Whistleblowing and gagging orders does the law need changing?

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1 Whistleblowing and gagging orders does the law need changing? Following the Mid-Staffordshire Foundation Trust Public Inquiry, the rights of employees and exemployees to go public to expose poor practice in their organisation (or former organisation) has been one of the hot employment law topics at the start of Much of the press focus has been on so-called gagging orders affecting public sector employees, and has tended to ignore (a) the fact that restrictions on ex-employees speaking out often stem from their having voluntarily signed compromise agreements, and (b) the existence of whistleblowing legislation, which offers protection to both employees and (case law has confirmed) ex-employees who disclose information which is in the public interest. The UK has had legislation to protect whistleblowers since There will shortly be some changes to that legislation. In addition, Public Concern at Work, a charity which aims to protect society by encouraging workplace whistleblowing, has now established an independent commission to examine the effectiveness of existing arrangements for workplace whistleblowing, and to make recommendations for change. Steve Vale, HR consultant, surveys the scene. 1. The current law on whistleblowing a brief guide The Public Interest Disclosure Act 1998 was introduced to protect workers from detrimental treatment or victimisation by their employer when, in the public interest, they raise a concern ( blow the whistle ) about a possible risk, wrong-doing or malpractice, either to someone within their organisation, or to a prescribed external regulator. The Act protects workers by stipulating that If an employee is dismissed because he or she has made a protected disclosure (see definition below), then the dismissal will be treated as automatically unfair; and Workers have a right not to be subjected to any detriment or disadvantage by their employer on the ground that they have made a protected disclosure. No qualifying service is required for an employee to bring a claim of unfair dismissal or detriment. The Act protects most workers (not just employees) in the public, private and voluntary sectors. It does not apply to the genuinely self-employed (other than in the NHS), voluntary workers, or workers in the intelligence services. Case law has established that the Act s provisions extend to cover a protected disclosure made by a worker even after employment with the particular employer has ended. In 2006, the Court of Appeal, in Woodward v Abbey National plc, ruled that the legislation covers not only employees but also exemployees. Earlier this year, in the case of Onyago v Berkeley Solicitors the Employment Appeal Tribunal reaffirmed that the legislation did not limit the whistleblower s protection to disclosures made during the relevant employment. In order for a disclosure to be protected, it must meet the definition of qualifying disclosures set out in the Act, i.e. it must be a disclosure of information about one or more of the following:

2 A criminal offence. The breach of a legal obligation, which case law has extended to include a legal obligation that arises from a contract of employment, following the Parkins v Sodexho case in 2002 A miscarriage of justice. A danger to the health and safety of any individual. Damage to the environment. Deliberate concealment of information tending to show any of the above five matters. Currently, a qualifying disclosure will be protected provided that the worker makes it in good faith to the employer or the person who has legal responsibility for the issue. Disclosure may also be made to a person referred to in the 1998 Act as a prescribed person. There are around 50 prescribed persons, most of whom head up regulatory bodies, including the Information Commissioner; HM Revenue & Customs; Environment Agency; Health and Safety Executive (HSE); Financial Services Authority; Pensions Regulator; the director of the Serious Fraud Office; the Charity Commissioners; and the Secretaries of State for Business, Innovation and Skills, and for Transport. As long as the employee or worker has a reasonable belief that the information disclosed is substantially true, it does not actually have to be true in order to trigger protected disclosure status. In addition to protecting disclosures made internally, or to prescribed persons, the Act includes provisions which may protect whistleblowers who disclose information more widely, e.g. to the police, media, MPs and non-prescribed regulators. Such disclosures will be protected if they are made in good faith and not for personal gain (including any payment by the media), are reasonable in all the circumstances, and meet any one of the following three criteria: The disclosure has already been raised internally or with a prescribed person. The whistleblower reasonably believes that he or she would have been victimised had he or she raised the matter internally or with a prescribed regulator. The whistleblower reasonably believes a complaint would lead to the evidence being concealed or destroyed and there was no prescribed person. The Act makes it clear that contractual clauses cannot be used to prevent disclosures or dis-apply the protection offered to workers who make protected disclosures. Confidentiality clauses are unenforceable if they are used to try to stop a protected disclosure. By the same logic, the inclusion in a compromise (or settlement) agreement made on termination to employment of a provision which purports to prevent a protected disclosure by the worker would also be void. The Act inserts Section 43J into the Employment Rights Act 1996, which states that: (1) Any provision in an agreement to which this section applies is void in so far as it purports to preclude the worker from making a protected disclosure. (2) This section applies to any agreement between a worker and his employer (whether a worker's contract or not), including an agreement to refrain from instituting or continuing any proceedings under this Act or any proceedings for breach of contract. This appears to provide that any clause or term in an agreement between a worker and his employer is void insofar as it purports to preclude the worker from making a protected disclosure. The wording implies that such an agreement will be void if it is in an employment contract, in a contract of a worker

