Employment Contracts

by Kate Russell

The Public Interest Disclosure Act 1998

Legislation seeks to provide protection against penalisation for employees who report wrongdoing. 

The Public Interest Disclosure Act 1998 (PIDA) act provides protection for ‘whistleblowers’ – employees who are dismissed or victimised as a result of making a qualifying disclosure. In addition to employees, it covers trainees, agency staff, contractors, home workers, police officers and every professional in the NHS. The usual employment law restrictions on minimum length of service and age do not apply.

Protected disclosures

This means that the disclosure must, in the reasonable belief of the person making it, show that one of the following conditions applies.

  • A criminal offence has been committed, is being committed or is likely to be committed.
  • A person has failed, is failing or is likely to fail to comply with any legal obligation to which he is subject.
  • A miscarriage of justice has occurred, is occurring or is likely to occur.
  • The health and safety of the individual has been, is being or is likely to be endangered.
  • The environment has been, is being or is likely to be endangered.
  • Information tending to show any matter falling within one of the above has been, is being or is likely to be concealed.

The Bribery Act 2010 became law from 1st July 2011 and offences under this act become a ‘wrong-doing’ that is covered by the whistleblowing legislation.

From October 2012 employees have been able to ‘whistleblow’ if they feel they have been subject to detriment or dismissal for making a protected disclosure if their employer fails to comply with the Pensions Auto-enrolment legislation.

An employer will also be vicariously liable where a worker is subject to detriment (bullying or harassment) by a co-worker when whistleblowing (the Employer has a defence where it took all reasonable steps to prevent the detriment).

PIDA does not require companies to have an internal whistleblowers policy, although it encourages them to do so. Employers are also encouraged under the recent Bribery Act (July 2011) to have a whistle-blowing policy and Bribery Prevention policies so they do not fall foul of the Act.

PIDA does not require a worker to raise their concerns with their employer first before speaking to anyone else, although it does encourage this.

Importantly, if your Contract of Employment contains a ‘gagging’ clause preventing you from blowing the whistle, this is void and not legally valid.

In June 2013, four changes came into effect protecting whistleblowers in the workplace.

Removal of the requirement for good faith

The Public Interest Disclosure Act originally required protected disclosures to be made ‘in good faith.’ Many employees made disclosures of matters that were in the public interest but failed in their unfair dismissal claims because their employers were able to show that the employee’s primary motive was to discredit the employer. The ‘good faith’ requirement came under much scrutiny and from June 2013, this requirement does not apply. The employee’s motive in making the disclosure is still relevant, as any compensation awarded to the employee can be reduced by up to 25 percent if the disclosure has been made in bad faith.

Public interest

The employee must now have a reasonable belief that a disclosure is ‘made in the public interest.’ The change in the legal test is intended to address the loophole that that allowed employees to submit a claim about their employer’s breach of their individual contracts of employment or failure to follow due process as protected disclosures. These claims would no longer succeed unless they also give rise to an issue that is in the public interest. There is no prescribed test for what is in the public interest, but the expectation is that it will be rare that breaches of the employer’s legal obligations (for example financial irregularity, discrimination, health and safety, environmental and criminal issues) are not in the public interest. However, there is likely to be a ‘triviality’ threshold in practice.

The most important case to consider the public interest element since 2013 is Chesterton Global Ltd & Anor v Nurmohamed & Anor [2017]

Example

Mr Nurmohamed worked as an estate agent at Chesterton Global Ltd, a well-known firm of estate agents, from January 2008 to his dismissal on 17 October 2013; latterly, he was employer as a Director at Chesterton’s Mayfair office.

In 2011 a new group of investors acquired a shareholding in Chesterton, which is a privatec company. Their involvement with the company led to a review of, and changes to, the existing system for payment of commission to sales staff, with the payment of commission being based on profitability rather than the previously-used metric of revenue. Mr Nurmohamed believed that this change would negatively affect the amount of commission he was paid and objected, but in February 2013 he agreed to the new system, subject to some modifications.

After the changes to the commission payment system Mr Nurmohamed monitored Chesterton’s accounts for a number of months. On 14 August 2013 he met with Patricia Farley, a director responsible for the London area, and explained a number of anomalies on the accounts which he believed showed that the profitability of the Mayfair office was being artificially suppressed in order to reduce the amount of commission payable to staff – two examples that he referred to were that a depreciation charge had been made that was higher than had been budgeted for and, further, a figure had been included for a ‘staff bonus’ that had not been paid. He made the accusation that he believed that the accounts were being manipulated “to the benefit of the shareholders”. Mr Nurmohamed repeated this allegation to Mr Verman (the company’s HR director) on 24 September 2013 and again to Ms Farley on 8 October 2013.

