Whistleblowing: the new public interest test and other developments Patrick Halliday

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1 Whistleblowing: the new public interest test and other developments Patrick Halliday A. Introduction 1. The title of the Public Interest Disclosure Act 1998 ( PIDA ) was a somewhat inaccurate description of the contents of that legislation. The statutory regime for the protection of whistleblowers which was introduced by PIDA did not include any requirement that, in order for a disclosure to be protected, it be made in the public interest. Neither, strictly speaking, did it include any requirement for disclosure of information: the regime applies to information being brought to the attention of a person who is already aware of it (section 43L(3) of the Employment Rights Act 1996 ( ERA 1996 )). 2. The absence of a statutory public interest test was compounded by the EAT s decision in Parkins v Sodexho Ltd [2002] IRLR 109 that an employee can make a protected disclosure about a past, current or putative breach of his own contract of employment, even though such a disclosure may have nothing to do with the public interest 1. Parkins paved the way for claims by bankers that they had been victimised for complaining that their own bonuses were too low. Claims of this ilk have engendered a rather jaundiced view of the whistleblowing legislation amongst some practitioners and commentators. The experience of many practitioners is that the whistleblowing legislation has been imaginatively exploited by claimants, in order to bypass the compensation cap for ordinary unfair dismissal claims, or to enhance settlement prospects by raising issues which may embarrass employers. In 2012, the Independent newspaper reported on an increase in the annual number of whistleblowing cases from 157 in 2000 to 1,761 in 2009, stating that Legal experts believe the increase is dominated by so-called pale stale males exploiting the law as a litigation tactic in disputes with financial institutions Conversely, certain features of the legislative scheme have been criticised for failing to offer adequate protection to those who genuinely blow the whistle in the public interest. Until now, whistleblowers have not been protected from victimisation by their colleagues (as opposed to their employers), and employers have not been vicariously liable for victimisation by colleagues: Fecitt v NHS Manchester [2012] ICR 372. Job applicants fall outside the definition of workers who are protected under the whistleblowing scheme. This has caused particular concern in the context of allegations that companies in the construction industry have been blacklisting workers who have previously blown the whistle about health and safety concerns. 4. The Enterprise and Regulatory Reform Act 2013 ( ERRA 2013 ) contains a series of amendments to the whistleblowing legislation which are designed to remedy these defects. 1 Parkins has been followed by the EAT on a number of subsequent occasions: see Odong v Chubb Security Personnel EAT/0819/2/TM per Recorder Luba at 21, Fincham v HM Prison Service EAT/0925/01RN & EAT/0091/01/RN per Elias J at 24 and 32 and Kraus v Penna PLC [2004] IRLR 260 per Cox J at

2 For example, if a disclosure is to be protected, it will now be necessary for the worker to hold a reasonable belief that it is made in the public interest. 5. The remainder of this paper deals in turn with the following matters: (i) a recap on the main elements of a whistleblowing claim under the current law; (ii) an update on recent case law (including decisions on post-termination whistleblowing, the different causation tests for detriment and dismissal cases, and claims by LLP members); and (iii) the ERRA 2013 reforms (namely potential protection for job applicants, protection from victimisation by colleagues, the new public interest test and the removal of the good faith requirement). B. Recap on the main elements of a whistleblowing claim under the current law 6. Whistleblowing claims raise two basic questions. First, did the claimant make a protected disclosure? Second, if so, was the protected disclosure the cause of the claimant s dismissal, or some other detriment suffered by the claimant? As to the second question, the causation test varies depending on whether one is dealing with a dismissal or a detriment claim: see below. 7. As to the first question, section 43A defines a protected disclosure as a qualifying disclosure within the meaning of section 43B, which is made by a worker in accordance with any of sections 43C to 43H. Broadly speaking section 43B prescribes the subject matter of the disclosure in order for it to qualify for protection; and sections 43C to 43G define the means by which it must be made (to whom? in what circumstances?) in order to attract protection. 8. In its current form -- which shall remain until amendments under ERRA 2013 take effect on 25 June section 43B(1) is worded as follows. (1) In this Part a 'qualifying disclosure' means any disclosure of information which, in the reasonable belief of the worker making the disclosure, tends to show one or more of the following-- (a) that a criminal offence has been committed, is being committed or is likely to be committed, (b) that a person has failed, is failing or is likely to fail to comply with any legal obligation to which he is subject, (c) that a miscarriage of justice has occurred, is occurring or is likely to occur, (d) that the health or safety of any individual has been, is being or is likely to be endangered, (e) that the environment has been, is being or is likely to be damaged, or (f) that information tending to show any matter falling within any one of the preceding paragraphs has been, or is likely to be deliberately concealed. 2