3 who is not an employee, or in any other agreement between a worker and employer, including settlement or compromise agreements. However, it appears that it had become common practice in some organisations (including the NHS) to seek to silence potential whistleblowers by inserting gagging clauses in their severance packages. These may have had the effect of preventing staff from speaking out (for example about patient care and safety in the NHS), even though their legal validity was questionable, given the wording in the Act. (The government has recently announced that it has now banned such clauses, which it would appear had been included in the majority of around 600 "compromise agreements" for departing NHS staff in the past three years.) 2. Imminent changes in the law on whistleblowing The current government has expressed disquiet at the unintended reach and effect of the whistleblowing legislation. In particular, the extension of protection to disclosures about breaches of legal obligations that arise from a contract of employment has caused concern (especially as there is no qualifying period required for an employee to claim such protection). The government has attributed the increase in whistleblowing cases (from 157 in 2000 to 1761 in 2009) to this extension of protection. The Enterprise and Regulatory Reform Bill, which will be enacted shortly, therefore includes a number of changes to the whistleblowing regime: 1. In future, only disclosures made "in the public interest" will be protected a provision intended to close the loophole created by the Parkins v Sodexho case, by removing the scope for workers to use the whistleblowing legislation to bring claims relating to their own contracts, even where the disclosure had no obvious public interest element to it. 2. The legal requirement for disclosures to be made in "good faith" in order to be protected will be removed. However, employment tribunals will be able to reduce compensation by up to 25 per cent if a disclosure was not made in good faith. 3. The legislation will be amended so that an employer can be found to be vicariously liable for workers who victimise colleagues for blowing the whistle (but employers will have a defence against this if they can show they took all reasonable steps to prevent the victimisation). Workers may also be personally liable for the victimisation. The definition of workers under the 1998 Act will also be extended to include job applicants, thus preventing the blacklisting of jobseekers who have made protected disclosures against previous employers. 3. Possible further changes - Public Concern at Work consultation With so much publicity (and some confusion) around the gagging order issue, it was timely for the whistleblowing charity, Public Concern at Work (PCaW), to set up a Commission to look at strengthening law and policy in this area. The Commission, which includes lawyers, business representatives, a TUC representative, former whistleblowers and the Dean of St Paul s Cathedral in its membership, has been asked to examine the effectiveness of existing arrangements for workplace whistleblowing and make recommendations for change.

