Work It: Employment Update - September 2017

This month we look at the following key employment and HR developments:

12 Sep 2017
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Whistleblowers: latest rulings on scope of legal protection

Two recent important legal decisions have swung the pendulum in favour of whistleblowers who are dismissed or who suffer detrimental treatment because they have blown the whistle:

  • The focus of the "public interest" test required for whistleblower protection is whether the whistleblower thought the disclosure was in the public interest and whether that belief was objectively reasonable; and
  • Whistleblowers can pursue claims relating to a dismissal against individual managers involved in the dismissal, as well as against the business itself.

Which whistleblowing disclosures are in the public interest?

In July 2017 the Court of Appeal set out detailed guidance on the "public interest" test required to be satisfied for whistleblower protection.

Prior to June 2013, there was no requirement that a whistleblowing report had to be in the public interest in order for the worker making the report to have legal protection against retaliation by their employer. The "public interest" test was added after a spate of whistleblowing claims based on reports about breaches of the worker's own contract of employment.

Under the "public interest" test, to achieve whistleblower protection, must reasonably believe that their disclosure of information is in the public interest and that certain types of wrongdoing have occurred, are occurring or are likely to occur. Reports of information that satisfy these criteria are known as "qualifying disclosures".

Following changes to Chesterton's commission structure, a senior manager, Mr Nurmohamed, complained on three occasions about alleged manipulation of the company's accounts, which he believed had an adverse effect on his, and 100 other senior managers', commission income. Mr Nurmohamed was dismissed and brought a successful whistleblowing claim on the basis that he had been dismissed for reporting this wrongdoing.

He argued that, as his disclosure affected not only his own position but that of the other 100 senior managers it satisfied the "public interest" test. The Court of Appeal ruled that:

  • the key question in such cases is not whether the tribunal thinks that a disclosure was in the public interest but whether the whistleblower thought so and whether that belief was objectively reasonable at the time
  • there are no absolute rules about what it is reasonable to view as being in the public interest
  • the issue depends on the character of the interest served by it rather than simply the number of people sharing that interest
  • the following non-exhaustive factors are relevant
    • the number of people in the group whose interests the disclosure served
    • the nature and extent of the interests affected
    • the nature of the wrongdoing disclosed
    • the identity of the alleged wrongdoer.

The Court of Appeal did not rule out the possibility that the disclosure of a breach of a worker's contract may be in the public interest, or reasonably be regarded as such, if a sufficiently large number of other employees share the same interest. It therefore did not overturn the Tribunal's decision that the "public interest" test was satisfied in this case.

Following this decision, tribunals will take a broad approach when considering whether alleged whistleblowing reports are in the public interest. In particular the whistleblower's own beliefs as to what is in the public interest, rather than Parliament's or the tribunal's views, are the focus.

Employers should manage whistleblowing and personal grievances carefully and reasonably and ensure that managers responsible for dealing with these matters receive regular training and support to minimise potential claims liability.

Claims against individuals are available to dismissed whistleblowers

The Employment Appeal Tribunal (EAT) has decided that two non-executive directors (NEDs) were personally liable for their part in the dismissal of Mr Osipov who had raised a number of whistleblowing concerns soon after joining International Petroleum Ltd (IPL) as CEO.

Mr Osipov claimed that he had been subjected to detriments by IPL and the two NEDs and ultimately unfairly dismissed by one of the NEDs, on the instructions of the other, because of the concerns he had raised. He was successful in his claims against IPL and the two NEDs and was awarded compensation of approximately £1,745,000 by the Employment Tribunal.

It was found that the NEDs' actions constituted an unlawful detriment under whistleblowing legislation. IPL and the two NEDs were found to be jointly and severally liable for the compensation award.

The NEDs tried to avoid personal liability for their role in Mr Osipov's dismissal. They claimed could only pursue his dismissal-related claim as an unfair dismissal claim against IPL as his employer, and could not bring an unlawful detriment claim arising from the dismissal against them as individuals

The EAT disagreed. It held that, although dismissal-related whistleblowing claims against the employer must be brought as unfair dismissal claims and not as detriment claims, there is no reason why an employee cannot pursue a separate unlawful detriment claim against individuals involved in the dismissal. The NEDs' actions in relation to Mr Osipov's dismissal were therefore personally liable for the losses flowing from their actions, which included Mr Osipov's post-dismissal losses and compensation for injury to his feelings.

Potential whistleblowers now have the option of pursuing a dismissal-related claim against both their employer (as an unfair dismissal) and the dismissing manager (as a detriment claim).

Managers dealing with workers who have raised whistleblowing concerns risk potential personal liability in respect of any pre-dismissal and post-dismissal losses suffered by the whistleblower arising from their actions. They should therefore take care to avoid subjecting such workers to detrimental treatment, up to and including dismissal.

Employers can be liable for detriment caused by their employees and workers towards a whistleblower. Employers have a defence in these circumstances if they took all reasonable steps to prevent the detrimental treatment and should therefore:

  • ensure managers are aware of and understand the potential liability both the business and they themselves can face if a whistleblower suffers detrimental treatment, including dismissal, on the ground that they have raised whistleblowing concerns;
  • have an appropriate Whistleblowing Policy in place and train employees and managers to spot and deal appropriately with whistleblowing disclosures.