3 The broadest of these categories, and the one upon which claimants rely most often in practice, is (b), i.e. failure to comply with any legal obligation. 9. The means by which a qualifying disclosure may attract protection are: disclosure in good faith to the worker s employer or another responsible person (section 43C); disclosure in the course of taking legal advice (section 43D); disclosure in good faith to a Minister of the Crown, where the worker s employer is statutorily appointed by a Minister of the Crown (section 43E); disclosure to persons prescribed in secondary legislation (section 43F); reasonable disclosure in good faith to other persons where there is, broadly speaking, some good reason to make the disclosure to someone other than the employer (section 43G); and reasonable disclosure in good faith to other persons of exceptionally serious failures (section 43H). By far the most important of these in practice is disclosure in good faith to the employer (section 43C). 10. In addition to Parkins v Sodexho, which is discussed above, the key cases on what amounts to a protected disclosure can be summarised briefly as follows. (i) In Easwaran v St George s University of London UKEAT0167/10, the EAT helpfully broke down section 43B(1) into three constituent questions. First, did the worker disclose information? Second, did he believe the information tended to show one of the relevant categories of wrongdoing? Third, was that belief reasonable? (ii) In Cavendish Munro Professional Risk Management v Geduld [2010] ICR 325, in relation to the first of these three questions, Slade J distinguished between (a) a disclosure of information and (b) the making of an allegation. She ruled that merely making an allegation does not convey facts, so cannot amount to a disclosure of information, so cannot attract the protection of the legislation. For example, if a hospital worker says, You are not complying with health and safety requirements, that would be an allegation not information, so unprotected. Communicating information would require saying something like, The wards have not been cleaned for two weeks.. The distinction is easier to state than to apply: in practice allegations frequently disclose information, often by implication. (iii) In Babula v Waltham Forest College [2007] ICR 1026 the Court of Appeal held that, provided the tribunal considers that the worker s belief that the relevant wrongdoing has occurred is reasonable, it does not matter that the belief subsequently turns out to be wrong, or even that the facts which the worker believed to be true did not amount in law to the relevant wrongdoing. (iv) In Street v Derbyshire Unemployed Workers Centre [2005] ICR 97 the Court of Appeal decided that good faith in section 43C means more than simply that the disclosure is made honestly or with honest intention. Rather, it is concerned with motive. Auld LJ held that a disclosure is not made in good faith where the dominant or predominant purpose of making it was for some ulterior motive, and not for a public interest purpose ( 56). Wall LJ, agreeing with Auld LJ, stated at 73 that a worker does not act in good faith where his or her predominant motivation for disclosing information was not directed to remedying the wrongs identified in section 43B, but was an ulterior motive unrelated to the statutory objectives. On the facts of Street, the disclosure was therefore not made in good faith because the claimant s predominant motivation had been antagonism towards her line manager. 3

