As changes to the law on whistleblowing come into effect, lawyer Sarah Hogg, details what companies need to know about handling whistleblowing situations.
The Public Interest Disclosure Act 1998 (PIDA) protects workers who make protected disclosures in the workplace ("whistleblowers”) from being dismissed, selected for redundancy or subjected to a detriment, such as disciplinary action or a loss of work or pay, as a result of making the protected disclosure.
How does this affect the employer?
- Litigation - cases can involve significant management time and legal costs. Such cases are not subject to the qualifying period of employment for unfair dismissal claims, nor the statutory cap on unfair dismissal compensation (the biggest pay-out recorded is £3.8 million)
- Reputational damage - an external disclosure of suspected malpractice, particularly if made to the media, can lead to negative publicity for an employer or organisation
- Impact on your workforce - one successful whistleblowing claim can immediately set a precedent within your company and encourage other employees to follow suit. Losing a case can have a significant impact on your employees’ perception of the company - but settling a case can be equally as damaging.
- It is therefore crucial for employers to keep informed in relation to changes to whistleblowing legislation and update their internal policies accordingly.
The changes
The Enterprise and Regulatory Reform Act 2013 (ERRA) has made a number of significant changes to the law on whistleblowing with effect from 25 June 2013, including:
- Adding a requirement that a disclosure must be "in the public interest”
- Removing the requirement for a disclosure to be made in "good faith”
- Making employers vicariously liable for victimisation of whistleblowers by their employees
Public interest
Prior to the recent amendments there was no specific requirement that a disclosure must be made in the public interest. Following the Parkins v Sodexho case in 2002, workers who blew the whistle (in good faith) about breaches of their own employment contract were protected by the whistleblowing legislation. This case opened the door to the use of tactical disclosures by employees, for example where they had insufficient service to bring an ‘ordinary’ unfair dismissal claim. The government considered this to be a "loophole” which needed closing.
From 25 June 2013 a disclosure will only be a qualifying disclosure if the worker reasonably believes the disclosure is in the "public interest”. Public interest has not been defined in the legislation; however its introduction was ostensibly to reverse the effect of the decision in Parkins v Sodexho, preventing employees from making protected disclosures in relation to breaches of their own employment contracts. This is not to say that an employee may never be able to show that complaining about a breach of their own employment contract is in the public interest, and there is likely to be further litigation on this point.
Good faith
It has been suggested that removal of the "good faith” requirement was intended to counterbalance the extra hurdle for workers introduced by the new public interest test (above), however concerns have been raised that its removal will serve only to open the floodgates further to self-interested and potentially calculated claims.
Good faith is not disappearing completely from whistleblowing legislation however: it is kept as an issue for the remedy stage. Where a whistleblower has been successful in a claim for unfair dismissal or detriment based on a protected disclosure but the Tribunal makes a finding that the disclosure was made in bad faith, it can reduce the compensation award by up to 25%.
Vicarious liability
The ERRA has also introduced vicarious liability for employers for the harassment or victimisation of whistleblowers by their colleagues, as well as personal liability for the individuals (so that they may be joined as parties to a claim and have Tribunal awards made against them personally). The amendment includes a defence for employers that are able to show that they took all reasonable steps to prevent the detrimental treatment of a colleague.
Practical steps to protect your business
- Implement a whistleblowing policy (or revise your existing policy)
- Train line manages with regard to the operation of the policy - make it clear that harassment or victimisation of a whistleblower will lead to disciplinary action
- Investigate disclosures promptly - keep the whistleblower informed as to the progress of the investigation (failure to do so may lead the whistleblower to make an external disclosure)
- Consider implementing a whistleblowing hotline - whistleblowers may feel more comfortable making disclosures where anonymity is assured
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