Introduction

The whistle‑blowing legislation has now been with us for nearly a decade.  The primary legislation can be found in the Public Interest Disclosure Act 1998 (which came into effect in 1999) and the Employment Rights Act 1996 (as amended) ("ERA").  Many practitioners feared a flurry of claims might follow the introduction of the legislation.  Indeed, the FSA embarked on a consultation in 2001 (and published a Policy Statement in April 2002 followed by guidance later that year) regarding public interest whistle‑blowing and encouraged employers to set up internal arrangements for handling information from whistle‑blowers.  However, in our view, those initial fears have not really come to fruition and whilst the legislation still has power to spring a shock, by and large the case law to date has not been headline-grabbing.  One issue which may have affected the number of claims is that the requirements of the legislation are fairly laborious and involve a successful claimant jumping through a number of technical "hoops".

Framework

The whistle‑blowing legislation provides a framework of legal protection for employees who disclose information so as to expose malpractice, illegality and matters of concern.  In essence, it protects an individual who has made a "protected disclosure" from being subjected to a detriment, victimised and/or dismissed as a result of having made that disclosure.

Section 43(1)(b) of ERA provides that a qualifying disclosure includes, for example, any disclosure of information which, in the reasonable belief of the worker making the disclosure, tends to show that a person or persons has failed or is likely to fail to comply with any legal obligation to which he is subject (this would include an allegation that an employer had breached the employee's contract of employment) or has committed or is likely to commit a criminal offence.

The Initial case law

The position on what could amount to a protected disclosure was initially clarified in 2004 in the case of Kraus ‑v‑ Penna(1). This case confirmed that if the employer was not in fact under any legal obligation, a worker could not, as a matter of law, claim the protection of the statute by claiming that he reasonably believed that the employer was under such an obligation.

This decision meant that in some circumstances employers, particularly those in the financial sector who are governed by a number of complex rules and regulations, could breathe something of a sigh of relief.  In this sector, the rules governing the various regulatory issues and legal obligations which financial institutions must comply with are of course found in the FSA Handbook.  As readers will be aware the FSA Handbook contains a number of Principles ranging from those governing "Approved Persons" and "Businesses" to non-exhaustive standards set out in various sections of the Handbook such as MAR (the code of practice on market conduct), COBS (the new code of practice on business) and ICOS (the new code of practice on insurance business).  In the past, determining whether a "disclosure" was related to an actual legal obligation could be a daunting and time-consuming task for a claimant and may have dissuaded many from taking their concerns forward.

Recent case law

However, the case of Babula ‑v‑ Waltham Forest College(2) has now removed the technical hurdle of whether the disclosure related to an actual breach of a legal obligation.  In Babula the Court of Appeal held that whilst Kraus ‑v‑ Penna had been correctly decided on its facts, its interpretation of section 43(1)(b) of ERA was incorrect.

The Court of Appeal in Babula preferred the reasoning that a belief could be reasonably held and yet be wrong.  In such circumstances a tribunal need only be satisfied that the whistle‑blower’s (subjective) belief that the malpractice has occurred is (objectively) reasonable.  Neither the fact that the individual was wrong nor the fact that the information that the individual seeks to rely on (and believes to be true) does not amount in law to a breach of a legal obligation or a criminal offence would be sufficient to render the whistle‑blower's belief to be "unreasonable" and therefore deprive him of the protection of the statute.  The case therefore removes a major barrier to the protection of whistle‑blowers in the workplace.

It is no longer a requirement that a claimant must rely on an actual legal obligation to gain the benefit of the statutory protection.  If, for example, an employee raised a complaint that was not actually covered by a specific regulation but fell within the general ambit of the FSA Handbook's standards, this should be sufficient to jump the first procedural hurdle of the legislation.

However, it must be remembered that a claimant must still prove causation between any alleged disclosure and the treatment he or she has suffered, which is often a difficult task.  However, it also means that employers should take extra care when dealing with any potential whistle‑blower and ensure that the correct procedures are followed in order to investigate any issues raised, even if it is found that ultimately there is no truth behind them.  In addition, caution must be exercised when dealing with a whistle‑blower, for example when disciplining him or her or applying redundancy criteria.  Whilst the fact that an individual might have protection under the statute does not preclude them from any action being taken by an employer – the employer must ensure that there can be no link back to the original disclosure.  In these circumstances it is extremely important to ensure that there is an adequate paper trail to objectively record the decisions taken and process which has been followed.

Claudia Rooney

Employment Team

Farrer & Co