This article was written by Jayne Flint, employment specialist at national law firm Shoosmiths.

The Enterprise and Regulatory Reform Act (ERRA) received royal assent on 25 April 2013 and is expected to come into force on 25 June 2013.

The ERRA proposes changes to the whistleblowing legislation including: replacing the requirement for a disclosure to be “in good faith” with a requirement for the disclosure to be in the public interest, making an employer vicariously liable for treatment by third parties, and extending the definition of ‘worker’.

This article will examine whether implementation of the ERRA will change the balance between the rights of the employer and the employee and what this will mean in practice for employers.

How does whistleblowing legislation work?

To make a protected disclosure a worker must communicate his or her concerns about a “qualifying disclosure” i.e. regarding a criminal offence, a breach of a legal obligation, a miscarriage of justice, a breach of health and safety, or damage to the environment. Provided that the worker reasonably believes in the malpractice and makes the disclosure in good faith, it is irrelevant whether the allegation transpires to be true or not.

Where a worker or ex-worker suffers a detriment as a consequence of making a protected disclosure they will have a statutory claim for detrimental treatment and an employee who is dismissed will have a claim for automatic unfair dismissal. There is no minimum qualifying period of service required to present a whistleblowing claim.

The disclosure must be made to either the employer or to a prescribed third party such as HSE or HMRC. Wider disclosure, for instance to the media, is only protected if the worker believes the information is substantially true and acts in good faith and not for their own personal gain.

There is no upper limit to the amount of compensation which may be awarded in whistleblowing claims. Accordingly, the consequences of a successful claim against an employer can be substantial.

Criticism of existing whistleblowing legislation

The need for statutory protection for whistleblowers was first acknowledged in the 1980s following a series of high profile scandals such as the Piper Alpha explosion, the Clapham Rail crash, and the Zeebrugge disaster, when a ferry left its bow doors open and sank, resulting in 187 people losing their lives. A subsequent inquiry found that employees had repeatedly raised concerns with management which were simply ignored.

This led to the Public Interest Disclosure Act 1998 (the Act) coming into force, which introduced sections 43A-43L and 103A into the Employment Rights Act 1996 (ERA 1996) and made it unlawful for an employer to dismiss an employee or to subject an employee to a detriment for making a protected disclosure. It was anticipated that this protection would encourage employees to come forward with concerns about wrongdoing or dangerous practices without fear of reprisal.

However, it is often perceived that the legislation is used by employees to bring spurious claims in order to get around the qualifying period rules for unfair dismissal. Further, despite the title of the Act, the disclosure does not actually need to be “in the public interest” and the Courts have interpreted the legislation more widely than was perhaps originally envisaged. This means that an employee can use whistleblowing legislation where, for instance, the “qualifying disclosure” is that their own contract of employment has been breached. This is clearly not what the Act was designed to do and the Government’s objective to close this loophole will be satisfied following the implementation of the ERRA.

On the flipside there has been criticism from employees arguing that the legislation fails to provide whistleblowers with adequate protection. The former Chief Executive of Lincolnshire United Hospitals Trust, Gary Walker, was told that he would have to repay £500,000 after he disclosed his concerns to the media about patient safety after signing a compromise agreement.

Mr Walker alleged he was sacked under the guise of misconduct after raising genuine concerns about the impact of the hospital’s targets on patient safety. He felt that he was backed into a corner and accepted a compromise agreement, which included a confidentiality clause seeking to prevent him from making any disclosures to anyone.

Mr Walker went to the media and argued that so called “gagging clauses” undermined the purpose of the whistleblowing provisions because he was prevented from bringing serious concerns about safety into the public domain. Following widespread criticism of this practice, the Health Secretary said earlier this year that he was banning the use of gagging clauses which prevent NHS staff raising concerns about patient safety. It should be remembered however that the ERA has always contained a safeguard for employees who blow the whistle. Section 43J renders a contractual provision in any agreement which tries to prevent a worker making a protected disclosure void.

Public Concern at Work, an independent charity which monitors whistleblowing, has also called into question whether it is fair that employees can be at risk of losing their jobs and of possible criminal sanctions for leaking information which was arguably in the public interest to disclose.

Reform under the ERRA

Vicarious liability

It had been accepted that an employer would be vicariously liable for its employees who subjected a colleague to detrimental treatment because of the fact they had made a protected disclosure. However, in 2012, the Court of Appeal ruled that this was not the case and that as it was not actually unlawful under the ERA for an employee to victimise a whistleblower an employer could not be vicariously liable. This anomaly has been addressed under the ERRA which provides that an employer will be vicariously liable for the act of subjecting a whistleblower to detrimental treatment. However, the employer will have a defence if it can show it took all reasonable steps to prevent the detrimental treatment; policies and procedures should therefore be amended accordingly and where necessary staff should receive training in this area in order to provide an arguable defence, if needed.

Worker
The definition of ‘worker’ has also been extended to include contract workers in the NHS.

“In the public interest”
Clause 17 of the ERRA amends the ERA 1996 so that any qualifying disclosure must, in the reasonable belief of the employee, be in the “public interest”. By way of balance however, clause 18 removes the “good faith” requirement. These proposals were first suggested by Dame Janet Smith in the fifth report into the Shipman inquiry who suggested that focus should be on the message, not on the messenger.

Does this mean that a worker who makes a qualifying disclosure out of malice or for some other personal gain which is nonetheless still in the public interest, will be afforded protection as a whistleblower?

The answer to this is yes, quite possibly. Does it matter? This is a much harder question to answer. Dame Janet’s Smith’s argument was that the focus should always be on whether the disclosure is in the public interest. The previous legislation meant that an employee could make a disclosure which was in the public interest but, because it was not made in good faith, would not be protected.

Take Gary Walker for example, was it in the public interest for him to make disclosures to the media regarding patient safety? The answer is most likely to be yes, because in an open and democratic country concerns about such matters must be capable of transparent scrutiny. If this is the case then surely it is irrelevant whether he was galvanised by the need to expose concerns about public safety, or out of the need for retribution that he had been dismissed as a consequence of raising the concerns? The distinction is arguably irrelevant under the new law, as they both led to him raising genuine concerns about patient safety in the NHS. However the distinction is very important to the employee as, under the good faith requirement, the former would afford him protection as a whistleblower, whilst the latter may very well be construed as being a disclosure for personal gain and therefore not in good faith.

The problem with the previous good faith requirement is that workers are often motivated by a combination of factors to blow the whistle, and attempting to dissect that motivation, in order to ascertain whether there was any indication of personal gain, loses sight of what the legislation aims to achieve.

There is a risk that the absence of the need for the disclosure to be in good faith may encourage disgruntled ex-employees to blow the whistle on more trivial issues, and the fact that a protected disclosure cannot be hushed up by way of compromise agreement makes it hard for employers to take control of this. However the ERRA does include provision that a Claimant who makes a disclosure in bad faith will have any compensation reduced by up to 25 percent.

Only time will tell whether the balance struck by these amendments achieves the desired outcome, and there will be an inevitable need for the tribunal to address how serious the alleged malpractice must be, to determine whether the disclosure is “in the public interest.” Until such time, the issue of what type of disclosure meets the public interest test will remain uncertain.