Fraser Younsonof Squire Patton Boggs explores recent amendments to the UK's Public Interest Disclosure Act and anticipates future developments:
"Whistleblowing reached the top of the UK political agenda last summer when the cover-up of medical malpractice, gagging clauses in severance agreements and the victimisation of whistleblowers came to light in the UK’s health service."
The UK was one of the first EU countries to have specific whistleblowing laws in its Public Interest Disclosure Act 1998 (PIDA). In the intervening years some other European countries have introduced differing levels of protection for whistleblowers, with the Irish Protected Disclosures Act 2013 being the most recent.
Whistleblowing reached the top of the UK political agenda last summer when the cover-up of medical malpractice, gagging clauses in severance agreements and the victimisation of whistleblowers came to light in the UK’s health service. This led the UK government to rush through amendments to the PIDA protection to widen its impact. A Whistleblowing Commission also made recommendations to government in November 2013 for further amendments to PIDA.
In fact the whistleblowing employment protection parts of PIDA are contained in the UK’s Employment Rights Act 1996 (as amended) and give protection against dismissal or other adverse/detrimental action. The important points about the UK protection for employee whistleblowers is that there is no limit to the financial compensation awardable to successful claimants and the protection exists from day one of employment (for most dismissal cases there is a two-year qualifying period). This is significant in the context of unfair dismissal claims where the current maximum compensatory award for financial losses is currently the lower of one year’s salary or £76,574. We have seen a tendency for some employees to assert that they have been victimised or dismissed due to whistleblowing as a means of leveraging up severance compensation.
To acquire protection against dismissal or detriment, the disclosure by the whistleblower must satisfy a number of requirements: in particular that the disclosure must be both a “qualified disclosure” (which relates mainly to its subject matter) and also a “protected disclosure” (which relates to the circumstances in which the disclosure is made and the persons to whom the disclosure is made).
A disclosure will be treated as a “qualified disclosure” where the subject matter of the disclosure tends to show that any of the following has happened, is happening or is likely to happen: a criminal offence; failure to comply with any legal obligation; a miscarriage of justice; endangering the health and safety of any person; environmental damage; or the concealment of any of the above.
The protection will still apply even if the person making the disclosure is actually wrong about any of the above happening – he or she only has to reasonably believe that the allegation in question is substantially true. This is so even if the disclosure was not made in good faith. This good faith requirement was, surprisingly, repealed in summer 2013 and replaced by a new requirement: that the individual reasonably believes that the disclosure of the relevant information is in the public interest. So even if a disclosure is made in bad faith, the whistleblower will still be protected, although he or she might lose up to 25 per cent of the compensation if the case is successful.
The legislation does not, unfortunately, define what is meant by disclosure being in the “public interest”. This will be left to employment tribunals to decide and is bound to be a field day for lawyers. For example, does a disclosure about bankers’ bonuses at a taxpayer-owned bank amount to being in the public interest? Or an employer’s employment practices? In fact, the disclosure of the relevant information does not actually have to be in the public interest – it is only necessary that the whistleblower reasonably believes that it is. This is a much lower hurdle for the whistleblower to jump.
A qualified disclosure will only be protected where a number of other conditions are met. The main ones are as follows:
Disclosure to the correct person(s)
Disclosure to the worker’s employer, or someone the worker reasonably believes is the perpetrator of the relevant wrongdoing, will be protected. But in the case of disclosure to the employer this must be done in accordance with the employer’s whistleblowing (or similar) policy or procedure.
Disclosure to prescribed persons
The legislation contains a long list of regulatory or other bodies to whom the disclosure should be made (“prescribed persons”). These are linked to the nature of the disclosure. For example, in the case of tax evasion, the prescribed person is the HMRC; in the case of health and safety breaches, it is the Health and Safety Executive; and so on.
Other disclosure avenues
The PIDA allows disclosure to other persons (eg, the media) in a limited set of circumstances. These include the following, as long as there is no personal gain for the whistleblower in making the disclosure and it is reasonable for him or her to make it:
• at the time of making the disclosure, the worker reasonably believes he or she will be subjected to a detriment by his or her employer if he discloses to the employer or the relevant prescribed person;
• in the instance that there is no prescribed person, the worker reasonably believes that it is likely that the evidence of the relevant wrongdoing will be concealed or destroyed; or
• the worker has previously made a disclosure of substantially the same information to his or her employer or the relevant prescribed person.
When deciding whether it is reasonable for the whistleblower to make the disclosure, the employment tribunals look at all circumstances including the identity of the person to whom the disclosure is made; the seriousness of the relevant disclosure; whether the relevant wrongdoing is continuing or else likely to occur in the future; whether the disclosure amounts to a breach of a duty of confidentiality owed by the employer to another person; what action was taken in respect of earlier substantially similar disclosures; and whether the worker has complied with his or her employer’s applicable whistleblowing procedures.
Exceptionally serious situations
Where the worker makes a disclosure that is not for personal gain, and the subject matter is exceptionally serious, the disclosure will be protected as long as, in all the circumstances, it is reasonable for the worker to make it. In this latter context, particular attention is placed on the identity of the person to whom the disclosure is made.
Employers are now vicariously liable for any acts of detriment taken against the whistleblower by their employees. So, for example, if a worker is shunned by his or her work colleagues because he or she reported an expenses scam undertaken by them, the employer would be liable for this – unless it could show that it had taken reasonably practicable steps to stop that behaviour from occurring.
Gagging clause in any contract (eg, an employment contract or settlement agreement) are void where they seek to preclude a worker from making a protected disclosure.
Most whistleblowing cases in the UK turn on causation – ie, whether the main reason for the dismissal or detrimental action was because the worker had made a protected disclosure. Case law has drawn a distinction between the making of the protected disclosure and how it is made (although in some cases it is difficult to separate the two): the former is protected and the latter is not.
For example, in Bolton School v Evans, an IT school teacher told his headmaster that the school’s computer system was not safe from hacking and, to prove the point, then hacked into the computer system. The Court of Appeal upheld the school’s argument that he was dismissed not because he had made a disclosure, but because of the way he went about it. He was therefore not protected by the PIDA.
Rewards for whistleblowers
In the USA, the Dodd-Frank/SEC programme for whistleblowers provides for financial rewards to be made. In 2013 there were 3,238 whistleblowing reports made to the SEC. The SEC made awards in only four cases: $14 million; $150,000; $125,000 (split three ways); and $55,000.
There has been some pressure in the UK to establish a similar reward scheme, but the Whistleblowing Commission has decided against recommending it. However the UK’s Financial Conduct Authority is currently considering that option for certain regulatory breaches in the financial sector, but has not yet made a decision on it.
Whistleblowing Commission – the future of whistleblowing?
In November 2013, the Whistleblowing Commission (set up by the government) made its recommendations on how the whistleblowing legislation might be amended to encourage people to report wrongdoing and to give wider protection to those who do. These include the widening of the categories of wrongdoing that would be protected to include “gross waste”, “mismanagement of funds” and “serious misuse or abuse of authority”! These are potentially very wide in scope and, while these kinds of behaviours should not be covered up, one fears this could be a recipe for more leveraged whistleblowing allegations.
At present only workers have PIDA protection. The Commission recommended that it should be extended to job applicants, non-executive directors, interns and overseas workers. Other suggested amendments include whistleblowing protection for workers wrongly identified as whistleblowers, clarification to workers on the effect of gagging clauses in settlement agreements, specialist judges in whistleblowing cases and clarification of what constitutes the public interest.