Mishcon Investigates from Mishcon De Reya. Conversations and insight into some of the biggest issues, challenges and cases in the world of investigations.
Laura Penny
Welcome to the second episode of Mishcon Investigates. My name is Laura Penny and I am Managing Associate in the Employment Team at Mishcon de Reya. In this episode I’m joined by Christopher Gribbin and we will be talking to you about whistleblowing in the context of investigations.
Christopher Gribbin
Thanks Laura. I am an Associate in the White Collar Crime and Investigations Team at Mishcon and I specialise in financial crime and investigations of that nature. Today we are going to be looking at the unique legal landscape in this area. When is whistleblowing, whistleblowing? Can a whistleblower remain anonymous? Can a whistleblower have immunity? Are there incentives for whistleblowers and what policies should be in place to encourage whistleblowing?
So to start at the start, when is whistleblowing, whistleblowing? Laura what does it mean as a matter of law for someone to whistleblow and how should an employer respond?
Laura Penny
So bear with us here because this is the bit of technical detail that kicks the whole thing off. So technically whistleblowing is the act of an employee or a worker making a so-called qualifying disclosure in the public interest to an employer, a regulator, legal advisor, minister, MP or any other person responsible or prescribed person about a number of prescribed matters such as a breach of a legal obligation for example. So subject to fulfilling certain criteria that qualifying disclosure may be considered a protected disclosure and the whistleblower will then be protected from being dismissed or subjected to a detriment on the grounds of having made that disclosure.
Christopher Gribbin
Okay so breaking down that test just a little bit further. What would you need to look at to see whether someone is considered a whistleblower for the purposes of those legal protections?
Laura Penny
Well that’s a really important question and one that features in most whistleblowing claims. So in order to make a qualifying disclosure you need to disclose information which in your reasonable belief firstly is made in the public interest and secondly, tends to show one or more of certain prescribed types of wrongdoing or failures. They include things like a criminal offence, a breach of any legal obligation, a risk to health and safety or damage to the environment and a couple of others in that list to. So importantly the wrongdoing can be past, present, prospective or merely alleged so it doesn’t have to be a report of an actual incident. Then the public interest test must also be satisfied and that is to say that the whistleblower had a reasonable belief that the disclosure they were making was in the public interest. There’s been much debate about what this means because the intention behind the introduction of the public interest test was to avoid whistleblowing laws being used simply to further internal workplace disputes. However of course very often whistleblowers will be making complaints about actions that have adversely affected them and that doesn’t necessarily mean that the public interest tests will be failed. A few factors need to be considered, for example, the numbers of people affected by the alleged breach, the severity of that effect, the nature of the alleged wrongdoing including whether it was deliberate or not and the identity of the alleged wrongdoer. Obviously the larger, more high profile, more significant the wrongdoer is the more likely that it’s going to be considered to be in the public interest for their wrongdoing to be in the spotlight. Remember as well that in order to be considered to be a whistleblower, you need to have disclosed information that’s not necessarily new or unknown information to the person you are talking to but you must have done more than simply complain. Again, this is a highly contentious area but a very simplistic example of a disclosure of information would be to say, ‘three tons of rubbish was dumped from the factory into a river yesterday’, rather than simply, ‘you are in breach of environmental regulations’, which could be considered to just be an allegation. So assuming you get that far and you tick the qualifying disclosure box in order then for that to be considered a protected disclosure it must be made to one of certain categories of people. This will usually be someone’s employer but it can also include the person responsible for the relevant failure, legal advisors, Government ministers or someone prescribed by an Order by the Secretary of State. In certain circumstances it could also be a person not covered by the list above and often those additional people come with certain conditions but in the most exceptionally serious cases even some of the conditions can be varied.
Christopher Gribbin
Okay so there are quite a lot of tests to be satisfied?
Laura Penny
Absolutely but assuming that you do then satisfy those criteria you may then be considered to be a whistleblower and get the protection from being dismissed or from being subjected to a detriment on grounds of the disclosure. One really important thing for employers to remember is that it is not only direct actions that they take that they can be found liable for, they can also be found vicariously liable for the acts of their employees and one last thing to remember is that the motive behind the whistleblowing won’t immediately be relevant when it comes to the whistleblower. A lack of good faith won’t prevent them from being protected so if they say, ‘you’ve been dumping toxic waste in a stream’, predominantly because they want to get back at their own line manager, they will still be protected if the disclosures satisfies the various criteria of run through.