4 (v) Street was followed in Bachnak v Emerging Markets Partnership (Europe) Ltd EAT/0288/05/RN. HHJ Peter Clark upheld a tribunal s decision that a disclosure had not been made in good faith because the claimant s predominant purpose in making it had been to strengthen his position in negotiations with his employer. He went further than Street in holding that The statutory protection is afforded to those who make disclosures in the public interest; thus where the predominant purpose is the employee's personal interest, the disclosure will not be made in good faith ( 24). 11. In effect, Street and Bachnak import, through the concept of good faith, a requirement that the disclosure is in the public interest. However, they do not clearly resolve the following question: if a disclosure is made with the aim of remedying one of the wrongs listed in section 43B, but that remedy is pursued because it is in the claimant s personal interest, is the disclosure made in good faith? On one hand, Wall LJ appeared to equate remedying the wrongs identified in section 43B with the public interest. On the other, HHJ Peter Clark stated that, if the predominant purpose is the employee s personal interest, good faith is absent. Take the example of a banker who complains that his low bonus breached his contract of employment. He is trying to remedy one of the wrongs identified in section 43B (failure to comply with a legal obligation) but he is doing so in his own personal interest. It is unclear whether, applying Street and Bachnak, he should be held to have made the disclosure in good faith. C. Recent case law C1. Post-termination whistleblowing 12. In Onyango v Berkeley Solicitors [2013] IRLR 338 HHJ Peter Clark held that a disclosure made after employment has terminated can still be a protected disclosure. 13. Prior to Onyango, in Woodward v Abbey National PLC [2006] ICR 1436, the Court of Appeal had held that a post-termination detriment can give rise to a whistleblowing claim; but had refrained from deciding whether disclosures could be protected only if they were made during the currency of the employment. However, the EAT in Onyango had no hesitation in accepting that a post-termination disclosure could be protected. Principally, that was because worker and employer are defined in section 230 of ERA 1996 as those who are or have ceased to be in the necessary contractual relationship. 14. Onyango raises interesting issues concerning confidentiality clauses in termination agreements. Contractual terms between employers and workers are void insofar as they purport to preclude the worker from making a protected disclosure: section 43J of ERA It follows from Onyango that confidentiality clauses in termination agreements may, in certain circumstances, be void. 15. Onyango may be significant in other ways, too. The most likely scenarios in which a worker is now likely to argue that a former employer has subjected him to a detriment for a posttermination protected disclosure are, first, where the employer refuses to provide a reference; and second, where the employer refuses to consider him or her in a future recruitment exercise. 4

5 C2. The different causation tests for detriment and dismissal cases 16. In many whistleblowing claims, causation is the critical issue. It is now clear that the causation test for detriment claims (under section 47B of ERA 1996) is different from that for dismissal claims (under section 103A). 17. Section 47B provides that a worker has the right not to be subjected to a detriment on the ground that a protected disclosure has been made. Section 103A is worded differently: it provides that dismissal is unfair if a protected disclosure was the reason or principal reason for the dismissal. 18. It follows from the wording of section 103A that the causation test for dismissal claims is a high one. The Northern Ireland Court of Appeal in McConnell v Bombardier Aerospace/Short Brothers plc (No 2) [2009] IRLR 201, interpreting Northern Irish legislation which uses the phrase reason or principal reason, confirmed that there can only be one principal reason for dismissal. Higgins LJ said: It was submitted by counsel on behalf of the appellants that there could be more than one principal reason of dismissal. I do not think that is so. The word principal means primary and there is only ever one primary reason, all others are subordinate. That this was the intention of the legislature is evident from the words in parenthesis. It is clear that the principal reason in this case was redundancy. The appellants allege selection for redundancy by reason of their other activities. Even if that were so the principal reason for dismissal was redundancy. 19. In Fecitt v NHS Manchester [2012] ICR 372, the EAT and Court of Appeal held that the section 103A test did not apply to section 47B claims. Elias LJ (with whom Davis and Mummery LJJ agreed) explained that section 47B will be infringed if the protected disclosure materially influences (in the sense of being more than a trivial influence) the employer s treatment of the whistleblower (emphasis added). 20. The Court of Appeal recognised that this creates an anomaly as between the two types of claim. It also raises a number of difficult questions. Can a claimant legitimately dress up a dismissal claim as a detriment claim, for example by claiming that a decision to initiate disciplinary action (a detriment) caused the financial losses which resulted from his subsequent loss of employment? Or should tribunals draw a Johnson v Unisys [2001] ICR 480 style exclusion zone around the dismissal? On a claim that his contract was terminated for blowing the whistle, a worker who is not an employee (and is therefore outside the unfair dismissal scheme) would claim under section 47B, and not under section 103A; why should he benefit from an easier causation test than an employee whose contract is terminated? C3. Claims by LLP members 21. In Bates Van Winkelhof v Clyde & Co LLP [2012] IRLR 992 the Court of Appeal held that, on the facts of that case, a member of an LLP was not a worker within the meaning of section 230(b) of ERA 1996, so could not pursue a whistleblowing claim. 22. The Court found that the purpose section 4(4) of the Limited Liability Partnerships Act 2000 was to ensure that those who would not have been employees or workers within a partnership under the Partnership Act 1890 would not enjoy such status within an LLP. A partner could not be an employee of a partnership, since each partner would have to be 5