Mr Nurmohamed was dismissed from his employment on 13 October 2013 and brought claims against Chesterton and Mr Verman in the Employment Tribunal for unfair dismissal and automatic unfair dismissal, claiming that his dismissal was because he had made protected disclosures within the meaning of the Employment Rights Act 1996 (i.e. that he was a whistleblower).

In its ET3 Chesterton and Mr Verman accepted liability for the unfair dismissal claim but disputed that the reason for Mr Nurmohamed’s dismissal was related to any protected disclosures.

The Employment Tribunal found in Mr Nurmohamed’s favour in respect of his claims for unfair dismissal and automatic unfair dismissal, holding that Mr Nurmohamed had made a number of protected disclosures (including his complaints about the artificial suppression of the accounts for the Mayfair office on 14 August 2013, 24 September 2013, and 8 October 2013), that those complaints were in the public interest, that at the time of making the disclosures Mr Nurmohamed had a reasonable belief that those disclosures were in the public interest, and that the sole or principal reason for Mr Nurmohamed’s dismissal was the making of one or more of those protected disclosures. In particular, the Employment Tribunal held that the disclosure had been in the public interest because the alleged misconduct was allegedly deliberate, that the financial effect of such alleged misconduct was potentially significant (between £2 million and £3 million), and that it affected over 100 senior managers’ earnings.

The company appealed unsuccessfully against the Tribunal’s conclusions, arguing that the Tribunal had erred in holding that the disclosures were sufficient to constitute being in the ‘public interest’, as only 100 employees were affected (and that this group was not sufficiently large).

The EAT found that Mr Nurmohamed’s disclosures were not only made in his own interest but that he also had in mind the interests of the 100 other senior managers who would have been affected by the allegations that the accounts had been artificially suppressed. The EAT held that the grouping of these 100 or so senior managers was sufficient in order to render a conclusion that a section of the public would be affected, particularly given the fact that Chesterton was a well-known estate agent, that the allegation was that its alleged misconduct was deliberate, and that the effect of the alleged misconduct was significant (at between £2 million and £3 million).

The company appealed to the Court of Appeal, on the basis that the EAT had erred in law in its finding that the disclosure had been made in the reasonable belief that it was in the ‘public interest’, given that Mr Nurmohamed had been complaining about a breach of a legal obligation that was principally related to his own private interests.

Dismissing the appeal, the CA found that the EAT had applied the law properly in the circumstances: it was open to the Employment Tribunal to conclude that, although Mr Nurmohamed clearly had a private interest in his disclosures to his employer, he had also had a reasonable belief that there had been a breach of a legal obligation owed by Chesterton to its senior managers; this category of persons was broad enough to constitute a section of the public, therefore rendering the disclosures in the ‘public interest’. The CA also held that the nature of the employer, the significance of the alleged breach, and the nature of the wrongdoing (i.e. whether it was accidental or deliberate) were also relevant factors in determining whether a disclosure was in the public interest.

Following the above case, the Court went on to suggest a broad test that could be applied in order to determine whether a disclosure of information was in the public interest or not. The Tribunal should examine:

  1. the numbers in the group whose interests the disclosure served;
  2. the nature of the interests affected and the extent to which they are affected by the wrongdoing disclosed;
  3. the nature of the wrongdoing disclosed;
  4. the identity of the alleged wrongdoer.

Any disclosure must be in the public interest. In Parsons v Airplus [2018] the EAT found that the whistleblowing law does not protect an employee who makes a disclosure purely out of self-interest and who does not believe their disclosures to be at all in the public interest.

Example

Ms Parsons (a qualified non-practising barrister) was employed by Airplus International Ltd, the employer, as its Legal and Compliance Officer. The job was subject to a six month probationary period. Airplus had found it hard to recruit into the role and had accepted Ms Parsons’ application although she had no compliance qualifications or experience.

Shortly after starting work, Ms Parsons raised concerns about Airplus’s consumer credit license, advising that a license should be sought as soon as possible. Ms Parsons also asked for confirmation that Airplus would get such license and that she would not be personally liable for any non-compliance. It was, however, unclear why Airplus would need a consumer credit license, as it did not provide any consumer products. Ms Parsons’ manager emailed her, advising her not to send warnings on non-compliance without knowing the facts.

A meeting was arranged between Ms Parsons and her manager, at which this incident was discussed. Ms Parsons was very upset, crying and saying that she did not want to go to prison. Her manager assured her that there was no question of her being held personally liable or going to prison, but that he was concerned about her response.

To address her concern about any potential personal liability, Ms Parsons’ job title was changed to Analyst for Regulatory Affairs and Contract Management. However, her line manager was concerned that Ms Parsons did not appear considered or commercial in her approach.

