STRATEGY AND TACTICS IN DEFENDING CITY WHISTLEBLOWING CLAIMS Daniel Oudkerk QC

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1 STRATEGY AND TACTICS IN DEFENDING CITY WHISTLEBLOWING CLAIMS Daniel Oudkerk QC Introduction 1. This talk addresses the essential elements of a whistleblowing claim in the context of the recent cases and considers strategies and tactics for employers and employees in high value claims: (1) Korashi v Abertawe Bro Morgannwg University Local Health Board [2012] IRLR 4 (2) NHS Manchester v Fecitt & Ors [2011] EWCA Civ 1190 (3) Cavendish Munro Professional Risks Management Ltd v Geduld [2010] ICR 325 (4) J Hibbins v Hesters Way Neighbourhood Project [2009] ICR 319, EAT (5) Kuzel v Roche Products Limited [2008] IRLR 530, CA (6) Babula v Waltham Forest College [2007] IRLR 346, CA (7) Bolton School v Evans [2007] IRLR 140, CA (8) Ezsias v North Glamorgan NHS Trust [2007] EWCA Civ 330 (9) Arthur v London Eastern Railway Ltd [2007] IRLR 58, CA

2 The development of PIDA 2. Part IVA of the Employment Rights Act 1996 ( ERA ) was inserted by the Public Interest Disclosure Act 1998 ( PIDA ) which came into force on 2 July During the Parliamentary debates it was described as the most far reaching piece of whistleblowing legislation in the world (Lord Borrie QC). 3. It might be thought that following the introduction in the US of the Sarbanes-Oxley Act 2002 ( SOX ) 2002 Lord Borrie s claim would no-longer hold good. However, by construing PIDA broadly, the courts have developed an increasingly flexible remedy. Indeed a worker s reasonable belief in a breach of a legal obligation under SOX may itself form the basis of a protected disclosure under PIDA. 4. One of the reasons that PIDA has proved so flexible is the purposive starting point when interpreting the provisions. As the Court of Appeal explained in ALM Medical Services Ltd v Bladon [2002] IRLR 807 (at para 2): The self-evident aim of the provisions is to protect employees from unfair treatment (ie victimisation and dismissal) for reasonably raising in a responsible way genuine concerns about wrongdoing in the workplace. 5. In order properly to understand the effect of the recent decisions it is necessary first to consider the statutory framework 6. The scope of PIDA Who may bring a claim? 7. A worker has the right not to be subjected to any detriment by any act, or any deliberate failure to act, by his employer done on the ground that the worker has made a protected disclosure (ERA Section 47B(1)). 8. The first point to note is that PIDA covers almost everyone in the workplace. Section 43K of the ERA extends the standard definition of worker (found in Section 230(3) of the ERA) to include agency workers, homeworkers, freelancers, National Health Service practitioners and trainees. In the context of high value claims an employee of the non-uk part of a global business may well be a worker (for the purposes of PIDA)

3 in the UK part of the business. Thus the extended definition can be a useful tool in establishing jurisdiction. 9. Where the worker is an employee and the detriment complained of is dismissal (including constructive dismissal) the employee cannot bring the claim under Section 47B (by virtue of Section 47B(2)) and the complaint is instead one of unfair dismissal contrary to Section 103A. 10. The root provision is, of course, ERA Section 43B which defines a qualifying protected disclosure. What amounts to a disclosure Section 43B? 11. A disclosure is defined in Section 43B as any disclosure of information relating to one of the statutory categories of relevant failures. Section 43B(1) provides: 43(B)(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) (b) (c) (d) (e) (f) that a criminal offence has been committed, is being committed or is likely to be committed, that a person has failed, is failing or is likely to fail to comply with any legal obligation to which he is subject, that a miscarriage of justice has occurred, is occurring or is likely to occur, that the health or safety of any individual has been, is being or is likely to be endangered, that the environment has been, is being or is likely to be damaged, or that information tending to show any matter falling within any one of the preceding paragraphs has been, or is likely to be deliberately concealed.