Christopher Gribbin
It’s interesting that you mentioned getting back at a manager because our experience of dealing with investigations arising out of whistleblower complaints is that often employees, other employees will necessarily feature in whistleblower’s allegations and how should an employer or corporate seek to deal with, with those people who feature from your perspective?
Laura Penny
So the starting point is that an employer will owe all of their employees a duty of care so you need to balance the importance of protecting a whistleblower against a proportionate and reasonable approach to any other employees who are named in that complaint. The most important thing is to not to jump to conclusions and to ensure that as an employer you have reasonable grounds for taking any action that you do. In any whistleblowing scenario the investigation is going to be key and we will come on and talk about that in more detail shortly but it will usually be appropriate for an employer to have made at least some preliminary investigation into an allegation before taking any action against other employees who are named in a complaint. Looking at extremes, is this on the face of it a valid complaint of serious wrongdoing that justifies taking immediate action or is it a complaint by a disgruntled employee who is trying to use the whistleblowing process to further a personal vendetta although in that later case, remember that an opportunistic disclosure shouldn’t be ignored but it might inform whether you need to take immediate action against any other employees.
Christopher Gribbin
Okay, so assuming you do conclude there are sufficient reasons to deal with employees who are named in the complaint, one of the most common initial steps that, that I see is that employee or those employees will be suspended from work?
Laura Penny
Yes and that’s particularly the case where there are grounds to believe that excluding them from the work environment will prevent or stop the unlawful action being continued. Suspension is an interesting one because in theory it’s a no blame option. Obviously someone who is suspended from work can feel very differently about that and there is now case law to suggest that it is not a purely neutral act so you need to be confident that even suspension is the right thing to do in the circumstances before you pull the trigger. Then obviously if in due course the investigation establishes that someone does appear to be at fault, then they should be dealt with under the employer’s normal disciplinary and dismissal processes. So before we get to there if we take a step back to the beginning, if you receive a whistleblowing complaint could you talk about some of the first things that you need to consider when you are approaching an investigation?
Christopher Gribbin
Yeah of course. The fact that an investigation is brought about by a whistleblower’s disclosure or complaint it doesn’t change the fundamentals that you would expect to see at the start of any investigation so the normal components still apply, for example, the first steps will include securing all of the relevant evidence whether that’s through a formal document hold notice or taking images of devices and if you are instructing lawyers then one of the first things will be to identify those persons from the company who will form the client group and will be receiving the advice and giving the instructions that will help manage the investigation as a matter of practice but more importantly perhaps it will preserve legal professional privilege and preclude those communications and subsequent disclosure and you will also want to consider the risk both the liabilities to the company arising out of the allegation whether that’s criminal or regulatory or civil liability but also the risk of further wrongdoing whether processes should be immediately changed to mitigate that risk. That said there are important differences when dealing with a whistleblower based investigation. Mostly obviously in the treatment of the whistleblower themselves, for example, when considering the order in which interviews may be conducted internally, the whistleblower is probably going to be the first person that ought to be interviewed on the basis that their evidence is the starting point for the investigation and that means that a decision will have to be taken at the earliest moment about whether the whistleblower should be offered independent legal advice. It’s factually dependent always but it’s likely to be the case that it will be appropriate to offer independent legal advice if the whistleblower’s allegations implicate the company in wrongdoing or if they place the whistleblower themselves at the risk of some sort of liability. Effectively where there’s a potential conflict of interest arising then separate legal advice is likely to be appropriate. In practice when you have a whistleblower there’s the source of the complaint that begins an internal investigation, one of the most difficult points we find is around anonymity or the expectations of anonymity for the whistleblower and I don’t know if you find similar Laura?
Laura Penny
We definitely do. The question of anonymity is, is difficult always. Someone who is making complaints or blowing the whistle may well feel vulnerable to a bad reaction either from their employer or from specific colleagues so quite often an employer may be faced with a whistleblower who doesn’t want their identity revealed. In addition to that some employers will now have anonymous reporting lines, the very function of which is to allow employees to report without giving their name or any details and of course you may have heard the press coverage of certain high profile cases where employers have been criticised for attempting to discover who it was that made a whistleblowing report. There is no doubt though that the investigation can sometimes be limited where the identity of a whistleblower is either not known or has to be protected. Are there any steps that you can take to deal with that in the investigation?
