Alan Chalmers – partner at DLA Piper – asks: Whistleblowing - Is it in the public interest?

As most employers are aware there have been laws protecting whistleblowers for a significant period of time, indeed since the Public Interest Disclosure Act 1998 ("PIDA"). Employees who blow the whistle are protected from dismissal or selection for redundancy if the reason for dismissal is that they have made a "protected disclosure". It is also unlawful for an employer to subject a worker to a detriment (including threats, disciplinary action, loss of pay, or damage to career prospects) on the ground that they have made a protected disclosure. In order to qualify as a "protected disclosure", the information disclosed must, in the reasonable belief of the worker be made in the public interest and show one of the following:

• A criminal offence.
• Breach of any legal obligation.
• Miscarriage of justice.
• Danger to the health and safety of any individual.
• Damage to the environment.
• The deliberate concealing of information about any of the above.

Employers have an interest in uncovering wrongdoing within their organisation, while also wishing to manage what information is revealed to the outside world. Encouraging the reporting of these matters through internal channels and protecting those who blow the whistle may help avoid serious accidents, fraud, regulatory breaches or financial scandals.

However, the whistleblowing legislation has been a double-edged sword. Whistleblowing claims have proved attractive to employees as they attract potentially unlimited compensation. Such claims are expensive to defend and can be damaging to a company's reputation. Case law and legislative amendments have substantially widened the scope of protection, extending the categories of workers to whom whistleblower protection applies, and the types of disclosure which are protected. The high watermark of this was when a court ruled that the category of protected disclosure regarding ‘failure to comply with a legal obligation’ could apply to a failure to comply with the individual's own contract of employment. This meant an employee complaining that their employer had breached their contract would have protection as a whistleblower. It is difficult to see the public interest in such a disclosure and many commentators felt that the whistleblower protection had been extended too far. This led to the law being amended in June 2013 to include a new requirement that, in order to attract protection, the disclosure had to be "in the public interest"; this was intended to limit the effect of whistleblowing so only genuine public interest cases were covered.

Two years on, the recent decision of the EAT in Chesterton Global Ltd & Verman v Nurmohamed has effectively driven a coach and horses through the 2013 amendment. Here the EAT upheld a tribunal’s decision that an allegation the company was manipulating profit and loss figures passed the "public interest" test for whistleblower protection, even though the employee’s motivation in raising the allegation was that the effect of the manipulation adversely affected his commission payments. The employee had complained several times that his employer was misstating £2-3 million of costs and liabilities and that this affected the earnings of 100 senior managers including him. He was later dismissed and brought a claim for automatically unfair dismissal for making a protected disclosure. A tribunal upheld this claim. Dismissing the appeal, the EAT pointed out that the test is not whether the disclosure was in the public interest but whether the worker making the disclosure had a reasonable belief that it was.

The EAT observed that the words "‘in the public interest" were introduced to do no more than prevent a worker from relying upon a breach of his own contract of employment where the breach is of a personal nature and there are no wider public interest implications. Here, while it recognised that the employee was most concerned about himself, the tribunal was satisfied that he did have the other managers in mind and permissibly concluded that a section of the public was affected. This sets the threshold for "public interest" very low and makes it unlikely that the 2013 amendment will do much to deter claims.

The key lesson for employers is to avoid any suggestion that the disclosure made by the employee was the cause of the employer's action (e.g. dismissal etc.). Transparency and consistency in respect of the reasons employers give for decisions made regarding employees is likely to be a more useful shield to claims than technical arguments about whether a disclosure was in the public interest or not.