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Protection for whistleblowers

01 July 2014

A Supreme Court judgement in May considered the scope of protection given to whistleblowers under employment legislation

The judgement considered whether a member of a limited liability partnership (LLP) was given whistleblower protection against the LLP itself.

The LLP is the business vehicle of choice for many professional services firms, including accountants, law firms and most other actuaries and surveyors typically trading through incorporated entities.

Members, however, are often still styled and held out as ‘partners’ – the distinction between partnership in an old style partnership, largely governed by the Partnership Act 1890 and membership of an LLP, is currently under scrutiny with the precise status of members often unclear.
Ms Bates van Winkelhof’s claim for the protection afforded by employment legislation to whistleblowers is a case in point.

Blowing the whistle
Ms Bates van Winkelhof was a member of Clyde & Co LLP. She was a so-called ‘fixed share’ member, meaning that she received a fixed annual amount of income from the firm, regardless of its profit level, and did not play a full part in the firm’s management structure.

In November 2010, she reported that a partner of an overseas office with whom Clyde & Co had a joint venture had admitted to paying bribes. She was later suspended and allegations of misconduct were made against her. She claimed that these were solely a result of her having ‘blown the whistle’ on a partner and that she was treated detrimentally as a result.

Whistleblower protection was brought into UK legislation in 1998 by the Public Interest Disclosure Act (PIDA). It created a right not to be subjected to any detriment by any act or any deliberate failure to act by an employer, carried out on the grounds that an employee or worker had made a protected disclosure. A disclosure qualifies for protection if it is made by a worker in the reasonable belief that it shows:

  • that a criminal offence has been committed or is likely to be committed
  • that a person has failed to comply with any legal obligation to which it is subject
  • that a miscarriage of justice has occurred or is likely to occur
  • that the health and safety of any individual is likely to be endangered
  • that the environment has been or is likely to be damaged or
  • that information showing any of the above has been or is likely to be deliberately concealed.

An individual is protected from any detriment if they make a disclosure in good faith to their employer or to a person other than the employer who has legal responsibility for the matter in question. In some cases, the legislation specifies bodies that a disclosure can be made to – for example, the Audit Commission, the Charity Commission, the Civil Aviation Authority, the Financial Conduct Authority, the Care Quality Commission and a number of other regulators.

Provided that an employee or worker making a disclosure of information reasonably believes that the information disclosed and any allegation contained in it are true and, does not make the disclosure for the purposes of personal gain (for example by selling a story to a newspaper), the whistleblower will be protected.

Who is protected?
A number of aspects of statutory employment protection apply to a group which is wider than just employees. A definition of ‘worker’ is used in a number of statutes, including the protection of whistleblowers. A ‘worker’ is defined as ‘an individual who has entered into or works under.... a contract, whether expressed or implied... whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of the client or customer of any profession or business undertaking carried on by the individual’. This has long been understood as covering individuals such as consultants who work on a self-employed basis but are required to deliver the services personally. Such individuals receive whistleblower protection in relation to the organisation they deliver their services.

The Supreme Court found that on a literal reading of the definition of worker, Ms Bates van Winkelhof was protected. As a member of an LLP, she will have been a signatory to a contract under which she will have undertaken to devote her working time to the interests of the LLP and will therefore not have been permitted to delegate her obligations to any other person. Further, it is self-evident that Clyde & Co was not a client of Miss Bates van Winkelhof. Nevertheless, the case proceeded from the Employment Tribunal which held she was not a whistleblower, to the Employment Appeal Tribunal, which held she was. It then went to the Court of Appeal which disagreed and found she was not a worker, before reaching the Supreme Court which confirmed she had worker status.

Workers and employees
Baroness Hale, giving the lead judgement in the Supreme Court noted that ‘the immediately striking thing about this case is how much hard work has to be done in order to find that a member of an LLP is not a worker within the meaning of [the legislation]’.

The Court of Appeal, in finding that she was not a worker, had relied on law relating to old style partnerships and the distinction between individuals who are in a subordinate role and those who are in positions of authority. Baroness Hale concluded that finding that an individual was a ‘worker’ for the purposes of whistleblower legislation, did not involve finding that she was an employee and that the two categories were clearly distinct.

The court held that the key distinction is not between employees and workers, but between those who carry on a professional business undertaking on their own account and enter into contracts with clients or customers and those who provide their services as part of a professional business undertaking carried on by someone else. That analysis holds good even if the individual is a member of the business entity.

Meaning in practice
There is now no doubt that members of LLPs are protected from whistleblower status.
Given their importance in uncovering wrongdoing or concealment within big organisations, the exclusion of LLP members who, by their role and often their seniority, will be in a position to become aware of such wrongdoing, would have left a significant gap in the protection of whistleblowers.

The decision therefore serves public policy and interest. In practice, however, it is right to wonder whether there was any awareness that protection from whistleblowing detriment might be limited to employment status and that others coming across wrongdoing might not be protected.

It is hoped that all organisations will take credible reports or allegations of wrongdoing seriously, particularly when these come from within. Inevitably, there are occasions when individuals seek to cloak themselves in the garb of the whistleblower in circumstances where there has been no wrongdoing on the part of the employer in an ongoing employment or other contractual dispute. Government changes to whistleblower legislation, requiring an emphasis on the public interest aspect of the disclosure in order to qualify, should help to minimise whistleblower claims being made by those in a private disputes with their employer.

For organisations such as LLPs who will not, perhaps, have an express whistleblower policy for their members, it will be appropriate now to review their processes and ensure that there is clear communication about the way in which whistleblowing reports are to be made and to whom. Such organisations should also ensure that there is awareness among those in positions of responsibility of their obligation not to subject individuals to a detriment once a report has been made.

Yvonne Gallagher is a Partner and employment specialist at Wragge Lawrence Graham & Co LLP

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