Christopher Gribbin
Yes is the answer. It is possible to draft the terms of reference of any investigation, the document that will govern effectively the investigation from the very start so it is to limit the investigation in order to build in protection for the whistleblower for example the extent to which allegations may be investigated may be limited by a requirement to ensure anonymity for the whistleblower. However even if there isn’t a decision to formally limit the investigation in that way, it is usually going to be important to take care when for example, interviewing other employees to protect the whistleblower’s identity in so far as possible which may involve redaction of documents that are put to the other employees and other steps round the questioning for example. The more difficult issue really is if things proceed to the stage of a self-report where the wrongdoing is deemed sufficiently serious and the investigation bears that out so that the matter is referred by the corporate to an enforcement body which is a decision that may be taken for a number of reasons but it’s at that point that it is inevitable that matters can no longer be completely controlled by the employer and further considerations are going to apply and in the event that a matter was to proceed to a contested trial then co-defendants may well attempt to challenge the bonifide’s of the whistleblower or if the matter is to resolve in what’s called a deferred prosecution agreement, an agreement between an enforcement body and the corporate to conclude proceedings by admission of liability by the corporate then care would have to be taken to avoid identification of the whistleblower through the statement of facts that would accompany that DPA for example. So the difficulty is that is not possible often to provide certainty around anonymity from the start. That said, the special status of the whistleblower means that they should be kept up-to-date in a way that other witnesses perhaps won’t through the process as far as possible.
Laura Penny
That’s really interesting so we’ve talked mainly the in the employment context for whistleblowing investigations. How do those employment law protections differ from any potential other protections and potential immunity that’s on offer in the whistleblowing context?
Christopher Gribbin
Yeah it’s a really interesting tension between the employment law protections and what we see in the criminal and regulatory context. We have seen an increasing focus on whistleblowing in recent years, for example the senior managers and certification regime that the Financial Conduct Authority has introduced requires banks to appoint what’s called a Whistleblower’s Champion, an individual who is within the organisation and oversees policies and practices relating to whistleblowing and at the same time we’ve seen enforcement bodies review their own policies on whistleblowing, for instance last week the Competition and Markets Authority issued new guidance to would be whistleblowers assuring them in that case of anonymity. However we haven’t seen this focus reflected in new substantive protections for whistleblowers in the context of enforcement action. In other words, if the individual is implicated in the conduct they are reporting then they have no guarantee that the act of whistleblowing will afford them immunity. On the contrary of course, they could be in fact responsible for effectively bringing about their own prosecution by virtue of their complaint. That said, there are some very limited exceptions to that general rule and again the Competition Markets Authority, the CMA, operates a formal leniency programme whereby individuals can obtain immunity. The CMA on the criminal side at least deals with cartels and has a similar programme for corporates who report their own involvement in a cartel they will be offered immunity under that programme and the directors and employees of that corporate will obtain immunity also but away from cartels, the position is much less certain. We have the Serious Organised Crime and Police Act 2005 which gives prosecutors the power to offer immunity for cooperation and we’ve seen the Serious Fraud Office in particular, talk these up in recent years as a possible mechanism which they would employ in exchange for cooperation from witnesses but it remains something that exists much more in theory than in practice and it’s important to note that that is a very significant difference to other jurisdictions in particular, the US for example, where whistleblowing is a much larger component of their enforcement landscape and where immunity is a much more familiar concept where whole investigations can begin with a whistleblower and then run on the principle of flipping witnesses which is a concept which effectively means each witness agrees to cooperate in exchange for immunity and through their cooperation the investigation gains access to further witnesses who flip in the same way. But we have simply not seen that same framework of investigation here in the UK.
Laura Penny
So picking up on the differences there with the US, obviously our main focus is the UK but there are inherent differences between lots of different jurisdictions and the varying approaches to whistleblowers aren’t there?
