A theme present in a number of press articles on “Whistleblowing” over recent months has been that, despite regulatory advances, whistle-blowers continue to be ignored, hushed or retaliated against.
This theme of “fear of reprisal” is central to the Government's published response to BIS’s recent call for evidence into the current whistleblowing framework.
Following the changes introduced by the Enterprise and Regulatory Reform Act 2013 to the whistleblowing protection framework, BIS had in July last year begun seeking evidence, of which the call for evidence formed a part, on whether any aspects of the protection framework no longer worked in the way originally intended, and whether further changes are needed.
From our reading of the recently published Response we make out some of the key points and developments that will arise from the call to evidence are as follows:
1. Categories Of Disclosure Which Qualify For Protection
The Response noted that there had been a called for additional categories to be added to the six categories of disclosure which currently qualify a worker for protection; they included:
- The incentivisation or incitement of others to conceal wrongdoing;
- Misreporting or pressure to misreport;
- Financial irregularities;
- Professional malpractice;
- Mismanagement of public funds by public bodies or private bodies in receipt of public funding;
- Abuse and misuse of power;
- Gross waste or mismanagement of funds;
- Serious abuse of authority;
- Breach of contract, employment malpractice and human rights abuses;
- Breach of standards of conduct/professional standards;
- Whistleblowing abuses outside of the UK; and
- Any other matter of public interest.
As set out in the Response the Government considers that all of the above were already captured under the existing six categories, other than two (vi) and (vii).
These two were considered by the Government to be too difficult to define and recognising that they could create uncertainty as to what type of activity would result in protection being available – they therefore declined to commit any change “in this area at this point”.
2. Lack On Information Following Report
The Response acknowledged that whistle-blowers were discouraged by the lack of information made available following the reporting of a matter to the relevant “prescribed person” (the UK Parliament has approved a list of "prescribed persons" to whom individuals can make reports, including HMRC, the Health and Safety Executive and the Office of Fair Trading).
While appreciating that transparency is difficult to achieve given the importance of maintaining confidentiality in an investigation of a case, the Government has committed to introduce a requirement for Prescribed Person’s to provide annual whistleblowing reports. The detail to be included within such a report (for example number of disclosures received, numbers of investigations, of those the number of organisations which had whistleblowing policies in place) will be subject to further consultation.
3. Definition Of Worker
Currently an individual eligible to be protected under the whistleblowing framework is someone who meets the definition of “worker” as contained in the Employment Rights Act. It was a question going into the call for evidence as to whether this definition was broad enough to give adequate protection.
As a result of the call for evidence, the Government has undertaken to broaden the scope of the definition, through secondary legislation, to ensure student nurses are covered.
Organisations other than health-care providers may want to track developments in this regard as, depending on the approach taken, it is not impossible that the language of secondary legislation may be broad enough to include not just student nurses, but other classes of student workers.
The Government also affirmed the recent Supreme Court decision in Clyde & Co LLP and another v Bates van Winkelhof where the Court concluded that members of an LLP can fall within the current definition of “worker”.
4. Financial Incentives
One of the areas of most interest addressed in the call for evidence was that around financial incentives as a means to encourage individuals to blow the whistle.
As readers may already know, authorities in the US have programmes that reward whistle blowers. For example the SEC offer rewards to individuals any in the world who report violations of US securities laws – whistle-blowers under this scheme can receive up to 30% of any fine if their information leads to the recovery of investor money over $1,000,000 USD.
So far the known SEC “bounty” record, a not insignificant sum of $14,000,000.00 USD, went to a whistle-blower who provided information in relation to a Chicago-based investment scheme. While not pocket change, this amount does not quite compare to the $104,000,000.00 the IRS paid out to former UBS banker Bradley Birkenfeld, which was paid under a similar IRS rewards programme.
The UK Government has though taken the position that it does not believe that financial incentives should be introduced to the general whistleblowing framework. While the Response recognised whistle-blowers do suffer detriment to which they should be compensated (unfair dismissal, victimisation or being blacklisted), it concluded that the Employment Tribunal was an existing and adequate avenue for whistle-blowers to seek redress.
The door though has been left slightly ajar in relation to whether bounty payments would be appropriate in specific cases, notably serious crime and financial regulatory matters. The Response noted that the FCA/PRA are considering this question and will publish statements regarding the impact of incentivising whistle-blowers, and also referenced that the Government committed in its Serious and Organised Crime Strategy to consider the case for incentivising whistleblowing in cases of fraud, bribery and corruption.
5. Employees Willingness To Expose Wronging
As already noted, and which may come as little surprise, the Response acknowledges that the most significant issue considered to be preventing individuals from blowing the whistle, lies in the fear of reprisal.
What may be slightly more concerning for companies however is that Government have formed the view that two other reasons preventing reporting was either the lack a relevant policies being in place in businesses (which seems alarming given the rise of compliance-based legislation like the Financial Services and Markets Act, and the UK Bribery Act), or that policies in place are not clear enough for individuals to understand.
In response the Government has undertaken to improve guidance and create a model whistleblowing policy. Any company currently operating some form of whistleblowing policy may want to make a note to sense-check its policy against the Government precedent once published. Any company operating without such a policy would be well advised not to wait for this point to introduce an appropriate policy.
Given how important a feature of an effective compliance programme a whistleblowing mechanism can be, these concerns should not be ignored. Crucially businesses should be confident that reprisals against whistle-blowers are not an issue for them, and that their organisation understands and trusts any whistleblowing policy and procedure they have in place. Deficiencies in these areas may very well lead to a Regulator challenging the overall effectiveness and adequacy of an organisations compliance programme.