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What will whistleblower reform mean for businesses?

A new law protects whistleblowers.

New Statesman
A new law protects whistleblowers. Photograph: Getty Images

Government reforms to UK laws protecting whistleblowers came into effect last week, shielding employees for disclosures they believe to be in the public interest and closing a legislative loophole which had allowed disputes over employment contracts to be protected

Legislation has been in place since 1999 to afford protection to employees and some workers who blow the whistle on improper or illegal activities in the workplace. Protection is afforded to those who disclose information that they reasonably believe shows wrongdoing (eg the commission of a criminal offence or breach of a legal obligation), when that disclosure is made to a permitted category of person, such as the worker’s employer. Importantly, and although this was not specified in the legislation, the protection implied that the disclosure should be made in the public interest.

However, both the legal profession and employers were surprised when the courts decided to afford whistle-blower protection to employees who complained about breaches of their own employment contracts. The UK government sought to address this apparent loophole by passing legislation to refine the scope of whistle-blower protection.

The law was amended by the Enterprise and Regulatory Reform Act 2013, with relevant aspects applying to disclosures made on or after the 25th.

Disclosures are now only protected in cases where a worker or employee discloses information which they reasonably believe to be in the public interest. The important distinction is that the disclosure does not need to be in the public interest, but that the whistle-blower must have a reasonable belief that it is. The whistleblower will also no longer be required to make the disclosure in good faith, although they may find it very difficult to satisfy the new "public interest" test if they are making a disclosure in bad faith. However, if a disclosure which satisfies the "public interest" test is made in bad faith, for example, if an employee is motivated by malice rather than a desire to right a wrong, then the Employment Tribunal can reduce any compensation awarded to a whistle-blower by up to 25 per cent.

The legislation does not define the "public interest", and it will fall to the courts to debate and define what constitutes the “public interest” in this context. Employees may consider (and hold a reasonable belief) that disclosing information concerning breaches of their own employment contract is in the “public interest”, intending to ensure that similar breaches do not happen to other employees. If the courts interpret the definition broadly, it may undermine the purpose of the changes.

Conversely, to take a very narrow approach to the definition could reduce the effectiveness of any whistleblower protection.

It is also automatically unfair for an employee to be dismissed where the reason or principal reason for the dismissal is that he or she has made a protected disclosure, even in cases where there are other issues, such as with the employee’s conduct or performance, and they are protected from being subjected to any detriment because they have made a protected disclosure. Furthermore, protection against unfair dismissal applies to whistle-blowers regardless of whether or not they have completed the two years’ service which is normally necessary to bring an unfair dismissal claim against an employer.

The protection given to whistle-blowers also removes the normal, statutory cap on compensation for unfair dismissal that can be awarded if their claim is successful. In addition, the government has made it clear that protection extends to retaliation or detrimental treatment of whistle-blowers at the hands of their colleagues, as well as their employer.

In an environment where businesses are facing increasing regulation, such as in financial services and since the introduction of the Bribery Act 2010, whistleblowing may become more prevalent and should be encouraged as an important means of monitoring compliance. The recent changes help to restore the focus of the legislation on issues which have implications for the public as a whole, while providing protection for whistle-blowers. It will be interesting to watch how the courts develop this area of law.

This piece first appeared on economia.

James Cox is a partner at Gibson, Dunn & Crutcher.