Christopher Gribbin
Yes, we’ve seen a number of very significant investigations come about in recent years following a whistleblowing complaint but there are some structural reasons why we haven’t seen the volume of whistleblowing led investigations that you see for example, in the US and this is partly connected to our hesitancy outside of the context of cartels to offer immunity in the UK but it is also partly because the UK’s decision not to reward whistleblowers in the way which again we see in the US. Under US law whistleblowers are entitled to a significant, sometimes very significant percentage of the money recovered by the Government by way of monetary sanctions following a successful prosecution. Just to give you a sense of the US approach; in 2020 alone 39 individuals were awarded 175 million dollars between them after reports that they had made as whistleblowers led to successful enforcement action in the US so they are obviously huge sums and they have driven a huge level of whistleblowing complaints such that other jurisdictions have seen fit to follow the US’s lead but the UK generally has not and again the main outlie here is the CMA which can exceptionally award up to a £100,000 for a whistleblowing tipoff and perhaps not unrelated to that the CMA has seen whistleblowing reports rise to their highest ever level in recent years but other enforcement bodies here in the UK have resisted that. The STA has come closest to consider it, expressly looked at it and found that it wouldn’t be appropriate and they pointed to a number of different issues, the risk of malicious reports being made, entrapment, even conflicts of interest in so far as the whistleblowers have an incentive to ensure a conviction in order to obtain their payment. They also interestingly noted the strength of the regulatory regime that we have in the UK in the financial sector at least in so far there as regulated individuals already have an obligation to act with integrity and cooperate with the regulator. The idea being that incentivising that financially would undercut that regime and there are also concerns which the FCA had that would apply across the board around public perception and the optics of individuals gaining what are as we see in the US, huge sums in the context of wrongdoing so that remains something we don’t have here.
Laura Penny
And as compared to those other jurisdictions then, we’ve seen quite different trends with whistleblowing and whistleblowing protections being promoted and enforced at a policy level, for example, as you mentioned the financial services sector and the regulators in that sector, most large firms now must and other regulated firms are encouraged to have comprehensive whistleblowing procedures in place and to appoint the Whistleblower’s Champion that you were talking about. I mean I would say even outside this sector employers should still encourage whistleblowing and implement suitable structures and policies in order to facilitate that so for example, making sure they have a whistleblowing policy setting out the procedures by which staff can confidentially report any concerns they have. Making sure that that policy enables someone to bypass the level of management at which that problems may exist and I think it’s important that it’s not often sufficient to say we’ve got a policy in place. You have to publicise that policy, train management staff particularly and make sure that it’s carried out, make it clear that victimisation of a whistleblower will lead to disciplinary action for example. In terms of dealing with any complaints specifically, it’s important that any disclosures are investigated promptly and that you keep the whistleblower informed as much as you can so any silence or apparent inaction from employers can often be self-defeating because the whistleblower may fear that no action is being taken and make a further and potentially external disclosure. Lots of employers are now looking at also introducing confidential whistleblowing hotlines and it’s also worth considering putting in place some sort of monitoring system to ensure that whistleblower’s aren’t later victimised to something that will alert senior managers to the fact that a whistleblower’s role has mysteriously been identified as potentially redundant six months after they made a disclosure about their immediate line manager for example. One final point on that I just add is that it’s important that employers don’t just try and rely on confidentiality clauses to try to prevent external disclosures. Those clauses won’t be enforceable if the disclosure is a protected disclosure and taking action against a whistleblower for a breach of confidence in these circumstances may well amount to an unlawful detriment.
Christopher Gribbin
It’s really interesting because those policies are obviously important as general preventative measures and good governance but from the perspective of enforcement action, they can also be an important aspect of any defence. I am thinking in particular of the Bribery Act 2010 and the Criminal Finances Act 2017 which each contain offences whereby corporates face liability if they fail to prevent wrongdoing, bribery in the case of the Bribery Act and the facilitation of tax evasion in the Criminal Finances Act but each statute allows a corporate to put forward a defence that they had put in place adequate or reasonable procedure to stop that offence taking place and there is guidance from Government that those procedures ought to include clear whistleblowing policies and procedures so they are material in practice these issues.
Laura Penny
And the same can be said for Employment Tribunal Claims. Going back to what we mentioned at the start, employers can be held vicariously liable for detrimental treatment of a whistleblower by any of their other employees so it’s important for an employer to be able to evidence the ways in which they’ve tried to prevent that happening.
Christopher Gribbin
Thanks Laura that’s great. I am afraid we are going to have to wrap up this session now as we’ve run out of time, but thank you for joining us for this, this second episode of the Mishcon Investigates podcast. The next session will be coming up shortly and in the meantime id you have any questions you would like answered or suggestions of what you’d like us to cover, please do let us know. You can contact us directly or at mishcon.com/contact.
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