6 employed by herself. Moreover, the concept of employment requires a hierarchical relationship which is inconsistent with a partnership relationship. 23. However, given the widely varying categories of partner within LLPs, it may be that some purely salaried partners could still fall within the definition of worker for the purposes of whistleblowing legislation. 24. The claimant in Bates Van Winkelhof has been granted permission to appeal to the Supreme Court. D. The ERRA 2013 reforms 25. The whistleblowing amendments are set out in sections 17 to 20 of ERRA They will apply to disclosures made from 25 June Each of these four sections is addressed separately below. D1. Protection for job applicants? 26. Whistleblowing protection covers all workers. This term is given a special, extended meaning for the purposes of the whistleblowing regime, which is wider than the general definition contained in section 230 of ERA 1996: see section 43K. But there are boundaries to the extended definition. LLP equity partners lie outside those boundaries (see above), as do job applicants who are yet to enter into employment (see BP PLC v Elstone [2010] ICR 879 at 37 per Langstaff J). 27. Section 20 of ERRA 2013 amends section 43K of ERA These amendments fall into two categories. First, they aim to ensure that all NHS workers are covered by the whistleblowing legislation. Second, section 20(7) of ERRA 2013 inserts a new section 43K(4) into ERA 1996, which gives the Secretary of State the power to amend by order the definition of workers in the whistleblowing provisions, even though the workers in question may not fall within the definition of worker contained in section 230 of ERA By section 43K(5), an order under section 43K(4) may not have the effect of removing a category of individuals from the definition of worker unless the Secretary of State is satisfied that there are no longer any individuals falling within the category. 28. One potential way in which the power to extend the definition of worker may be exercised is in order to bring job applicants within the protection for whistleblowers. When the Enterprise and Regulatory Reform Bill was being debated in Parliament, an amendment to ERA 1996 was proposed which would have secured such protection for job applicants. The background to that proposal was that there have been widespread press reports of workers in the construction industry being blacklisted for (amongst other things) previously raising health and safety concerns. That proposed amendment was withdrawn on the basis that the government will investigate the extent to which such blacklisting is a genuine problem, before deciding whether to use secondary legislation in order to extend whistleblowing protection to job applicants 3. 3 Hansard, 26 February 2013, columns