4 12. Section 43B(1)(b) is a very broadly drawn provision - see Parkins v Sodexho Ltd [2002] IRLR 109. In practical terms Section 43(1)(b) will often encompass disclosures falling within the other categories 13. Sodexho was recently considered in Cavendish Munro Professional Risks Management Ltd v Geduld [2010] ICR 325. In Cavendish the EAT held that in order to fall within the statutory definition of protected disclosure, there must be a disclosure of information. It considered that there is a distinction between information and an allegation for the purposes of the Act. The ordinary meaning of giving information is conveying facts. For example, communicating information about the state of a hospital would be stating that: The wards have not been cleaned for the past two weeks. Yesterday, sharps were left lying around. However, an allegation about the same subject-matter would be you are not complying with the health and safety requirements. It is respectfully submitted that, even if correct, that nice distinction will often be difficult to draw. 14. It is often forgotten that the person who has failed to comply with the legal obligation need not be the employer - Section 43(1)(b) simply refers to a person (see now J Hibbins v Hesters Way Neighbourhood Project [2009] ICR 319). There may be causation problems where the breach of legal obligation is said to relate to a third party since the employer may argue that it would not victimise or dismiss an employee for disclosing the breach of an obligation on the part of a third party. However, in many cases there will be a link between the third party and the employer for example in cases concerning group companies or where the employee discloses a breach of a legal obligation by a substantial shareholder or a director of both the employer and the third party. The requirement of a reasonable belief on the part of the worker 15. A reasonable belief on the part of the worker is an essential element of a qualifying disclosure (Section 43B). 16. The test is a subjective one and provided the worker s belief is reasonable a disclosure may qualify as a protected disclosure even if it subsequently transpires that the information was untrue. In Darnton v University of Surrey [2003] IRLR 133 the EAT held (at paragraph 29): the determination of the factual accuracy of the disclosure by the tribunal will, in many cases, be an important tool in determining whether the worker held the reasonable belief that the disclosure tended to show a relevant

5 failure. Thus if an employment tribunal finds that an employee s factual allegation of something he claims to have seen himself is false, that will be highly relevant to the question of the worker s reasonable belief. It is extremely difficult to see how a worker can reasonably believe that an allegation tends to show that there has been a relevant failure if he knew or believed that the factual basis was false, unless there may somehow have been an honest mistake on his part. The relevance and extent of the employment tribunal s enquiry into the factual accuracy of the disclosure will, therefore, necessarily depend on the circumstances of each case. In many cases, it will be an important tool to decide whether the worker held the reasonable belief that is required by s.43b(1). 17. In Kraus v Penna plc [2004] IRLR 260 the EAT held that an employee not could have a reasonable belief in a legal obligation if the employer was under no legal obligation as a matter of law. As I noted in previous drafts of this talk Kraus was unsatisfactory and unlikely to be followed. It was explained by the EAT in Bolton School v Evans [2006] IRLR 500 per Elias P at paras and the Court of Appeal have now confirmed that Kraus was wrongly decided. The law is now stated in Babula v Waltham Forest College [2007] IRLR 346, per Wall LJ at paras 79-80: It is also, I think, significant that s.43b(1) uses the phrase 'tends to show' not 'shows'. There is, in short, nothing in s.43b(1) which requires the whistleblower to be right. At its highest in relation to s.43b(1)(a) he must have a reasonable belief that the information in his possession 'tends to show' that a criminal offence has been committed: at its lowest he must have a reasonable belief that the information in his possession tends to show that a criminal offence is likely to be committed. The fact that he may be wrong is not relevant, provided his belief is reasonable, and the disclosure to his employer made in good faith (s.43c(1)(a)). 80. The purpose of the statute, as I read it, is to encourage responsible whistleblowing. To expect employees on the factory floor or in shops and offices to have a detailed knowledge of the criminal law sufficient to enable them to determine whether or not particular facts which they reasonably believe to be true are capable, as a matter of law, of constituting a particular criminal offence seems to me both unrealistic and to work against the policy of the statute. The requirement of good faith 19. Section 43F of the ERA provides: (1) A qualifying disclosure is made in accordance with this section if the worker

