February 2018 Issue
‘Blowing the whistle’ on malfeasance or malpractice is always a courageous act. Whistleblowers can face intimidation and retaliation which negatively impacts both their personal and professional lives. Accordingly, some would-be whistleblowers are reluctant to take action. A new report from Freshfields Bruckhaus Deringer notes that nearly two-thirds of UK business managers would avoid whistleblowing for fear of damaging their careers. “A whistleblower needs to weigh up what will be gained against the potential adverse repercussions,” says Richard Nicolle, a partner at Stewarts. “Being a high profile whistleblower is unlikely to be seen favourably by potential employers, however justified the disclosure.” Furthermore, around 55 percent of managers believe they would not be able to maintain anonymity if they blew the whistle, which acts as an additional deterrent.
Thankfully, however, attitudes are changing, and more firms are ensuring protection for whistleblowers. Yet the pace of change remains slow and unfortunately many whistleblowers are still being punished by the companies they hope to protect. “Most companies and larger organisations have whistleblowing or ‘speak-up’ policies, but issues still arise in practice,” says Mr Nicolle. “An example of this is the approach adopted by Jes Staley, chief executive of Barclays, who sought to identify a whistleblower when this should have remained confidential. This could have been construed as an attempt to vilify rather than protect a whistleblower.”
Regulatory measures
Many jurisdictions, the UK included, have introduced specific whistleblowing legislation to protect individuals. The UK was one of the first jurisdictions to act, introducing the Public Interest Disclosure Act (PIDA) in 1998, inserting new provisions into the Employment Rights Act 1996. However, in recent years the PIDA has been found wanting. Arguably, it is no longer fit for purpose. The Act has been criticised for its inability to stop whistleblowers from being targeted, as well as the perceived lack of penalties for managers and co-workers who retaliate against whistleblowers. Furthermore, given the turmoil which is currently gripping the UK as a result of Brexit, there is little political will to change the UK’s legislative approach to whistleblower protection.
“We have had legislation here for nearly 20 years, which we have hailed as model legislation, however we have been completely overtaken in that 20 years,” explains David Lewis, professor of employment law and head of the Whistleblowing Research Unit at Middlesex University. “Most countries have got legislation and they have got legislation that is better. There are ‘heads in the sand’ in the UK. While we have an adequate piece of legislation – it is still a model – there is a kind of conspiracy of silence in the UK currently as everything is now focused on Brexit. There is no pressure in the UK for change, even though we are aware that our legislation is not up to scratch.”
Wim Vandekerckhove, a lecturer in business ethics at the University of Greenwich, agrees. “When the PIDA was enacted two decades ago it was quite progressive in comparison to other jurisdictions, certainly with its three-tiered approach: internal, regulator and media. But what the UK experience shows is that it takes more than a nudge to get organisations and regulators to step up to their responsibilities with regard to whistleblowing. The National Audit Office showed how unprofessional and disorganised regulators were when it came to receiving and acting upon whistleblower concerns. But equally so, organisations are not legally required to have internal whistleblowing procedures and policies. The legislation does not provide penalties for those who retaliate against whistleblowers or for those who breach the confidentiality of whistleblowers’ identity. In all these areas, the UK is lagging behind what we see happening in other countries.”
“A whistleblower needs to weigh up what will be gained against the potential adverse repercussions.”
Amendments to the PIDA would be welcomed by many; however, that change is unlikely to be forthcoming. In 2013 the Whistleblowing Commission recommended there should be a broader definition of a worker, bringing the Act in line with modern working arrangements. Currently, self-employed individuals, job applicants and volunteers are not protected by whistleblowing laws. There have also been calls for the PIDA to be brought in line with discrimination protections under the Equality Act 2010, so that workers who are perceived by their employers to be whistleblowers and treated detrimentally or dismissed as a result of that perception are also protected. A whistleblowing officer or body being appointed in each sector, with specific oversight of whistleblowing issues, has also been mooted. This, in theory, would help improve morale and confidence among whistleblowers and would-be whistleblowers.
“The PIDA could be amended to give employment tribunals power to compel employers to redress detriments suffered by whistleblowers, including full reinstatement if they have been dismissed for blowing the whistle, even in circumstances where the employers argues reinstatement is not appropriate, and action to protect them from victimisation,” suggests Mr Nicolle.
Previous amendments to the PIDA have seen the test of good faith and motive replaced by the public interest test. For Dr Vandekerckhove, the good faith test created too much uncertainty for whistleblowers as their motivation becomes increasingly complex and multifaceted during the drawn-out process, and they were able to take their case to an employment tribunal.
