Whistleblowing – Goodbye "in good faith", Hello "in the public interest" – and wider issues

21 June 2013

Stephen Musgrave, Alice Dunn

Introduction

The UK has been a leader in whistleblower protection in Europe since the introduction of the Public Interest Disclosure Act in 1998, which was designed to protect workers who exposed wrongdoing within their organisations from detriment or dismissal. Recent cases such as Fecitt and high-profile whistleblower Gary Walker, as well as public scandals around phone hacking, the Mid-Staffordshire NHS trust and energy price-fixing, have led to much public debate about the adequacy of protection provided by the current legislation. In addition, the widening of the definition of "qualifying disclosure", following the Parkins case in 2002, to include disclosures relating to breaches of a personal contract of employment, has led to the law being used for personal gain by some employees and workers in a way which is not in the spirit of the legislation, and this has prompted calls for reform.

In response to these perceived flaws, the government has introduced changes to the law through the Enterprise and Regulatory Reform Act (ERRA), with effect from 25 June 2013. The requirement that disclosures be made in "good faith" is removed. Instead they must be made "in the public interest" to qualify for protection. There is a new provision for employers to be held vicariously liable for detriment to whistleblowers caused by their employees and a new, broader definition of the "workers" who benefit from the protection.

Key changes

1. Public interest

s.17 ERRA 2013 adds a new requirement for "qualifying disclosures" in s.43B ERA 1996. Those claiming protection must now be able to show that the disclosure was made in the reasonable belief that it was "in the public interest".

Under the previous law, there was no requirement that a whistleblowing disclosure be "in the public interest" to qualify for protection. Indeed, since the EAT in Parkins v Sodexho (2002) held that the definition of a qualifying disclosure included the disclosure of information about the breach of "any legal obligation", any worker could bring a claim based on a breach of their own contract of employment. This led to claims based on disclosures made purely for personal gain, for example, in relation to bonus payments, and not issues of genuine public interest. It was also used by opportunistic employees without the requisite length of service for an ordinary unfair dismissal claim to take action against their employers, potentially for uncapped compensation. In a 2011 speech to parliament, Vince Cable referred to this situation as a "loophole" which needed to be closed and "not what the legislation is designed to achieve".

The requirement for disclosures to be made "in the public interest", however, may not altogether rule out disclosures made in relation to breaches of a personal contract of employment qualifying under s.43 ERA. During the parliamentary debate of ERRA , it was noted that disclosures in relation to contracts of employment may still be protected where "the breach in itself might have wider public interest implications". This is much narrower in scope than breaches of individual contracts of employment but still leaves room for litigation on the point.

Tribunals may turn to guidance on the Freedom of Information Act 2000, which also includes a "public interest" test. The Information Commissioner's Office's (ICO) guidance to public authorities on how to assess "public interest" when dealing with requests under the Freedom of Information Act states that it should be taken to mean "public good" or "something which serves the interests of the public". Disclosures in the "public interest" would include those which highlight misconduct, wrongdoing or risks to the public, promote openness or transparency, or promote freedom of expression. The scope of "public interest" is, therefore, potentially very broad.

It is clear, however, that "public interest" is not the same as "what the public is interested in". This point is made in the ICO guidance as well as in several cases concerning the balance between the rights to privacy and freedom of expression. Jameel v Wall Street Journal Europe (2006) was a defamation claim brought by a Saudi Arabian businessman about an article published in the Wall Street Journal, which said that Saudi Arabian authorities had been monitoring the bank accounts of several Saudi businessmen, of which the Claimant was named as one, in order to prevent them from being used for funneling terrorist funds. The House of Lords held that where the subject of media reports was in the public interest and had been published responsibly, it should not attract damages for libel. In his judgment, Lord Bingham said that "what engages the interest of the public may not be material to what engages the public interest." It is likely that a similar approach will be adopted in the context of whistleblowing claims.

Moreover, the only requirement will be that the Claimant had a "reasonable belief" that the disclosure was made in the public interest. This means that the Tribunal will only need to decide whether the Claimant thought at the time of the disclosure that making the disclosure was in the "public interest", not whether it was in fact in the "public interest" for the disclosure to be made. Furthermore, and in contrast to the public interest defence in the new Defamation Act 2013, there is no requirement that the disclosure is about a matter of public interest. Under the Defamation Act 2013, the maker of a defamatory statement (i.e. a published statement causing serious harm to the reputation of the subject of the statement) has a defence if he can show that the statement was made in the reasonable belief that it was in the public interest and also that the statement was in fact on a matter of public interest. The "public interest" requirement for whistleblowing claimants is therefore less onerous than it first seems. There is no need to show that the disclosure was on a matter of "public interest", although it will still need to fall within the categories for a disclosure in s.43B (1) ERA. It is only the Claimant's belief in the "public interest" in making the disclosure which needs to be proved.