4 The Commission has launched a consultation process which runs from 27 th March 2013 to 21 st June 2013, to gain evidence about: 1. Attitudes to whistleblowing from individuals, organisations and wider society 2. Law and policy - is it adequate and effective? 3. Rewards - should whistleblowing be incentivised? 4. Regulators - should they be doing more? 5. Tribunals - are they protecting whistleblowers and wider society? To this end, it has published a consultation document raising a number of issues, which are summarised below. In the introduction to this document, the Chair of the Commission, the Right Honorable Anthony Hopper (a former Court of Appeal Judge) states that findings of public inquiries often show that workers, who are the eyes and ears of an organisation, are either too scared to speak up or dissuaded from raising concerns because of a sense that nothing will be done. He says that the Commission is seeking to understand the barriers to effective whistleblowing and what changes need to be made to make sure that whistleblowing is seen to be an effective and positive activity while balancing the competing interests of whistleblowers, their fellow workers, employers and society at large. He acknowledges that the pioneering 1998 legislation protecting whistleblowers, which PCaW promoted, has been effective overall, but notes that, as the government has accepted, it is time now to consider the need for reform. If whistleblowing is to be embedded into workplace culture, making it safe to speak up early and with confidence the messages will be heard, there is a need to understand what more can be done by government, employers, regulators and civil society. The consultation document is then divided into 5 sections, details of which are set out below. Section 1: Encouraging whistleblowing within organisations The Commission notes that whistleblowing is increasingly seen as a key component of good governance, and that the public sector has played an important role in this. For example, the Committee on Standards in Public Life has highlighted the role whistleblowing plays both as an instrument of good governance and a manifestation of a more open culture There are a number of measures in place to encourage good practice in this area: Under the UK Corporate Governance Code, listed companies must have whistleblowing policies in place, or explain why they do not. The UK Bribery Act 2010 encourages organisations to have in place adequate procedures as a defence to corporate liability provisions. Whistleblowing or Speak Up policies are recommended in the government guidance accompanying the Bribery Act. The British Standards Institution has produced a Code of Practice on Whistleblowing Arrangements, which was drafted by PCaW and which is endorsed by the National Fraud Authority in their Fighting Fraud Locally guidance. But there is currently no legal requirement for an organisation to have a whistleblowing policy, and many regulators encourage but do not require whistleblowing arrangements. Whilst the number of businesses with whistleblowing policies is increasing, less than half of UK employees are aware of a whistleblowing policy in their workplace.

5 The Commission therefore asks what more can be done to embed good practice whistleblowing arrangements in all sectors of the UK, and has raised the issue of whether it should be mandatory for employers to have specific arrangements in place. Section 2: Rewards for whistleblowers? The Commission points out that, under the current law, a person is protected if making a disclosure to a regulatory body ( prescribed persons identified within the legislation) even if he does so for the purposes of personal gain. However, there is no protection when making a wider public disclosure if it is for personal gain. It says that, at present there is a sense that, for those who blow the whistle to prevent damage and disaster, there are more risks than benefits. Whistleblowing is not often rewarded within business, in appraisal structures, promotion or remuneration processes, or even in mere thanks. (In fact, there are marginal incentives in that both the Office of Fair Trading and the HMRC have discretion to provide rewards for information, but these appear to be applied very rarely). The Commission points out that rewards need not be monetary; there are other ways to recognise those who have acted for the public benefit. Elsewhere, the American system allows for monetary awards, where there has been significant financial loss to the government which is identified and redressed as a result of whistleblowing. The Commission feels that this type of system could have merits, as the provision of a reward for information sends out a strong message and is likely to incentivise those who consider the risks of blowing the whistle too high or those who would not normally be motivated by the public interest. Additionally it particularly rewards those who come forward with public interest information rather than compensates those who can demonstrate they have been victimised or dismissed for making a disclosure. However, it is also concerned that monetary rewards would introduce an element of jackpot justice. An individual could be encouraged to wait until there is concrete evidence of wrongdoing or unacceptable risk before going to the authorities, to increase the chances of a fine or restitution and therefore a reward. This may discourage workers from speaking out early and would not give employers the opportunity to address concerns at an early stage. It notes that the American system relates to financial wrongdoing, but in cases of non-financial wrongdoing it is less clear how rewards can be decided or funded. The upshot is that the Commission merely seeks view on the issue of rewards, their advantages and disadvantages and how they could be funded. Comment: Given its emphasis on settling employment disputes at employer level and keeping them away from the courts wherever possible, it seems unlikely that the present government would want to go down the road of offering financial rewards or incentives. And the problem of how to fund them when public sector employers are involved would be a further likely deterrent to their introduction.