7 D2. Victimisation by colleagues 29. In Fecitt, as well as ruling on the causation test applicable to detriment claims, the Court of Appeal held that an employer cannot be held vicariously liable for detriments inflicted on an employee by his or her colleagues. The reason for this was that the existing legislation did not make the acts of other employees actionable wrongs -- it imposed personal liability only on the employer -- so that there was no personal liability of employees for which the employer could be vicariously liable (per Elias LJ at 32 to 35). 30. This loophole is closed by section 19 of ERRA 2013, which makes amendments to section 47B(1B) of ERA Under the amended provisions, a worker has the right not to be victimised (a) by another worker of his employer in the course of that other worker s employment or (b) by an agent of his employer with the employer s authority. The employer will be held vicariously liable for such victimisation, unless it took all reasonable steps to prevent it. This mirrors the employer s defence in discrimination law. The worker or agent will be personally liable for such victimisation unless he acts in reliance on a statement by the employer that he would not thereby be in contravention of ERA 1996, and it is reasonable for him to rely on that statement. D3. The new public interest test 31. As stated at the start of this paper, the whistleblowing rules introduced by PIDA did not include any public interest test. Section 17 of ERRA 2013 will introduce such a test for the first time, by amending section 43B(1) of ERA 1996 so that it will now read (new words underlined): (1) In this Part a 'qualifying disclosure' means any disclosure of information which, in the reasonable belief of the worker making the disclosure, is made in the public interest and tends to show one or more of the following-- [criminal offence, breach of legal obligation, etc]. 32. This amendment is plainly designed to remedy the problem identified at the outset of this paper, namely the abuse of whistleblowing legislation by claimants whose disclosures have not been in the public interest, but relate to personal disputes, typically concerning breaches of their own contract of employment (following Parkins v Sodexho). 33. However, there are two striking features of the amendment. First, the public interest is not defined in the statute. Second, there is no requirement that the disclosure is actually in the public interest; all that is required is that the worker has a reasonable belief that the disclosure is in the public interest. The combination of these two features creates some uncertainty as to whether the amendment will significantly reduce the scope for workers to claim that they have made a protected disclosure, and whether it will achieve its intended purpose. The meaning of public interest 34. The range of possible meanings of public interest is very wide. At one end of the spectrum, it may require that disclosure is of demonstrable benefit to the public in general, or to a significant part thereof. At the other end of the spectrum, it might be argued that any exposure of, or attempt to rectify, the categories of wrongdoing set out in section 43B(1) of ERA 1996 is in the public interest. Take the example of breaches of legal obligations (section 43B(1)(b)). On one view, the public interest in the rule of law means that any 7

8 exposure of or attempt to rectify a breach of a legal obligation is in the public interest, even if done for selfish reasons, and even if performance of the legal obligation would deliver direct benefits only to the person making the disclosure. However, such a wide interpretation of the public interest would take the law straight back to Parkins v Sodexho territory. 35. Some assistance may be gleaned from the explanatory notes which accompanied the Enterprise and Regulatory Reform Bill when it was introduced in Parliament, which stated: The amendment made by this clause means that public interest disclosures must in future satisfy a public interest test and excludes those which can be characterised as being of a personal rather public interest. For example, if a worker does not receive the correct amount of holiday pay (which may be a breach of the terms of his contract of employment), this is a matter of personal rather than wider interest. 36. Nonetheless, it should still be possible for employees to show that some complaints about breaches of their own employment contracts are in the public interest. For example, an employee may complain that he has been discriminated against on grounds of his race by his employer. The employer might argue that the complaint does not engage the protection of the whistleblowing legislation, since it is made in the employee s own personal interest, and not in the public interest. The employee will probably be able to defeat such an argument by relying on the public interest in combatting racial discrimination. He may also argue that his disclosure is of benefit to others, since it will serve as a challenge to a prevailing culture of discrimination in his workplace. Even if the employer is able to establish that the disclosure was made in part in the employee s own personal interest, that is unlikely to defeat the claim, since the legislation does not require that the disclosure is made solely in the public interest. Similarly, if a worker complains that the workplace is endangering his health and safety, his complaint is probably in the public interest if the subject matter of his complaint also presents a threat to the health and safety of others. 37. There is support in Hansard for this view. The opposition tabled an amendment which was rejected at the Commons Committee stage, which would have excluded from protection disclosures about breaches of a private contractual obligation which is owed solely to the person making the disclosure. The Under-Secretary of State for the Department of Business, Innovation and Skills stated that the amendment was not acceptable since it was not the intention of the government to close off complaints about breach of the claimant s own contract if they are made in the public interest: Indeed, although our aim is to prevent the opportunistic use of breaches of an individual s contract that are of a personal nature, there are also likely to be instances where a worker should be able to rely on breaches of his own contract where those engage wider public interest issues There will inevitably be a period of uncertainty about the meaning of the public interest, and a body of case law which interprets the phrase. There is particular uncertainty over the precise circumstances in which a complaint about the complainant s personal situation is nonetheless made in the public interest. The reasonable belief test 39. There is already considerable judicial guidance on the meaning of reasonable belief in section 43B, since that phrase already qualifies the question of whether the information disclosed tends to show one of the relevant categories of wrongdoing. 4 Hansard, 3 July 2012, column