2. Good faith

s.18 ERRA 2013 removes the requirement that disclosures are made in "good faith" to gain protection but gives employment tribunals the power to reduce compensation by up to 25% where a disclosure is not made in good faith. So while whether a disclosure was made in "good faith" has no bearing on liability, it will still be relevant to the size of award.

In the context of the current whistleblowing legislation, "good faith" could be described as "acting with a predominantly honest motive". In Street v Derbyshire Unemployed Workers' Centre (2004), a case involving a worker who was dismissed after making a series of allegations about her manager but who lost her whistleblowing claim at an employment tribunal on the grounds that her disclosure was not made in "good faith", Wall LJ said that a claimant would not be acting in good faith where "his or her predominant motivation for disclosing information was not directed to remedying the wrongs identified in [the whistleblowing legislation] but was an ulterior motive unrelated to the statutory objectives". The Court of Appeal held that the Claimant's dominant motive in acting had been her personal antagonism towards her line manager and so she was not acting in "good faith".

Whilst the new "public interest" requirement may be seen to present an obstacle to whistleblowers making claims, the removal of the requirement for "good faith" may help to balance this out. This is in line with arguments made by Dame Janet Smith in her 2004 report on the Shipman Inquiry that the requirement of "good faith" should be omitted in favour of a "public interest" requirement so as to move the focus of the legislation to "the message rather than the messenger", on the basis that a disclosure which is in the public interest should not be unprotected solely because it is made in bad faith.

This change has been welcomed by interest group Public Concern at Work (PCAW), which, in its briefing to parliament during the reading of ERRA, identified "good faith" as a basis on which employers attempted to discourage employees from making claims under s.43 ERA. It will be interesting to see whether the removal of the "good faith" requirement leads to a significant increase in the number of claims.

3. Vicarious liability for detriment

s.19 ERRA introduces a new provision making personally liable for their actions workers who, in the course of their employment, subject whistleblowers to detriment. It also makes the employers of workers liable for any such detriment caused by their workers. This "vicarious liability" means that where a worker subjects another worker to detriment, for example harassment or bullying, as a result of them having made a protected disclosure, the employer of that worker will be treated as though it had caused the detriment itself. An employer will have a defence under s.47B (1D) ERA if it is able to show that it took reasonable steps to prevent the worker from causing such detriment. Similarly, the worker who has caused the detriment will have a defence under s.47B (1E) if able to show that the acts were done in reasonable reliance on a statement made by their employer that in doing it they would not be contravening whistleblowing legislation.

In the recent Court of Appeal case of Fecitt & Ors v NHS Manchester (2011), three employees who had raised (legitimate) concerns to their employer about the qualifications of another colleague were subjected to harassment and bullying from co-workers as a result of their disclosure. This harassment included sending anonymous letters, a telephone call threatening to burn down one of the Claimants' houses, the removal of one of the Claimants' management functions at work and redeployment of another to a different centre. The Claimants lost their whistleblowing claim at the Court of Appeal where it was held that they were not entitled to a remedy against their employer because there was no provision under s.47B ERA for vicarious liability of employers.

The introduction of vicarious liability under ERRA should close this loophole in the legislation. Arguably, however, an employer will still be able to evade vicarious liability by arguing that in causing detriment the workers were acting outside the course of their employment. However, we do not think that this will be an easy defence to prove. In the 2012 cases of Richard Weddall v Barchester Healthcare Limited and Wallbank v Wallbank Fox Designs Limited, the Court of Appeal reviewed a number of key authorities on vicarious liability and what amounted to "in the course of employment". Pill LJ concluded that "a broad view of the nature of an employment and what is reasonably incidental to the employee's duties under it" should be taken when considering what is done in the course of employment. In these cases, the Court of Appeal held that an employer could be held vicariously liable for physical violence inflicted by one employee upon another, where that employee's actions were closely linked to their employment. This is at odds with the narrower approach taken to vicarious liability in other areas of law such as discrimination. It remains to be seen how the courts will interpret the new provision.

4. New definition of worker

s.20 ERRA broadens the definition of "worker" in s.43 ERA, expanding the category of employees protected by the legislation. The main effect of this change will be to extend protection to contractors working in the NHS. Under s.20(7), the Secretary of State also has the power to add further categories of "worker".
The recent case of Clyde & Co LLP v Bates Van Winkelhof (2012), in which a partner at a law firm was dismissed after raising concerns about financial irregularities in one of her firm's offices, has confirmed that partners of law firms are not included in the broad definition of "worker" in s.43K ERA and therefore are not protected under whistleblowing legislation. The amendment to the definition of "worker" brought in by ERRA does not bring members of partnerships within the scope of the whistleblowing laws, but the Secretary of State could use his powers under s.20(7) to change this. Moreover, leave to appeal to the Supreme Court on the "worker" status of a partner has been granted in the Clyde & Co LLP case, so it is possible that there will be a change in this area in the near future.

