The Public Interest Disclosure Act 1998 is almost ten years old, but has it made it easier for employees to speak out about their company's suspected wrongdoings? Jon Robins reports


Just when is it OK for a worker to blow the whistle? Take the seemingly extreme and topical example of a college employee alarmed that a fellow lecturer is allegedly segregating his non-Muslim students from Muslim students and telling the latter group that he was wishing a 9/11-type terrorist strike in London. These were the facts that led to an American called Michael Babula working at Waltham Forest College in east London to alert the CIA, the FBI and the police after concerns that a colleague posed a threat to national security.



However, an Employment Appeal Tribunal (EAT) ruled that Mr Babula could not rely on the protection of the Public Interest Disclosure Act 1998 (PIDA). He had argued that the lecturer’s comments amounted to incitement to religious hatred; however, the tribunal resisted the claim on the grounds that no such offence existed at the time when he blew the whistle. The tribunal countered that he could not have reasonably believed that a criminal offence would be committed or a legal obligation breached, so there was no claim under PIDA. A few weeks ago, the Court of Appeal came to his rescue (Babula v Waltham Forest College [2007] EWCA Civ 174), overturning the EAT and remitting the case for rehearing.



Guy Dehn, director of the charity Public Concern at Work, says: ‘The important thing about the ruling is that it overturns a decision which, if taken seriously, meant employees had to seek legal advice before they blew the whistle.’



The Court of Appeal reversed the much-criticised ruling in Kraus v Penna [2004] IRLR 260, where the EAT put the onus on the whistleblower to demonstrate a reasonable belief of malpractice in the workplace and that the belief was right and correct in law.



‘Kraus went too far because it essentially held that if the employee was wrong as to whether or not the employer was under a legal obligation, he hadn’t the protection under PIDA,’ explains Brian Palmer, an employment partner at City firm Charles Russell. ‘The problem with that is that individual employees aren’t necessarily going to know whether or not a particular legal obligation actually exists, especially if they are talking about financial wrongdoing [where the law is complex]. Therefore, to put in the extra hurdle that not only do you have to have a reasonable belief and act in good faith, but you also have to be right about the particular legal obligation was, I think, a step too far. The Babula decision restores a more appropriate balance. Whistleblowers have strengthened protection but employers still have the comfort that whistleblowers must act in good faith.’



Mr Dehn says Babula is ‘another example of the appellate court taking a robust, purposive approach’ to PIDA. He points to another supportive ruling this year that PIDA should be approached by the courts like a discrimination case (Ezsias v North Glamorgan NHS Trust [2007] EWCA Civ 330). That ruling meant that the courts see such cases ‘not just as a private dispute between the parties but consider whether the effect of the decision will make it more or less likely that whistleblowing concerns are raised and addressed constructively’.



Mr Dehn adds that there were about 1,000 PIDA cases last year, which demonstrates that the Act has become part of the legal culture without having prompted a deafening cacophony of whistleblowing as critics feared.



Another recognition of how embedded PIDA has become in the legal culture is that the Law Society’s Commerce and Industry (C&I) Group last month published guidance, Blowing The Whistle, for its in-house lawyer members (see [2007] Gazette, 10 May, 4). It says: ‘How an organisation responds to [whistleblowing] is the litmus test of its corporate governance arrangements, which proves whether they are genuine or just paying lip service.’



It is a sentiment that Mr Dehn endorses. ‘The test for us is whether there’s an alternative to silence and whether the Act is encouraging employers, when concerns about serious malpractice are raised, to address them properly rather than to close their eyes, hope they go away, or cover them up,’ he says. ‘There is evidence to suggest that the legislation is making a useful contribution.’



Of course, in-house lawyers do not need reminding of their dual role within the workplace to speak out when they see corporate wrongdoing and to facilitate others to do so. The guidance relates the cautionary tale of Robert Maxwell’s in-house lawyer, who tried, but failed, to persuade her boss to disclose to shareholders that an affiliate held more than 3% of Maxwell Communication Corporation’s shares. She resigned because her advice was ignored but remained legal consultant for the subsequent flotation of Mirror Group Newspapers. She was criticised by the Department of Trade and Industry for failing to bring the earlier breach to the attention of the advisers or the board. The C&I report asks: ‘It is not immediately obvious what duty she had to speak out: was it a legal duty or a moral or ethical duty?’ It continues that corporate counsel should ‘judge for themselves what they would have done in her situation and if she was treated fairly or harshly’.



Simon Welch, who chairs the C&I Group’s corporate governance committee and is legal counsel for West Bromwich Building Society, says: ‘What we’re trying to do is to make in-house lawyers think about how much information they can provide to a potential whistleblower. The more information they receive, the greater the likelihood is that they will make the right decision, not just in terms of doing the right thing, which we all want them to do, but also making sure that they do not suffer the post-whistleblowing consequences.’



As the Babula case demonstrates, judgements for employees as to whether to make a disclosure can be less than clear-cut. The C&I report notes: ‘The law sometimes protects a person even if it was later shown that the disclosure was factually incorrect. On the other hand, there are some situations in which a person may be required to blow the whistle but may not be protected by the legislation at all.’ In particular, employees are required to report malpractice to the likes of the Financial Services Authority (FSA) or the Serious Organised Crime Agency.



It seems sensible for PIDA to allow for the same kind of protection afforded workers in other areas. ‘Unfortunately it does not,’ the C&I report notes. ‘Instead it imposes an important additional burden on the whistleblower if he or she has to blow the whistle to an external regulator… by requiring him or her to show that they had a reasonable belief that the information disclosed and that any allegations contained in it are substantially true. Consequently, compliance officers may be required to report matters to the FSA before they have sufficient information to be sure that they are within the safe harbour provided by PIDA.’



So, is the in-house lawyer the natural person to be the whistleblowing officer within an organisation? ‘I do not think that we could fall into the trap of saying that it has to be the job of the lawyer to be the whistleblower,’ replies Mr Welch. ‘But there is a greater probability that they will be.’ He points out that the money laundering reporting officer or whoever is responsible for internal audit might be a more appropriate point of contact for the would-be whistleblower.



Employment lawyers report that PIDA is increasingly being used as another weapon in the armoury of disgruntled workers. David Appleton, a partner at City employment law specialists Lewis Silkin, says: ‘I find PIDA being invoked reasonably frequently, especially if where a person is working is in a regulatory environment. It is another category, a bit like discrimination, which is useful to work up into a claim because you don’t need a year’s service and, secondly, the compensation that is available isn’t capped like it is for unfair discrimination [at £60,600].



‘My attitude is that if it looks hopeless, I don’t go there because it undermines their credibility and weakens their claim, but often in a regulatory environment they can create enough doubt to help their case.’



Brian Palmer agrees, but says: ‘My experience is that these claims have tended to be quite strained arguments under PIDA as a way for people who don’t have any other discrimination angle to make a claim for unlimited compensation.’ He adds that such claims are likely to diminish as discrimination law has expanded, most recently with age discrimination, where damages are also uncapped.



‘As of next year, the Act will have been on the statute books for ten years and it’s approaching its adolescence,’ says Mr Dehn. ‘When you get legislation, particularly in the employment field where there are uncapped damages, a lot of lawyers are going to test it. It has been tested and the legislation is seaworthy.’



Jon Robins is a freelance journalist