6 (a) makes the disclosure in good faith to a person prescribed by an order made by the Secretary of State for the purposes of this section, and (b) reasonably believes (i) that the relevant failure falls within any description of matters in respect of which that person is so prescribed, and (ii) that the information disclosed, and any allegation contained in it, are substantially true. [emphasis added] 20. In addition to the requirement of a reasonable belief by the disclosure must also be made in good faith (Section 43C). In Street v Derbyshire Unemployed Workers Centre [2004] IRLR the CA held (per Auld LJ at paragraph 56): it seems more in keeping with the declared public interest purpose of this legislation, fair and a more useful guide to employment tribunals in conducting this sometimes difficult, sometimes straightforward, exercise depending on the facts- to hold that they should only find that a disclosure was not made in good faith when they are of the view that the dominant or predominant purpose of making it was for some ulterior movie not that purpose. (and per Wall LJ at paragraph 73) it seems to me that tribunals must be free, when examining an applicant s motivation, to conclude on a given set of facts that he or she had mixed motives, and was not acting in good faith. If that it correct, how is it to be done? I can see no more satisfactory way of reaching such a conclusion than by finding that the applicant was not acting in good faith because his or her predominant motivation for disclosing information was not directed to remedying the wrongs identified in s.43b, but was an ulterior motive unrelated to the statutory objectives In Bachnak v Emerging Markets Partnership (Europe) Ltd (UKEAT/0288/05/RN) HHJ Peter Clark held (at [24]) that where, as on the facts of that case, the employee s predominant purpose is his or her own personal interest, the disclosure will not be made in good faith within the meaning of section 43C(1) of the ERA. And see recently, Korashi v Abertawe Bro Morgannwg University Local Health Board [2012] IRLR 4

7 The protection is limited to the disclosure itself and does not extend to steps taken to establish a reasonable belief 21. In Bolton School the EAT held that the ET had erred in deciding that the claimant had been given a disciplinary warning because he had made a protected disclosure and not, as the employers contended, because he had committed an act of gross misconduct by hacking into a computer system. The EAT held (paras 65-68): An employee cannot be entitled to break into his employer's filing cabinet in the hope of finding papers which will demonstrate some relevant wrongdoing which he can then disclose to the appropriate person. He is liable to be disciplined for such conduct, and that is so whether he turns up such papers or not. Provided that his misconduct is genuinely the reason for the disciplinary action, the employee will not be protected even if he does in fact discover incriminating papers. Success does not retrospectively provide a cloak of immunity for his actions, although he will then of course be protected with respect to the subsequent disclosure of the information itself. We think there are two quite separate issues here. First, the conduct designed to demonstrate that the belief was reasonable and, second, the disclosure of the information itself which tended to show a breach of the relevant legal obligation. Putting it simply, it seems to us that the law protects the disclosure of information which the employee reasonably believes tends to demonstrate the kind of wrongdoing, or anticipated wrongdoing, which is covered by s.43b. It does not protect the actions of the employee which are directed to establishing or confirming the reasonableness of that belief. The protection is for the whistleblower who reasonably believes, to put it colloquially if inaccurately, that something is wrong, not the investigator who seeks either to establish that it is wrong or to show that his concerns are reasonable. 22. Whilst the EAT expressly declined to treat this as a question of causation the effect is the same. As the Court of Appeal held, upholding the decision of the EAT, per Buxton LJ (at para 18): But even assuming, contrary to what he has said in paragraph 17, that Mr Evans's whole course of conduct should be regarded as a continuing act of disclosure, the employer's reason for the warning, as found by the ET, was its belief that Mr Evans had at the same time committed an act of misconduct. That was, in the terms of

