and each case would be decided on its own facts.
Our recommendation is to be clear from the outset what the remit of the role is- conducting an investigation that makes findings and suggestions is different to chairing a panel at which a decision is made and implemented. Keep decision-making within the hands of the organisation and avoid overlap between the adviser and the investigator.
Ideally, they should be separate; otherwise, the integrity of the investigation will come into question. In addition, remember that advice from a lawyer is protected by legal privilege (and therefore not disclosable), whereas advice or recommendations from an HR consultant would have to be revealed in any subsequent proceedings.
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