However, the public interest test has also drawn criticism. “The problem with the public interest test is that you get told afterward that you will or will not be protected,” says Mr Lewis. “When I advise people, I tell them that what you are disclosing is in the public interest, and clearly you think it is, but subsequently a tribunal might say that they do not believe that it is in the public interest; it may be important, but more of a grievance, complaint or private matter. Best practice legislation does not have a public interest test, it simply says, ‘did this person reasonably believe they were reporting a concern about wrongdoing?’ And that is all that matters.” The public interest test requires something of a leap of faith from the whistleblower, which can create too many hurdles. Individuals raising concerns will never know in advance whether their disclosure is in the public interest. It is the nature of the beast.
Incentivising change
Though attitudes are changing toward whistleblowing, more must be done to not only protect those that come forward, but also encourage others to blow the whistle. Financial incentives have been offered in other jurisdictions, most notably in the US, where the Securities and Exchange Commission (SEC) operates a bounty system for useful information. Under the SEC’s scheme, a whistleblower can receive a percent of any fine levied against a company. Whether such a scheme would work in the UK is unclear. Whistleblowers in the UK may be unhappy with the suggestion that they are only taking action for financial gain, rather than because their moral sensibilities have been offended. As Caroline Stroud, a partner at Freshfields Bruckhaus Deringer, notes, financial incentives may be culturally specific. “The US, for example, continues to advocate a different approach to promoting a whistleblowing culture, compared to the UK, by offering financial incentives to whistleblowers. In most European jurisdictions, scepticism of financial incentives remains high,” she adds.
But according to Clive Howard, a senior principal lawyer at Slater and Gordon, incentives should be extended to the UK. “Financial awards to whistleblowers in the US, since the programme began, have surpassed $160m. So there is very serious money being awarded to individuals from around the world who are blowing the whistle to the US government. It is disappointing that UK attempts to introduce a bounty award system, in addition to existing protection, have been rejected. It means the focus is still on the messenger and not the message, and that is the wrong focus.”
The UK Competition and Markets Authority does offer rewards of up to £100,000 for information on cartel activity, although this is discretionary and reserved for exceptional circumstances. Regardless, the SEC’s whistleblower programme in the US has yielded impressive results, both in terms of revenue generated for government agencies from whistleblowing tips, and payouts for individuals. As such, there is a strong argument for it to be introduced in the UK – yet, there are drawbacks.
Encouraging cultural change
As Anna Birtwistle, a partner at CM Murray explains, the UK’s whistleblowing regime is well established and the legal framework in which it operates is a complex space. “This is reflected in the scarcity of whistleblowing cases before the tribunals and courts which are brought by unrepresented claimants,” says Ms Birtwistle. “The tests that determine whether an individual act of blowing the whistle will be protected can be difficult to understand and may regrettably act to put off would-be whistleblowers from voicing their concerns.”
If more cases are to make their way to the courts, companies must place a greater emphasis on whistleblowing and insulating whistleblowers from retaliation. They cannot merely pay lip service to their internal obligations.
A combination of fear of bad publicity, expensive litigation and loss of business can make a company hostile and defensive when confronted with allegations of wrongdoing. Yet neglecting whistleblowing can be detrimental to an organisation, explains Ms Stroud. “High profile cases of whistleblowing show it is much better for businesses to retain control of a whistleblowing process and investigate internally at an early stage, in order to deal properly with an issue and prevent further damage more quickly, rather than to leave an employee with no option but to raise the issues externally, most likely at a later stage, by which time matters may have escalated,” she says.
“Whistleblowing policies and procedures are meaningless if they sit on a company’s intranet unknown and unread by anyone,” explains Ms Birtwistle. “Attitudes will only change with meaningful communication and engagement with staff; this means creating an environment in which everyone understands that they will be supported and listened to if they speak up. From a practical perspective, companies should avoid complex legal jargon so that policies are easily accessible to everyone.”
Though the FCA and the Prudential Regulation Authority have published rules on whistleblowing clearly stating that confidentiality must be protected, and requiring firms to create a culture that encourages employees to raise concerns about poor behaviour, many organisations have lacked the willingness to implement their own internal policies. This requires companies to foster an ‘open door’ culture where employees are encouraged to raise their concerns. Where such policies exist, problems are likely to be aired earlier and addressed long before they develop into crisis-management issues. A strong and well communicated tone from the top must also be established. Staff must be trained on a number of key areas, such as how to raise a concern, how individuals will be protected and how the concern will be dealt with. Establishing a clear and consistent reporting structure is vital. Those employees receiving a report must also be adequately informed and trained on the right processes to follow.
Whistleblowing has been a feature in the UK for nearly 20 years, yet with other jurisdictions displaying a willingness to move beyond British legislation, for the time being at least, the onus is on businesses to improve and correctly implement their whistleblower protections. Companies must ensure that they get their culture, processes, training and communication right. Though there has been some progress made in recent years, the UK is still trailing behind its international partners from a legislative perspective.
© Financier Worldwide
BY
Richard Summerfield