6 Section 3: The Law The Commission is seeking views and information on whether the current Act is working effectively, or whether there are ways in which it can be simplified or improved. It raises a number of questions on specific issues: Expanding the range of wrongdoings which could be the subject of a protected disclosure The Commission asks o Whether the list of wrongdoing which could be the subject of a protected disclosure should be expanded to include misuse and abuse of authority and gross waste or mismanagement of public funds. o Whether there should be a catch-all category whereby any information which it is in the public interest to disclose can be the subject of a protected disclosure. o Whether the changes to legislation proposed by government to (1) protect only disclosures made "in the public interest" whilst (2) removing the good faith test achieve a fair balance between employer and employee interests. Comment: the experiences of local authorities since the new standards regime for elected councillors was introduced, and the volume and nature of the issues which have been raised over the appropriateness of conduct (and the scope for litigiousness), would seem to counsel against including misuse and abuse of authority and gross waste or mismanagement of public funds in the list of wrongdoing which could be the subject of a protected disclosure. Certainly, coming up with clear definitions of or guidance on this type of wrongdoing would be important, otherwise there is a danger of a huge increase in the number of disclosures, some of which might be very trivial in nature. Ensuring that all workers are covered The consultation paper also raises concerns over whether the Act, as currently worded, protects sufficient categories of worker for example, trainees and interns do not appear to be covered, and there are issues affecting the coverage of non-executive directors and partners in limited liability partnerships. It is concerned that there may be issues over whether foster carers should be protected, and whether there may be certain categories of office holders who are currently excluded from protection. There are also concerns that the Civil Service Code and the Official Secrets Act are potentially at odds with the some of the principles of public interest disclosure, and that there is a need for greater clarity in this area, so that the boundary between disclosures which are protected and those which may be regarded as misconduct is clearer. Comment: It seems logical that all types of worker should be covered by the Act, given that any of them could encounter wrongdoing which needs to be revealed. At the same time it also seems inevitable that certain specific work areas or types of work, particularly in the public sector, will always need to be excluded from the Act s coverage, particularly where there may be issues of national security or other similar issues at stake. Workers wrongly identified as whistleblowers The consultation paper notes that a problem has arisen where a worker who has not raised a concern has been dismissed or victimised because it is wrongly believed by the employer that

7 the worker was a whistleblower. The Act does not offer protection in these situations and a worker may not necessarily have the protection of unfair dismissal provisions, which now have a qualifying period of two years. Protection from blacklisting There are serious concerns that a whistleblower will not be able to find new employment, if their previous actions are known. Recent allegations of blacklisting of workers in the construction industry who have raised health and safety issues fuel such concerns. The Commission notes that protection against blacklisting could be extended to whistleblowers by means of adding job applicants to the list of workers covered by the Act and including prospective employers within its provisions, and the government has already included a provision to this effect in the current Enterprise and Regulatory Reform Bill. Simplifying the prescribed person arrangements The Commission is concerned that the provisions of the Act relating to disclosure to a prescribed person are too complex. There is a risk that a worker loses protection if the wrong is prescribed person approached. Some regulatory bodies are prescribed persons but others are not, which can cause confusion. If there is no regulatory body for a particular sector a whistleblower may not know where to go, and may consider raising the concern more widely. But disclosures made to the police would be considered a wider disclosure and therefore require a higher threshold for protection than that required for a disclosure to a regulatory body. The Commission asks whether trade unions, Members of Parliament and parliamentary committees, which are often the recipient of whistleblowing concerns, should be added to the list of prescribed persons. Comment: A simpler potential solution might be a requirement for a worker s statement of particulars of employment to specify how any whistleblowing concern should be routed, in the same way as the route for a grievance is already required to be set out. This could cover any prescribed person /external regulator as well as internal routing arrangements. Protection from detriment and dismissal The Commission notes that there is a slight inconsistency in the protection from (a) detriment and (b) unfair dismissal. The Act implies that detriment will be unlawful if it has any linkage to the worker having made a protected disclosure, whereas dismissal will be unlawful only if the principal reason was the worker having made a protected disclosure. It also notes that interim relief provisions apply only to unfair dismissal claims under the Act and not to detriment claims. It asks whether there should be greater consistency in the way dismissal and detriment are treated. Gagging clauses Whilst the Commission takes the view that the current Act means that a gagging clause in a compromise (or settlement) agreement would be void (effectively unlawful) in so far as it purported to prevent a protected disclosure by a worker in relation to matters which occurred whilst he or she was a worker, it still feels that there is a confusion in this area. It notes that a compromise (or settlement) agreement may legally prevent the former worker from speaking

