“Whistleblowers” - new protection for employees who expose corporate malpractice

United Kingdom
'whistleblowers'

Susan Mayne discusses new protection for employees who expose corporate malpractice

The aim of the Public Interest Disclosure Act 1998 is to protect employees who 'blow the whistle' on corporate malpractice. It also suggest steps which employers should consider taking to tighten up their internal practices to minimise instances of corporate misconduct.

Duty of confidentiality

Employees have an implied duty of good faith towards their employer, which includes the duty not to disclose confidential information obtained in the course of their employment. This implied duty is often contractually strengthened by express terms. An employee who breaches his implied or express duty by disclosing such information may be subject to disciplinary proceedings, including dismissal. An employer may also obtain injunctive relief to prevent such disclosure and/or claim damages.

Disclosures in the public interest

An employee who is summarily dismissed for disclosing confidential information may argue that the disclosure was in the 'public interest'. If this argument is successful, he could recover damages for wrongful dismissal. His dismissal may also be held unfair, particularly if the disclosure was made in relation to health and safety or discrimination matters. However, dismissals have often been held to be fair where disclosure related to other matters.

It has traditionally been difficult to define what matters are in the 'public interest'. Clearly, disclosure of illegal acts will qualify but, often, the defence has included the rather vague 'just cause or excuse'. In one case, this defence applied to the disclosure of confidential information about the reliability of a breath-testing machine used by the police. Where no illegality is involved, an employee will have to prove that disclosure was in the public interest. Malicious allegations which are shown to be unfounded could lead to actions for defamation or malicious falsehood. Clearly, without the protection which the Act will provide, an employee has to think long and hard before exposing any malpractice.

The Act

The Act encourages workers to voice their concerns internally by way of a formal procedure. Only after exhausting the internal procedure should they complain to an external body. Whether or not the employee acts reasonably in disclosing information to an external body is judged against the existence of internal procedures available to him to complain to higher management. It is advisable for employers to review their policies and procedures and to adopt a formal internal mechanism through which 'whistleblowers' can register and pursue their concerns. The Consultation Document issued with the Bill encouraged employees to voice (in a responsible way) any concerns they have about any malpractice which threatens the public interest. This may result in an increase in the number of companies adopting formal internal procedures.

The Act offers protection to employees against victimisation provided they voice their concerns in a specified manner. There are 6 ways in which a protected disclosure can be made. This initially involves raising any concerns internally and following an internal whistleblowing procedure if one is available and then only disclosing to specified persons or bodies.

The Act provides protection for an employee who makes a protected disclosure to outside bodies such as a legal adviser, Minister of the Crown or other person on a list prescribed by the Secretary of State. There is also a catch-all clause which covers disclosure in other cases where the worker meets certain conditions (see below). The disclosure should always be made in a specified way. The Act protects employees and most categories of workers excluding the genuinely self-employed and professionals; it does not cover non-executive directors.

Qualifying or 'protected disclosures'

The Act only protects employees who disclose information about a malpractice which involves one or more of the following:


  • crime
  • breach of regulatory, administrative or common law,
  • miscarriage of justice,
  • danger to health and safety,
  • damage to the environment, or
  • information which indicates that any of the above has deliberately been concealed.

An employee who discloses confidential information must always act in good faith. If the employee can demonstrate reasonable grounds for his belief, a disclosure of specified information to his employer will always be protected. However, an employee must comply with stricter conditions in order to make a disclosure to one of the outside bodies (see above). In order to be protected in these cases, the employee must also show that he does not make the disclosure for purposes of personal gain and that he reasonably believes the information disclosed to be substantially true.

Disclosure to other persons or bodies under the catch-all clause (such as the media) will generally only be protected if the disclosure is reasonable and the employee can show reasonable grounds for believing that he would be penalised for raising the matter with his employer or that the evidence would be concealed or destroyed if he made the disclosure to his employer.

Remedies

The Act provides for a series of amendments to the Employment Rights Act 1996 which introduce a new category of automatic unfair dismissal for making a protected disclosure. All workers would be protected by the proposed new law regardless of how long they have worked for their employer.

The minimum compensation payable following dismissal is £16,544 irrespective of the actual loss suffered by the employee, rising to a maximum award of £47,600. This raises the question whether it will encourage 'gold diggers'.

Employees who have been victimised but not dismissed for making a protected disclosure will be entitled to obtain compensation in line with that which can be claimed by health and safety representatives or pension fund trustees who are victimised for carrying out their duties.