Whistleblower laws under threat

Taped shut. New legislation may deter whistlebowers. (image shutterstock.com)

It appears under the heading ‘Miscellaneous’ and is one sentence long. But critics claim that Section 14 of the Government’s Enterprise and Regulatory Reform Bill (2012) may deter whistleblowers from making important revelations of illicit corporate activities.

Section 14 of The Entreprise and Regulatory Reform Bill (2012), currently making its way through the House of Commons, would have the effect of protecting whistleblowers only where the disclosure is made ‘in the public interest’.

As it currently stands the law does not apply a discrete public interest test to whistleblower disclosures.

The Government argues its amendment to section 43B of the Employment Rights Act 1996, which incorporates the Public Interest Disclosure Act 1998, will close ‘a loophole, created by case law, around whistleblowing’ and consequently ‘reduce the burden of unnecessary employment legislation’.

In a Department of Business, Skills and Innovation Annual Report from March 2012, the amendment is grouped with a package of reforms estimated to ‘deliver benefits of more than £40m p.a. to business.’

Explaining the case for reform, the Annual Review Update argues that judicial case law demonstrates a history of misuse of PIDA 1998 in allowing any breach of an employment contract to be subject to whistleblowing litigation. BIS has written that PIDA has been used by employees in a way ‘which is not what the legislation (Public Interest Disclosure Act (PIDA)) was designed for’.

After forming part of David Cameron’s Queen’s Speech on May 9 2012, the Enterprise and Regulatory Reform Bill went through its first reading in the House of Commons on May 23 2012. The second reading is scheduled for June 11 2012.

The one-sentence proposed amendment, however, has not passed unnoticed.

In an open letter to the Minister for Business, Innovation and Skills, Vince Cable, employment law specialist and current convenor of an International Whistleblowing Research network Professor David Lewis, asked the Minister to ‘re-consider the value of this proposed amendment’.

‘These provisions have not been the subject of official review since they came into force in 1999,’ wrote Professor Lewis ‘and there appears to have been no consultation about the proposed introduction of a general public interest test in all cases.’

Professor Lewis expressed concern that the proposed change would damage the UK’s reputation as a model student in whistleblowing legislation and would subject all disclosures to a public interest test, potentially discouraging people from speaking out against wrongdoing.

‘In my opinion, the current economic crisis underlines how important it is to have tip-offs about improprieties,’ wrote Professor Lewis.

Professor Lewis has no doubt that lobbying from employers has helped to bring the amendment about. PIDA became an employer’s bête noire after the Employment Appeal Tribunal’s decision in Parkins v Sodexho. In that 2002 case, the court surprised many in holding that a disclosure about a breach of contractual obligations could amount to whistleblowing. He recognises that employees can use the law as a bargaining tool and that it may be attractive to employees because it has no minimum requirement of service.

But while research shows that the number of cases brought to employment tribunals by whistleblowers increased from 157 in 1999/2000 to 1,761 in 2008/9, there is no evidence of abuse, according to Professor Lewis.

‘This is a lawful use of the provision,’ he told the Bureau. ‘The beauty of the legislation is that it deliberately does not define public disclosure. The public interest is embodied in the statute.’

The whistleblowing charity, Public Concern at Work, has also expressed alarm at the reform.

Cathy James, Chief Executive, commented that: ‘At a time when our public services are under strain, the last thing we need is another barrier for whistleblowers.’ She opined that the amendment ‘will be viewed as an obstacle to genuine and honest whistleblowers who will have to show that their concern is in the public interest.’

A spokesman for the Department of Business, Innovation and Skills stated ‘[w]e do not believe this will weaken employee’s rights.’

The BIS spokesman told the Bureau that ‘the issue of difficulties created by the Parkins v Sodexho judgment was raised through our Red Tape Challenge and this Bill is the first legislative opportunity to address it.’

Rejecting claims that the Bill was born after business lobbying pressure, the spokesman noted that ‘all interested parties,’ including civil society, ‘have had their say on a wide range of employment matters.’

The accusation that the amendment could have a potential chilling effect on whistleblowers resonates even more strongly in light of investigations into employment gagging clauses.

In 2010, the Bureau and Channel 4 News conducted a joint investigation into the gagging of whistleblowers within the NHS.  The investigation found that hospital trusts had spent millions settling out of court with employees and 90% of employment contracts viewed under Freedom of Information (FoI) requests contained gagging clauses preventing employees from further discussing malpractice allegations.

The restriction of UK legislation on whistleblowing is in sharp contrast to recent whistleblowing reform in the United States of America that encourages evermore disclosures.

The 2010 Dodd-Frank Act, introduced in response to the financial crisis, allows whistleblowers to receive financial rewards for certain commercial disclosures.

The Dodd-Frank Act complements incentives and penalties for retaliation against whistleblowers as they currently exist in the USA under the False Claims Act and Sarbanes-Oxley Act, both of which have been used in high-profile corporate malpractice suits. Under the False Claims Act whistleblowers may receive between 15% to 35% of an award paid by parties found to have committed fraud against the government. In one case, Cheryl Eckard, former global assurance manager of pharmaceutical giant GlaxoSmithKline received $96m for her whistleblowing role.

While the United Kingdom Home Office released a consultation paper in 2007 seeking comments on a similar incentive system, also known as a “qui tam” measure, no legislation was introduced and the current government has expressed no interest in following the American example.

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