8 out in other ways e.g. disparagement of the former employer or the revelation of commercially sensitive data. It therefore asks whether more can be done to ensure that potential whistleblowers have complete confidence in the protection afforded by the Act, not withstanding any other agreements they may have reached with their employer. Comment: It is certainly true that there has been a lot of confusion in recent months, but it is not clear that the law itself needs to be changed: a clear statement of the protection which the current Act offers, and clarity that it cannot be circumvented by compromise or settlement agreements, could be sufficient to deal with the situation without re-wording of legislation. Section 4: Regulatory bodies The Commission asks whether there should be clearer rules on how regulatory bodies which are prescribed persons under the Act should handle disclosures made to them, and whether there should be a regime to look into any potential failures or wrongdoings by the regulatory bodies in handling information or disclosures. It asks whether there should be a whistleblowing ombudsman service, and whether this could then be the first port of call for potential whistleblowers, before they are referred on to the appropriate prescribed person. Section 5: Tribunals and procedures Claims under the Act make up less than 1% of all employment tribunal (ET) claims. But the Commission notes that any claims made are usually complex and lengthy. It is concerned that ETs do not always interpret the Act consistently, and asks whether there should be specialist tribunals specifically for whistleblowng cases. It also asks whether referral of claims to the relevant prescribed person by the Employment Tribunal Service should be automatic, rather than, as at present, only when the claimant consents. It is concerned that the current referral system may mean that regulators do not always learn of matters of underlying public concern. Comment: Again, it seems unlikely that the present government, with its anti red tape approach, would be keen to pursue either of these issues. Conclusion The recent controversy around gagging clauses (much of it misinformed) has moved the whistleblowing issue a long way up the political agenda. It means that the PCaW has been able to launch its Whistleblowing Commission with a much higher profile than would otherwise have been the case, and that the focus on all the issues the Commission is raising (not just the gagging clause issues) will be stronger. Against that background, there is a danger that the small number reforms put forward in the Enterprise and Regulatory Reform Bill look piecemeal and ad hoc, failing to tackle some important issues or take a comprehensive approach to the need for reform. The PCaW has sought to characterise the current reforms in this way, regarding them as merely policy on the hoof. It believes that, worse still, the new emphasis on public interest will act as an obstacle to genuine and honest whistleblowers, who will have to meet as yet ill-defined criteria to prove that their concern is in the public interest. On this basis, the PCaW is likely to use the outcomes from the work the Whistleblowing Commission undertakes to argue for a more comprehensive review of the law something that the government may be likely to resist and portray as an attempt to increase so-called red tape affecting employers.

9 Employers may take a more pragmatic approach and argue that, although some of the issues raised in the Commission s consultation paper are potentially important, few appear urgent in the current context. The urgent issues are: removing the scope for workers to use the whistleblowing legislation to bring claims relating to their own contracts, even where the disclosure has no obvious public interest element to it (something which the original legislation did not envisage); and clarifying the position on protected disclosures and compromise/settlement agreements (presumably to the effect that such agreements cannot override the provisions of the Act). The first of these is already in hand, and the second could be resolved by a clear statement from government and/or judiciary on the implications of the current Act more specifically, clause 43J of the Employment Rights Act If these two matters can be dealt with, other issues can be progressed at a more leisurely pace, which will mean that employers do not have to worry about more changes in the immediate future. On the latter point, it is understood that the Government, nervous about the public response to the Mid-Staffordshire Foundation Trust Public Inquiry, may play for time by itself launching a wider consultation on the whistleblowing regime and whether it is fit for purpose. References: Public Concern at Work: Whistleblowing Commission: Whilstleblowing Commission consultation document: Stengthening Law and Policy: - responses to the consultation must be made by 21 st June 2013 Steve Vale is a Consultant in Human Resources and is a regular contributor to Croner-i HR for Local Government. Croner-i HR for Local Government is an on-line employment law and practice reference source designed specifically for HR Managers and their teams in local government.