8 s.103a, the reason (or, if more than one, the principal reason) for what turned into a constructive dismissal. While I agree that the tribunal should look with care at arguments that say that the dismissal was because of acts related to the disclosure rather than because of the disclosure itself, in this case there is no reason to attribute ulterior motives to the employer. Causation the real battleground 23. In most whistleblowing claims the real battleground will usually be causation for two principal reasons: (1) first, even in the weakest of cases it will often be possible for a claimant to establish that he has made a protected disclosure; (2) secondly, in a high profile case a respondent may well seek to limit the extent to which the facts and matters surrounding the disclosure itself are subject to public scrutiny in the tribunal. The respondent may therefore make admissions which are designed to limit the scope of the tribunal s factual enquiry into the disclosures themselves and to focus its fire on causation. 24. The classic example of a bolt-on whistleblowing claim is the employee who is disciplined for a regulatory breach who defends himself by asserting ( disclosing ) that other employees are in breach of the regulations. If the employee is subsequently dismissed he will inevitably claim that he has been dismissed not because of his own misconduct but as a result of his disclosure. Section 47B requires that the detriment is on the ground that the worker has made a protected disclosure and thus the answer to many (but not all) of these claims is likely be that the disclosure was not causative of the dismissal or detriment complained of. 25. In Aspinal v Mechforge Ltd the EAT held that words on the ground that mean that the employee must be able to prove a causal nexus between the fact of making a protected disclosure and the decision of the employer to subject him to the detriment. The EAT adopted the approach of the House of Lords in Chief Constable of West Yorkshire Police v Khan [2001] ICR 1065 (a claim under the RRA). The EAT held (at paragraph 14): For there to be a detriment under section 47B on the ground that the worker has made a protected disclosure the protected disclosure has to

9 be causative in the sense of being the real reason, the core reason, the causa causans, the motive for the treatment complained off, to borrow the words of Lord Scott in the Race Relations case Chief Constable of West Yorkshire Police v Khan [2002] ICR 1065 at Similarly if the detriment is (as was suggested in this case) dismissal, the making of the protected disclosure has to be the reason or principal reason for dismissal. In this case not only was there no dismissal but the steps which the employer took were not because of any protected disclosure It was solely because of the perceived breach of the confidentiality of M s manufacturing process. 26. See also London Borough of Harrow v Knight [2003] IRLR 140, EAT and Bolton School (above). 27. There can only be one principal reason for dismissal, as was held by the Northern Ireland Court of Appeal in McConnell v Bombardier Aerospace/Short Brothers plc (No 2) [2009] IRLR 201. Higgins LJ stated at [8]: 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 In order to succeed in a claim that he was unfairly dismissal on whistleblowing grounds, the claimant must show that the one principal reason for his dismissal was the fact that he had made protected disclosures. 29. As the Court of Appeal has recently made clear in NHS Manchester v Fecitt & Ors [2011] EWCA Civ 1190 an employer faced with a dysfunctional situation does not have his hands tied even if the employee can show that he has made a protected disclosure. There - unlike the instant case - the employees were subjected to the significant detriment of being re-deployed through no fault of their own when they were harassed as a result of making protected disclosures. The Court of Appeal dismissed their whistleblowing claims (at para 56): The consequence of [the employee s] submission, however, is that there could be no explanation which the employer could offer in these circumstances which would relieve him from liability. The need to resolve a difficult and dysfunctional situation could never provide a lawful explanation for imposing detrimental treatment on an innocent whistleblower. I do not think that can possibly be right. It cannot be the case that the

