WHISTLEBLOWING: Legislative changes, possible reforms and case law update. Euan Smith

Transcription

1 WHISTLEBLOWING: Legislative changes, possible reforms and case law update Euan Smith

2 Why is a Whistleblowing Policy Important? PIDA and public policy legislation only intended as a backstop Compliance and internal control Avoiding external disclosures Minimising litigation risk Reputation and staff morale Avoiding criminal liability for bribery Requirement for listed companies

3 Listed Companies Requirement UK Corporate Governance Code requires audit committees to enable staff to raise concerns in confidence about financial improprieties, and to put in place arrangements for investigation and follow-up (C.3.5, 2014 edition) Must maintain a Whistleblowing policy, which is reviewed annually, and report to the shareholders that they have done so Listed companies who do not comply must provide an explanation for their non-compliance

4 The Rise of the Whistleblower 11% of all claims in the UK in the last year included a PIDA claim 1 in 10 claims 8% increase on the previous year A means of circumventing the compensation cap and qualifying period of service requirements Ups the ante from a reputational, complexity and costs perspective

5 Legislative Background Public Interest Disclosure Act 1998 (PIDA) amended the Employment Rights Act 1996 (ERA) to introduce protection for workers who blow the whistle on wrongdoing at work Workers have the right not to be dismissed or suffer any detriment at work as a result of making a protected disclosure

6 Legislative Background Public Interest Disclosure (Prescribed Persons) Order 1999 introduced lists of public sector roles and the jurisdictions in respect of which disclosures can be made to those prescribed persons Latest list is The Public Interest Disclosure (Prescribed Persons) Order 2014

7 Central concept Employees are protected if they make protected disclosures Whether a disclosure is protected depends on: The content of what is disclosed (a qualifying disclosure ) To whom it is disclosed

8 Scope of the protection Employment Rights Act 1996, s47b(1): 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. Employment Rights Act 1996, s103a: An employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed if the reason (or, if more than one, the principal reason) for the dismissal is that the employee made a protected disclosure.

9 When is an Employee Protected? To be protected, the worker must: Make a disclosure of information. Reasonably believe that the information tends to show that one or more of the following had occurred or was likely to occur: A criminal offence. Breach of any legal obligation. A miscarriage of justice. Danger to the health and safety of any individual. Damage to the environment. The deliberate concealment of information about any of the above. Where the disclosure is made on or after 25 June 2013, reasonably believe that the disclosure is "in the public interest". Meet other conditions, which depend on the identity of the person to whom the disclosure is made.

10 When is an Employee Protected? The disclosure must be a disclosure of information: not an allegation (Cavendish Munro Professional Risks Management Ltd v Geduld [2010]); not an expression of opinion (Goode v Marks & Spencer [2009]) not a position statement (Smith v London Metropolitan University [2011])

11 Legislative Changes Changes introduced through the Enterprise and Regulatory Reform Act 2013 on 25 June 2013: A new "public interest" test for qualifying disclosures; The removal of "good faith" from the definition of a protected disclosure; A new power for tribunals to reduce compensation by up to 25% if a protected disclosure has not been made in good faith; Vicarious liability of the employer for detriment caused to a whistleblower by another worker; The Protected Disclosures (Extension of Meaning of Worker) Order 2015 extends protection to student nurses and midwives

12 The new Public Interest test Introduced by the Enterprise and Regulatory Reform Act 2013 for all disclosures made on or after 25 June Disclosures must be made, in the reasonable belief of the worker making the disclosure, in the public interest. Designed to lessen the effect of Parkins v Sodexho [2002] IRLR 109 What is in the public interest?

13 The Removal of Good Faith Before 25 June 2015, a qualifying disclosure had to be made in good faith to be protected Good faith = acting with honest motives A disclosure can be made in good faith even if the information is ultimately discovered to be false The good faith requirement was removed to counterbalance the introduction of the public interest test

14 Reduction in Compensation Introduced by Enterprise and Regulatory Reform Act 2013, s18 Where a whistle blower is found to have suffered detriment or dismissal as a result of their disclosure, the Tribunal may reduce compensation if the disclosure was not made in Good Faith Can reduce compensation by up to 25% The burden of showing bad faith falls on the employer Existing case law regarding what constitutes good faith in whistleblowing situations remains

15 Recent Case Law Who is protected? Keppel Seghers UK Ltd v Hinds [2014] Clyde & Co LLP v Bates van Winkelhof [2014] When does the time limit for bringing a claim start? Flynn v Warrior Square Recoveries Ltd [2014] McKinney v London Borough of Newham [2014]

16 Future Reform? Government launched a call for evidence on the effectiveness of whistleblowing legislation in July 2013 Government response issued in July 2014 No proposals to implement radical reforms to the whistleblowing legislation but call for a "culture change Government will produce guidance on how the legislation works, as well as a model policy

17 Future Reform The Small Business, Enterprise and Employment Bill Currently at HofL committee stage Enables the making of Regulations to require prescribed persons to produce for publication annual reports on disclosures made to that person

18 Future Reform? The Government has committed to: Publish an updated list of prescribed persons on an annual basis Identify and celebrate organisations that embrace whistleblowing Review those groups which, for the moment, fall outwith the scope of Whistleblowing legislation Review the current referral system for referring alleged wrongdoing to the appropriate regulator

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