Whistleblowing update: EAT confirms public interest requirement is a low hurdle

The EAT in Chestertons v Nurmohamed has provided the first appellate guidance on what may reasonably be viewed as being “in the public interest” in the context of a whistleblowing claim. Accordingly “in the public interest” does not necessarily mean that it is of interest to the public at large: it can cover a distinct section of the public, and in this case a group of employees.

The requirement that a protected disclosure should be in the public interest (inserted into s.43B of the Employment Rights Act 1996 by s.17 of the Enterprise and Regulatory Reform Act 2013) was introduced to reverse what was perceived as the unintended and unwelcome effect of the decision in Parkins v Sodexho. The EAT in Parkins said that the whistleblowing legislation was wide enough to cover an allegation concerning a breach of a whistleblower’s own contract of employment, given that a qualifying disclosure could be made in respect of a breach of any legal obligation. The effect of this in practice was often that employees who could see their dismissal on the horizon, or the possibility of a disciplinary sanction or alteration to their terms and conditions or working arrangements, had the opportunity to make “tactical” disclosures, alleging breach of their own employment contracts. They did so in order to use aspects of whistleblowing protection, including uncapped compensation for successful claims and no requirement for a qualifying period of service in order to be able to bring a claim, either to raise the stakes in a subsequent unfair dismissal claim or to deter employers from taking a particular course of action.

In Chestertons, a director of the Mayfair branch of the estate agency complained, in essence, that the costs of the business were being overstated and, as a result, the commission levels for himself and 100 senior managers, all of whom participated in the same commission scheme, were being lowered. He brought a successful claim in the ET for unfair dismissal and detriment suffered as a result of making protected disclosures. Chestertons appealed the decision to the EAT, arguing that the disclosures were not sufficient to meet the public interest requirement as they were made in the context of what was essentially a personal dispute relating to the commission payable under his contract of employment. Accordingly, it was argued, this could not be considered as being in the public interest merely because other employees may also have the same breach of contract claim.

The EAT disagreed and held that the disclosures satisfied the public interest requirement, making the following key points:

1. The public interest requirement was introduced to prevent breaches of individual employment contracts attracting whistleblowing protection only where the breach has no wider public interest implications. There is no blanket rule that disclosures relating to breaches of employment contracts cannot amount to protected disclosures.
2. A disclosure may be in the public interest if it is in the interest of a section of the public, which could include a group of employees. There is no statutory guidance on the meaning of “public interest” – and the EAT specifically stated that it did not consider that assistance was gained by considering what “in the public interest” meant in other areas of law - but, given the specific nature of protected disclosures, it would illogical for this not to apply to a section of the public as opposed to the public as a whole. In this case, the 100 managers amounted to a section of the public. It was also suggested that persons who may have relied on the inaccurate accounting practices of Chestertons would also be a relevant section of the public.
3. The requirement that a whistleblower must have a reasonable belief that a disclosure is in the public interest, does not amount to a requirement that whistleblowers must establish for themselves that the legal test of “public interest” is satisfied. In other words, the employee must show that they actually held the belief (a subjective test) and that it was reasonable to do so (crucially, an objective test).
4. Although the EAT accepted that the director was primarily interested in the effect of the accounting misstatements on his own commission level it found, specifically, that he also had in mind the impact that it would have on the other office managers.

Following this decision, employers should be aware that contractual breaches alleged by workers, in particular where the breach would affect a number of workers, may be sufficient to attract whistleblowing protection.

There is no guidance from the EAT, however, as to how many other workers may be viewed as amounting to a section of the public, save that it accepts that “ a relatively small” group may be sufficient. It described the issue as being necessarily fact-specific. However, it also appeared to accept that a complaint by an employee that an employer is operating a discriminatory policy contrary to the protections afforded to protected characteristics under the Equality Act 2010, irrespective of the number of employees that may be so affected. This is because public policy is directed against discrimination at large within society as a whole.

The decision emphasises that the intent of the legislation is to encourage whistleblowing and as such it would be wrong to place excessive hurdles in the way of employees as that may practically discourage whistleblowing. That said, the case should not be read as a wholesale re-introduction of the pre-Parkins regime by the back door. Take the example of 10 employees all of whom, whether independently or collectively, suggest, whether via a grievance process or otherwise, that the awards that they have received under a discretionary bonus scheme were too low relative to their financial contribution. On the face of it there is a potential breach of a legal obligation – namely the exercise of discretion in the context of the bonus award – but query whether in the absence of suggestions of discriminatory practice it would be reasonable for any of the employees reasonably to believe that such a complaint was in the public interest. The nature of the alleged breach coupled with the numbers affected will be important factors to be weighed by a Tribunal facing such arguments.