In the following weeks, various complaints were made about Ms Parsons’ rude and disrespectful manner when raising concerns. In particular on one occasion, Ms Parsons challenged the Managing Director in an aggressive way, asking “do you know how to run a company?” and querying whether key decisions were minuted.

Following this exchange, the Managing Director met with Ms Parsons’ line manager who concluded that there had been insufficient improvement in Ms Parsons’ performance and conduct since the initial concerns raised and following the change in job title. Her line manager considered that Ms Parsons “left behind burnt soil pretty much everywhere after only six weeks in the job”. Ms Parsons’ employment was terminated with two weeks’ pay in lieu of notice on the basis that she was a ‘cultural misfit’.

Ms Parsons brought a tribunal claim, asserting that she had been automatically unfairly dismissed for having made protected disclosures. Airplus said she was dismissed following complaints from colleagues about her rude manner and due to the company’s concerns that she could not give cogent reasons for why she believed it was non-compliant.

Ms Parsons’ claim was rejected. The Tribunal found that the reason for the dismissal was not the disclosures, but her manner and attitude. In any event, the disclosures were not made in the public interest. Rather, the Tribunal found that Ms Parsons had made her disclosures purely out of self-interest. In reality, Ms Parsons was only concerned about her personal responsibility and liability and nothing else. Therefore, her disclosures did not qualify as protected disclosures.

The EAT agreed that Ms Parsons had not made the disclosures in the reasonable belief that they were in the public interest. It reiterated that a disclosure can be made for many reasons and provided that the public interest is included in those reasons, the disclosure will be protected.

This decision confirms that there does need to be at least an element of belief that the disclosure is being made in the public interest in order to be protected. However, this case turns on its facts and does not open the door to dismissing employees who raise concerns out of self-interest. 

Vicarious liability

The Act now provides that workers should not be subjected to a detriment at the hands of a co-worker, for example, in a case where an employee has made a disclosure about a colleague’s unlawful conduct. An employer can therefore be liable for the co-worker’s actions, whether or not the employer is aware of or approves the conduct in question. The test will be whether the co-worker’s actions were in the course of his employment. Assuming that existing case law relating to tortious conduct is followed, the detriment in question should be in connection with what the co-worker is employed to do. For example, if the co-worker is the employee’s line manager and the detriment occurs in the course of the employee’s performance review, it clearly would be covered.

An employer will have a defence to any claim about a worker’s conduct if the organisation can demonstrate that it ‘took all reasonable steps’ to prevent the worker from ‘doing that thing’ or ‘doing anything of that description.’ To benefit from this defence, employers must introduce and proactively implement effective whistleblowing policies identifying what amounts to a protected disclosure, the action to be taken when a disclosure is made and the potential disciplinary sanctions for the victimisation of workers for making such a disclosure.

Individual liability

A co-worker can now be individually liable for subjecting a colleague to a detriment. The worker will have a defence if his actions are in reliance on a statement by the employer that the detriment does not contravene the Act and it is reasonable for the co-worker to rely on the employer’s statement.

Who is protected?

PIDA protects workers in all sectors. The PIDA has a wide definition of what is a ‘protected worker’, which includes most workers and employees plus contractors, homeworkers, trainees and agency workers (including those people who are introduced or supplied by 3rd parties to do work at the employers).

In 2016, the Employment Appeal Tribunal found that an agency worker could be a whistleblower and disclose wrong doing by an end-user (i.e. the organisation for whom who she worked) in McTigue v University Hospital Bristol NHS Foundation. Ms McTigue made a disclosure about malpractice to the Hospital, which then terminated her agency worker assignment. She claimed this was an unlawful detriment and that she qualified as a whistleblower; the EAT agreed.

 Protection for whistleblowers

There are comprehensive protections for workers who make disclosures in accordance with PIDA:

  • The Act provides workers who make disclosures with protection from penalisation. This includes but is not limited to, suspension, dismissal, demotion, and unfair treatment. An employer is held vicariously liable if they cause or allow another person to penalise or to threaten penalisation against an employee for having made a protected disclosure.
  • In a case for unfair dismissal, compensation of up to a maximum of five years’ remuneration may be awarded to an employee who was dismissed for having made a protected disclosure.
  • Workers under the Act who are dismissed for having made protected disclosures also have the option of applying for interim relief before the Circuit Court. If the employer and employee agree, the Court may order that the employee is re-instated or re-engaged in another position on no less favourable terms and conditions.
  • Workers and third parties also have a cause of action in tort against a person who causes detriment to them because they, or another person, has made a protected disclosure.
  • There is civil and criminal immunity for employees who make disclosures.