Although employees (and workers) have been protected from detriment or dismissal for ‘whistleblowing’ since July 1999, there are some recent changes in this area which you should be aware of. These are set out below, together with guidance on practical steps you should be taking.
The Bribery Act 2010
The Bribery Act 2010 (now due to come into force in April 2011) encourages “commercial organisations” which carry on a business in the UK to adopt anti-bribery safeguards. It does this by providing that it will be a defence to the new corporate offence of failure to prevent bribery if a commercial organisation has implemented “adequate procedures” designed to prevent bribery. What constitutes “adequate procedures” will be set out in guidance and the Government is due to launch a short consultation on this in September. The guidance is expected to be published at the start of 2011 and is likely to recommend that employers establish clear anti-bribery policies and procedures, and that they both publicise these internally and provide adequate training to staff (on an on-going basis) on their principles and operation. Employers should start thinking now about the extent to which their business is at risk from bribery. Certain industry sectors will be more at risk than others and what constitutes “adequate procedures” is likely to vary slightly depending on the nature of your business. All employers should aim to put “adequate procedures” in place before April 2011 so that they can rely on the defence if the need arises.
It is likely that the volume of whistleblowing claims will increase following the introduction of the anti-bribery procedures and policies as employees ‘blow the whistle’ on any breaches or failure to follow these procedures. This is because a ‘protected disclosure’ for the purposes of UK whistleblowing legislation includes where an employee discloses information which, in his reasonable belief, tends to show that a criminal offence may have been or is likely to be committed or that a failure to carry out a legal obligation has occurred or is likely to occur.
Employers should make it clear that employees can confidentially report concerns about breaches or potential breaches of the anti-bribery procedures through their whistleblowing procedure. The procedure should also expressly provide that employees can, if appropriate, bypass the level of management at which the problem may exist.
Regulators to be notified of ‘whistleblowing’ claims
Since 6 April 2010, employment tribunal claim forms (ET1 forms) have included an additional box for whistleblowing claims. This box allows the claimant to indicate that they consent to the tribunal giving notice of the relevant disclosure to the appropriate regulator. Now, therefore, even where a business may have conducted an investigation and concluded that it is not necessary to notify the regulator of a particular matter, it may nevertheless find its way to the regulator’s desk via the employment tribunal.
Even if the whistleblowing claim fails (or settles), it will then be for the regulator to determine whether to investigate (or continue to investigate) the facts underlying the original allegations.
US developments – incentivising ‘whistleblowers’ to make their concerns known
In July 2010, the US passed legislation implementing a new incentive regime, providing private individuals such as current or former employees with significant financial incentives of up to 30% of the proceeds of any judgment or settlement arising from the disclosure of ‘relevant information’ to federal regulatory authorities.
Such financial incentives (or “bounty payments”) become payable where an individual demonstrates that he provided “original information” to the regulator which led to successful enforcement action. The new provisions also contain a number of strong legal protections for prospective whistleblowers. Most notably, employers are prohibited from taking retaliatory action against employees who qualify as whistleblowers. The US legislation also creates a private right of action for any employees who are the subject of retaliatory actions to bring law suits in the federal district court. The legislation also contains confidentiality protections intended to safeguard against the disclosure of any information that “could reasonably be expected to reveal the identity of a whistleblower”, subject to certain limited exceptions.
Employees are not required first to disclose their concerns to their employer in order to receive a bounty payment in the US. In fact, it may be argued that any provision in an employment agreement requiring an employee to do so may be unenforceable in the US. In comparison, there are three levels of disclosure in the UK that are designed to encourage employees to disclose information:
- level 1 – internal (usually to the employer or to the employer’s advisers). At this level, disclosure will qualify as having been made in good faith if there is a reasonable belief that the malpractice or misconduct has occurred or will occur;
- level 2 – prescribed body (usually to the regulator). If a level 2 disclosure is made, the employee must also reasonably believe that the allegations are substantially true; and
- level 3 – to the police or the media. More stringent conditions apply to level 3 disclosures.
We have recently produced a briefing on the expansion of financial incentives for whistleblowers in the US under the recent US financial reform act.
In the UK, a breach of the ‘whistleblowing’ legislation can give rise to an employment tribunal claim and uncapped compensation. It is therefore important that employers carefully manage any potential ‘protected disclosures’.
Most employers will have well-established whistleblowing policies in place. These should now be reviewed and updated to reflect the introduction by the employer of new anti-bribery procedures. This would also be a good time to ensure that existing policies still meet best practice standards.
We can help you to review and update your whistleblowing policy and procedures and to train your workforce. We also have a great deal of experience in dealing with whistleblowing investigations (both in the UK and globally) (in particular, advising businesses on the HR, legal and regulatory issues which arise).
Our global investigations practice has recently been advising many FTSE 100 companies and international clients on their risk exposure to bribery and corruption worldwide and the team can help you manage all aspects of corporate investigations, wherever they arise.