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Whistleblowing and the public interest test: the field day is cancelled

Submitted By Firm: Addleshaw Goddard

Contact(s): Michael Leftley, Sarah Harrop


Annabel Mackay

Date Published: 6/18/2015

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In an article first published by Thomson Reuters Accelus, Managing Associate Annabel Mackay discusses the implications of the EAT's recent decision on the meaning of the "public interest" requirement in whistle-blowing disclosures (Chesterton Global Ltd & Anor v Nurmohamed).

When the Enterprise and Regulatory Reform Act 2013 was going through Parliament, the introduction of a public interest test for whistle-blowing was described as a "field day for lawyers".

Although the preamble to the Public Interest Disclosure Act 1998 emphasised that it was designed to protect those who made disclosures in the public interest, the legislation itself contained no such restriction. Public interest featured indirectly in the original legislation in the categories of wrongdoing that formed the basis of a protected disclosure, and the requirement for such disclosures to be made in good faith. The Court of Appeal said that the relevant provisions struck, "an intricate balance between (a) promoting the public interest in the detection, exposure and elimination of misconduct, malpractice and potential dangers by those likely to have early knowledge of them, and (b) protecting the respective interests of employers and employees".

When the public interest test was introduced with effect from June 25, 2013 commentators speculated about what it would add to current understanding and whether it would lead to a raft of satellite litigation on the subject. Would guidance be drawn from other areas of law, such as defamation or breach of confidence? Would tribunals develop their own body of case law on the meaning of the public interest, and whether disclosures had to affect a significant proportion of the public or merely be of interest to some members of the public?

Since this reform, respondents have challenged claimants on whether their disclosures are genuinely made in the public interest or to further personal objectives, indirectly reintroducing elements of the good faith test that was removed for liability purposes in 2013. Claimants have pushed back, arguing that the whistle-blowing reforms were not designed to put additional barriers in their way and/or emphasising the extent to which complaints about their own employment contract could still raise matters of public interest (even as broadly as a need for employers to comply with their own policies and procedures and the rule of law).

Private dispute or matter of public interest?

The Employment Appeal Tribunal (EAT) resolved this debate on the public interest test in Chesterton Global Ltd & Anor v Nurmohamed. This decision confirmed that the public interest test is not a significant obstacle for claimants, even where the complaint concerns a breach of their own employment contract.

Nurmohamed's disclosures concerned allegations that senior managers' bonus arrangements were being undermined by the manipulation of profit and loss accounts. He believed that Chestertons was deliberately mis-stating £2-3 million of costs and liabilities through its office and departmental network, which affected the earnings of 100 senior managers, including him. The tribunal found that these disclosures were made in Nurmohamed's reasonable belief that they were in the interests of 100 senior managers; a sufficient group of the public to be a matter of public interest.

The appeal was brought on the grounds that the interests of 100 senior managers were not sufficient for the matter to be a public interest disclosure, and that the tribunal had failed to determine objectively whether the disclosures were of real public interest. Chestertons argued that Nurmohamed's disclosures concerned his personal employment contract, as the alleged manipulation of profits would limit the amount of commission payable to him. Parallels were drawn with a holiday pay complaint, although it was conceded that a private contractual dispute concerning discriminatory employment policies could be a matter of public interest.

Although the appeal was put on the basis of the number of senior managers affected, that was "not of singular importance" when the matter was argued before the EAT. The primary argument advanced was that this was a private dispute, and not a matter of public interest, and the fact that other managers were affected did not make the disclosure a matter of public interest.

The EAT agreed that the relevant section (s 43B(1) of the Employment Rights Act 1996) did not require an objective assessment about whether the disclosure was in the public interest. The test concerned whether the individual reasonably believed that the disclosure was made in the public interest. The legislation already required the individual to establish a reasonable belief that their disclosure tended to show a statutory category of wrongdoing. This case law on reasonable belief applied to the public interest disclosure test.

Reasonable belief

The question of whether or not the individual has the requisite belief is subjective. If belief is established, the reasonableness of that belief is assessed objectively. A belief can still be reasonable even if it is wrong, however. If the same approach is adopted for the public interest test, it becomes a low threshold for claimants to satisfy. The disclosure will qualify for protection as long as the individual believed that the disclosure was made in the public interest and that belief was objectively reasonable. Nurmohamed genuinely believed that the disclosure was in the interests of the 100 managers in the office network and that belief was reasonably held.

The EAT emphasised that the reason for introducing the public interest test was to prevent a worker from relying on their own contract where the breach was personal and had no wider public interest implications. Although Nurmohamed was concerned with his own situation, he had other managers in mind. He suggested that the other London office accounts should be examined as the mis-statement of costs and liabilities affected the entire network. The question of whether the employer was a public or private employer was not determinative; a point that had been argued in relation to the manipulation of accounts in a public limited company.

Although counsel for both parties had researched other areas of law for guidance on the public interest test, these did not provide assistance. The EAT focused on the parliamentary debates that preceded the reforms and case law on reasonable belief, notably Babula v Waltham Forest College, where a senior lecturer wrongly believed that his predecessor had broken the law in his teachings and reported him to the Central Intelligence Agency (CIA) and the Federal Bureau of Investigation (FBI).

An employee may therefore rely on a breach of their own contract where they believe that it has wider public interest, provided that such a belief is objectively reasonable. Employers may find that challenging the reasonableness of the belief leads to a wider discussion about the veracity of the disclosures themselves, as the employee explains why the belief was reasonable having regard to what they did or did not know, their experience and the context of the disclosure. This may not be desirable.

Bonus arrangements

The EAT decision also means that employers will not be able to knock out complaints about personal employment issues so easily. Financial services employees will seek to rely on the case to underpin complaints about their bonus arrangements, arguing that other employees have an interest in the way in which an employer exercises its discretion, calculates profits or operates claw back. In Smania v Standard Chartered Bank, although it did not change the approach to whether a tribunal could hear unfair dismissal and detriment complaints by an employee based overseas, it was accepted that certain disclosures in respect of the financial services sector, "may be of greater public interest than those in many other fields".

It is therefore apparent that there will not be a flurry of satellite litigation on the subject of the public interest test; certainly in the financial services sector. The field day is cancelled.

Originally published on Thomson Reuters © 2015

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