Minimising the reputational damage of Employment Tribunal claims

Businesses facing high value or potentially newsworthy employment claims from disgruntled employees increasingly have more than their defence of the claims to worry about.

Minimising the reputational risk, from negative press coverage or an employee repeating allegations on social media, is an important aspect of how businesses manage employment disputes. The potential reputational damage can significantly impact staff morale, consumer/customer perception of the business and its brand as well as a business' value or share price.

The introduction last year of the searchable online database of employment tribunal decisions has also made access to this information much easier.

So what can businesses do to manage the reputational risks when facing a contentious employment-related dispute?

Employment tribunal hearings are usually open to the public, including the press. It is, however, possible to obtain a restricted reporting order (RRO) which prevents or restricts the public disclosure of any aspect of formal employment tribunal proceedings.

RROs are available in a wide range of circumstances where the tribunal considers it necessary in the interests of justice or to protect human rights. An RRO can impose a range of restrictions, including that hearings be held partly or completely in private, that the identities of specified parties are not made public, or preventing witnesses being publicly identifiable. RROs have historically been used in cases involving sexual misconduct or disability.

Where a privacy order is not available, the anticipated reputational damage may be so serious that settlement is the preferred option. Early settlement avoids incurring significant time and cost and offers the business the opportunity to include appropriate confidentiality provisions as part of a legally binding settlement agreement. Such provisions may deter the individual from disclosing details of not only the settlement terms but also the circumstances of the dispute - assuming the beans have not already been spilled.

Whilst enforcing confidentiality provisions can be challenging in practice, they can often serve as an effective deterrent, particularly if receipt of settlement monies is stated to be conditional on the employee keeping matters under wraps (although such wording is often challenged by the employee's legal adviser when negotiating the agreement).

Confidentiality restrictions may not, however, be effective in all cases. They have been the subject of considerable press scrutiny in the healthcare and financial services sectors and are often described as unreasonable "gagging" clauses. Further, clauses which seek to prevent a worker from making "protected disclosures" (blowing the whistle) are void. New rules introduced in 2016 for specified financial services firms require settlement agreements to include a clear statement that the individual is not prevented from reporting wrongdoing under whistleblowing law, including to the Financial Conduct Authority or the Prudential Regulation Authority.

Businesses should also consider whether settling employment related disputes sends out the wrong message to staff who are aware that the business routinely pays out to disgruntled employees as soon as there is the possibility of potential negative PR. A careful balance is required to identify the key priorities in each case.

Tax-free childcare update

The government has introduced two new childcare support schemes: the Tax-Free Childcare Scheme (TFC scheme) and, from this month, an increase from 15 to 30 hours of free childcare.

The TFC scheme

The current Childcare Voucher Scheme (Current Scheme), whereby an amount of gross salary (exempt from tax and NIC deductions) is exchanged for childcare vouchers, will close to new entrants in April 2018. Working parents have been able to apply for the new TFC scheme since 21 April 2017 and it is currently available to eligible parents of children under 4 (or 17 if the child is disabled) and will be extended to eligible parents of children under 12 by the end of 2017. It does not depend on any participation by employers and therefore does not involve any form of salary sacrifice.

Under the TFC scheme:

  • eligible parents can open and pay into an online account to cover the cost of childcare with a registered provider
  • for every 80p paid in, the government will add an extra 20p, up to a maximum contribution of £2,000 per child. The government top-up is the equivalent of the 20% tax rate. Higher rate tax payers do not therefore achieve the same tax saving that the Current Scheme provides
  • to qualify, parents have to be in work and each earning at least £120 per week and less than £100,000 a year
  • any working parents who meet the eligibility criteria can use the scheme and it does not rely on employers offering it.

Parents cannot use both the Current Scheme and the TFC scheme and must notify their employers that they are leaving any Current Scheme three months before joining the TFC Scheme.

The TFC scheme will operate directly between parents and the government. However, employers can opt to play a voluntary role by providing employees with information on the scheme, and/or by paying into a childcare account directly from an employee's net pay via payroll, or by making additional payments into the account without an employee's net pay being reduced (the additional payment would be classed as earnings and subject to tax and NI deductions). Further, instead of making a series of smaller payments, employers have the option of making one bulk payment.

If employers choose to take up a payment role within the scheme, they are not required to check that an employee meets the eligibility criteria. This remains the government's responsibility.

30 hours' free childcare

All 3 and 4-year-olds in England already get 15 hours a week of free childcare.

From this month, if their parents are living and working in England, 3 and 4-year-olds may be entitled to 30 hours' free childcare (i.e. an additional 15 hours' free childcare per week). The eligibility criteria are the same as for the TFC scheme.

On the horizon

Bereavement leave: There is currently no legal requirement for employers to provide paid leave for grieving parents. The Parental Bereavement (Pay and Leave) Bill 2017-19 was introduced into the House of Commons on 19 July 2017. Under the bill, employed parents who have lost a child would be entitled to statutory paid leave to allow them time to grieve away from the workplace. The bill is expected to have its second reading on 20 October 2017.

Howard Kennedy news and events


Upcoming events hosted by the Howard Kennedy employment team:

  • Seminar: How employers can prepare for the GDPR - 10 October 2017
  • Transport sector drinks reception - 12 October 2017
  • Seminar: International mobility for the retail, leisure and hospitality sector - 7 November 2017.


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