5. Other issues

The recent case of NHS whistleblower Gary Walker raised the issue of the relationship between confidentiality clauses used in settlement agreements and whistleblower protection. Walker was formerly chief executive of United Lincolnshire Hospitals NHS Trust, and claimed he had been dismissed for raising concerns that pressure to meet Government targets was putting patient safety at risk. On termination of his employment, Mr Walker signed a compromise agreement containing a confidentiality clause (commonly referred to in the media as a "gagging clause") which prevented him from disclosing the details of the circumstances of his departure. Mr Walker publically claimed that he had been "gagged" by his former employer from repeating his safety concerns.

Such clauses are widely used in compromise agreements, but do not affect a worker's right to make a protected disclosure. S.43J ERA expressly states that any provision in an agreement between a worker and his employer will be void to the extent that it tries to prevent a worker from making a protected disclosure. In addition, it has been confirmed by the EAT in Onwango v Berkeley (t/a Berkeley Solicitors) (2013) that an employee who makes a protected disclosure after their employment has terminated will still be protected by the legislation. Employers should be aware that "gagging clauses" included in compromise agreements will not prevent a former employee from making protected disclosures, but can continue to be properly used to preserve confidentiality.

Conclusion

The introduction of a public interest test to whistleblowing law will be welcomed by many who saw the wide protection, following Parkins, as allowing claims which were beyond the intended scope of the legislation. Whilst groups such as PCAW may argue that the "public interest" requirement is an unfair deterrent to whistleblowers considering making claims against their employers, employers will hope that the change in legislation will stop s.43 ERA being used as a tool by opportunistic employees to bring claims for uncapped compensation. It remains to be seen whether the new "public interest" requirement, combined with the removal of the "good faith" requirement, will have an effect on the number of whistleblowing claims brought each year to employment tribunals and it is of course as yet unknown how high the bar of the requirement for "public interest" will be set. It may be that Tribunals adopt the wide definition of "something which serves the interests of the public" given by the ICO, or it may be that the Claimant will only need to prove their "reasonable belief" that making the disclosure was in the public interest. Either way, this area of the law will continue to develop, and all employers will need to ensure that they have adequate policies and procedures in place for their workers.

References

Fecitt & Ors v NHS Manchester [2011] EWCA Civ 1190
http://www.bailii.org/ew/cases/EWCA/Civ/2011/1190.html

Parkins v Sodexho [2002] IRLR 109
http://www.bailii.org/uk/cases/UKEAT/2001/1239_00_2206.html

Jameel v Wall Street Journal Europe (2006) UKHL 44
http://www.bailii.org/uk/cases/UKHL/2006/44.html

Street v Derbyshire Unemployed Workers' Centre (2004) EWCA Civ 964
http://www.bailii.org/ew/cases/EWCA/Civ/2004/964.html

Clyde & Co LLP v Bates Van Winkelhof [2012] EWCA Civ 1207
http://www.bailii.org/ew/cases/EWCA/Civ/2012/1207.html

Richard Weddall v Barchester Healthcare Limited [2012] EWCA Civ 25; Wallbank v Wallbank Fox Designs Limited [2012] EWCA Civ 25
http://www.bailii.org/ew/cases/EWCA/Civ/2012/25.html

Onwango v Berkeley (t/a Berkeley Solicitors) (2013) UKEAT/0407/12
http://www.bailii.org/uk/cases/UKEAT/2013/0407_12_2501.html

Vince Cable MP, Department for Business Innovation and Skills, Oral Statement to Parliament Reforming Employment Relations, 23 November 2011
https://www.gov.uk/government/speeches/reforming-employment-relations

Hansard, 3 July 2012, Enterprise and Regulatory Reform Bill
http://www.publications.parliament.uk/pa/cm201213/cmpublic/enterprise/120703/pm/120703s01.htm

Dame Janet Smith, Fifth Report on the Shipman Inquiry, paragraph 11.108 http://www.archive2.official-documents.co.uk/document/cm63/6394/pdf/s511.pdf

Public Concern at Work, Briefing Notes on Whistleblowing Amendments Laid as part of the Enterprise and Regulatory Reform Bill, Clause 15, December 2012
http://www.pcaw.org.uk/files/PCaWBriefingCommitteeStageHouseofLords10.12.12.pdf

ICO Guidance: The Duty of Confidence and the Public Interest http://www.ico.org.uk/upload/documents/library/freedom_of_information/detailed_specialist_guides/sec41_confidence_public_interest_test_v1.pdf

ICO Guidance: Freedom of Information Act, Awareness Guidance No.3 – The Public Interest Test http://www.ico.org.uk/upload/documents/library/freedom_of_information/detailed_specialist_guides/awareness_guidance_3_public_interest_test.pdf

ICO Guidance: The public interest test http://www.ico.org.uk/for_organisations/guidance_index/~/media/documents/library/Freedom_of_Information/Detailed_specialist