10 employer is necessarily obliged to ensure that the whistleblowers are not adversely treated in such a situation. This would mean that the reason why the employer acted as he did must be deemed to be the protected disclosure even where the Tribunal is wholly satisfied on the facts that it was not. What if the detriment is post-termination? 30. The Court of Appeal has held that Section 47B does apply to post-termination detriment Woodward v Abbey National plc [2006] IRLR 677. Thus a failure to provide a reference to a former employee on the grounds that she blew the whistle during the course of her employment may found a claim. Per Ward LJ (at para 68): It simply makes no sense at all to protect the current employee but not the former employee, especially since the frequent response of the embittered exposed employer may well be dismissal and a determination to make life impossible for the nasty little sneak for as long thereafter as he can. If it is in the public interest to blow the whistle, and the Act shows that it is, then he who blows the whistle should be protected when he becomes victimised for doing so, whenever the retribution is exacted 31. The Court of Appeal expressly left open the question of whether or not a claim could be brought in circumstances where the protected disclosure was made after the employment had come to an end (at para 67): In striving to avert the affirmative answer, the respondent points out that the rights not to suffer detriment conferred by Part V manifestly relate to the retaliatory action by the employer being taken because of something done in the course of the employment, for example attending for jury service, taking maternity leave etc That may be a good argument for saying that the action of the employee which provokes the retaliation must be some activity during the currency of the employment but it does not follow that the retaliation must likewise be so confined. There is no sensible reason for so confining it. (I emphasise 'may be a good argument' because I would not want it to be thought that I am excluding a remedy for blowing the whistle after the contract of employment has terminated: this is an issue which does not arise on the facts of this case.)

11 The burden of proof 32. The burden of proof in whistleblowing cases varies in a rather unsatisfactory way. In practical terms: (1) where the claim is under Section 47B - i.e. a detriment claim the burden of proof is on the claimant subject to Section 48(2) which provides that it is for the employer to show the ground on which any act, or deliberate failure to act, was done; (2) where the claim is under Section 103A but the claimant has less than a year s service the burden of proof is on the claimant to show the true reason for his dismissal; (3) where the claim is under Section 103A and the claimant has at least one year s service the principal burden of proof falls on the respondent (see Kuzel v Roche Products Ltd [2008] IRLR 530, CA). 33. In Kuzel the Court of Appeal held (per Mummery LJ at paras 56-60): I agree that when an employee positively asserts that there was a different and inadmissible reason for his dismissal, he must produce some evidence supporting the positive case, such as making protected disclosures. This does not mean, however, that, in order to succeed in an unfair dismissal claim, the employee has to discharge the burden of proving that the dismissal was for that different reason. It is sufficient for the employee to challenge the evidence produced by the employer to show the reason advanced by him for the dismissal and to produce some evidence of a different reason. Having heard the evidence of both sides relating to the reason for dismissal it will then be for the ET to consider the evidence as a whole and to make findings of primary fact on the basis of direct evidence or by reasonable inferences from primary facts established by the evidence or not contested in the evidence. The ET must then decide what was the reason or principal reason for the dismissal of the claimant on the basis that it was for the employer to show what the reason was. If the employer does not show to the satisfaction of the ET that the reason was what he asserted it was, it is open to the ET to find that the reason was what the employee

12 asserted it was. But it is not correct to say, either as a matter of law or logic, that the ET must find that, if the reason was not that asserted by the employer, then it must have been for the reason asserted by the employee. That may often be the outcome in practice, but it is not necessarily so. As it is a matter of fact, the identification of the reason or principal reason turns on direct evidence and permissible inferences from it. It may be open to the tribunal to find that, on a consideration of all the evidence in the particular case, the true reason for dismissal was not that advanced by either side. In brief, an employer may fail in its case of fair dismissal for an admissible reason, but that does not mean that the employer fails in disputing the case advanced by the employee on the basis of an automatically unfair dismissal on the basis of a different reason. Conclusions 34. The key to the successful disposal of whistleblowing claims often owes more to the litigation strategy than to nice questions of law. The recent high profile case of Evershed v New Star provides a useful illustration of a case which was in practice easier to unpick on the facts than on the law. Whilst a rigorous analysis of the legal structure of any claim is essential many claims will be won by effective crossexamination of the claimant and carefully considered approach to the presentation of the employer s evidence and its explanation for the treatment complained of. DANIEL OUDKERK QC