9 40. The leading case is Babula (see above). The Court of Appeal held that the reasonable belief test involves both a subjective question about the worker s actual belief and an objective element in determining whether that belief could reasonably be held (per Wall LJ at 82). The worker may hold a reasonable belief, even if it turns out to be wrong ( 41 and 75). What is reasonable will depend on all the circumstances, assessed from the perspective of the worker at the time of the disclosure, not with the benefit of hindsight ( 41). The burden of proof is on the worker to establish the requisite reasonable belief ( 74). Conclusion on the new public interest test 41. The new public interest test presents a relatively modest hurdle for claimants, since the worker need demonstrate only that he reasonably believed that his disclosure was in the public interest, and not that it was in fact in the public interest. It remains to be seen how broadly or narrowly the tribunals interpret the concept of the public interest. If they adopt a broad interpretation then the new test may have little practical impact in filtering out complaints by those who abuse the whistleblowing provisions for the purposes of personal gain. D4. The removal of the requirement for good faith 42. Section 18 of ERRA 2013 removes the requirement (in sections 43C(1), 43E(b), 43F(1)(a), 43G(1)(a) and 43H(1)(a) of ERA 1996) that protected disclosures be made in good faith. The removal of this requirement is off-set by new powers for tribunals to reduce compensation by up to 25%, where a disclosure is not made in good faith (section 18(4), (5) of ERRA 2013, inserting subsections 123(6A) and 49(6A) in ERA 1996). 43. At first blush, these reforms are curious. It seems odd that a claimant who has made disclosures in bad faith should be able to pursue a whistleblowing claim, and suffer no more than a modest reduction in compensation. 44. However, these changes can be explained by reference to the probable purpose of the whistleblowing legislation. The fundamental aim of this legislation is, it seems, to encourage exposure of wrongdoing. This aim is not undermined, and is in fact served, where exposure is achieved through whistleblowers acting for purely selfish reasons, and therefore not in good faith, in the Street v Derbyshire sense of that phrase. The focus of the legislation has shifted away from the messenger and onto the message; it has shifted away from the whistleblower s motivation, and onto the issue of whether a belief that the disclosure was in the public interest could reasonably be held. 45. Cases where an employee has acted in bad faith but nonetheless passes the public interest test may be relatively rare in practice, but they are conceivable. For example, a banker may recognise that there is a public interest in his disclosure about mis-selling, but his reason for making the disclosure may be malicious, in order to blackmail his manager. Furthermore, his attempt at blackmail may goad his employer into retaliation. It seems wrong that he should be compensated at all for this retaliation. 46. In such circumstances, common sense may be served by applying the EAT s decision in Martin v Devonshires Solicitors [2011] ICR 352, a victimisation decision on causation. In Martin, Underhill J held that there could in principle be cases where an employer has dismissed an employee (or subjected him or her to some other detriment) in response to the doing of a protected act, but where the employer could say that the reason for the dismissal 9

10 was not the complaint as such but some feature of it which could properly be treated as separable -- such as the manner in which the complaint was made. In the example described above, the employer could argue that the retaliation resulted not from the protected disclosure as such, but from the attempt to blackmail. The employee who makes a disclosure in bad faith may therefore find that, although his disclosure was protected, he has no claim, since he fails on causation. Patrick Halliday May

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