Consultation Paper issued by
Public Concern at Work

on Mr Richard Shepherd MP's

Public Interest Disclosure Bill

 

Public Concern at Work Suite 306 16 Baldwin's Gardens London   EC1N 7RJ Telephone   0171 404 6609 Fax   0171 404 6576 whistle@pcaw.demon.co.uk

Contents 1 INTRODUCTION 2 SUPPORTING STATEMENTS 3 HOW THE BILL WORKS IN PRACTICE 3.1 Purpose 3.2 Scope 3.3 Raising the concern internally : general 3.4 Raising the concern internally : practice 3.5 Raising the concern externally : general 3.6 Raising the concern externally : authorised regulators 3.7 Raising the concern externally : other disclosures 3.8 Protection 4 ISSUES FOR CONSULTATION 4.1 General 4.2 Note on compensation for dismissal

Please send any comments as soon as possible, and in any event by 31st January 1998, to Richard Shepherd MP, c/o Public Concern at Work at the above address. Unless you indicate otherwise, we will assume your response may be made available to others and in particular to the Department of Trade and Industry for their information.     Introduction Mr Richard Shepherd MP decided to introduce a private member's Bill to protect whistleblowers after he won a place in the ballot. He had been a sponsor of the whistleblowing proposals in Mr Don Touhig's Public Interest Disclosure Bill which was introduced in the 1995/96 session of Parliament. Although that Bill failed to reach the statute book, it was strongly supported in Parliament and backed by all relevant interests outside during wide consultation. In advance of its Second Reading Tony Blair publicly pledged that a future Government of his would introduce legislation along the lines of Mr Touhig's Bill. Accordingly the Government indicated to Mr Shepherd that it would be willing to support his Bill if agreement could be made on its detailed provisions. As a result Mr Shepherd has been in discussion with the Government - led by the Minister of State at the Department of Trade and Industry (DTI), Mr Ian McCartney - about the detail of the Bill. The Bill supplied with this consultation paper is the result of those discussions. While its approach is broadly similar to that in Mr Touhig's 1996 Bill, it seeks to provide clearer signals to employees and employers as to how the protection will apply in practice. Mr Shepherd is therefore now consulting you and other interested parties on the Bill. As the Government wants to see legislative protection for responsible whistleblowers, it has agreed this consultation paper with Mr Shepherd and is also interested in your response. Further information Please note that the Bill has been printed with full explanatory notes to assist the reader understand its provisions. If you would like general background information on this issue, please contact Public Concern at Work on 0171 404 6609. Consultation period Comments are now sought on the detailed provisions of the Bill and, in particular, on the proposals for compensation. In the light of responses, there will be opportunities to consider any necessary amendments during the Bill's Committee stage. At this time it is not possible to predict the Bill's timetable through the House and, accordingly, we would welcome your initial views at the earliest opportunity and in any event by 31st January 1998.     Comments on the Public Interest Disclosure Bill   "We welcome the Bill as it means that at the end of the day an employee faced with serious wrongdoing or a deliberate cover-up cannot be forced to remain silent. This is built into the Bill's structure and emphasised in the important new controls on gagging clauses." Maurice Frankel, Campaign for Freedom of Information   "The CBI is broadly supportive of the aims of the Public Interest Disclosure Bill. We believe that good management practice should encourage an open culture and good governance and that the law should protect an employee who is penalised for acting in good faith to rectify wrongdoing. The CBI are therefore pleased that the Bill identifies the public interest issues, and specifies that employees, acting in good faith, will be required to use internal procedures for raising such concerns, save in exceptional and specified circumstances." Confederation of British Industry   "Workers who disclose wrongdoing at work should be protected from victimisation by their employer. The Government therefore fully supports Mr Shepherd's Public Interest Disclosure Bill". Ian McCartney MP, DTI Minister of State, HM Government   "The IoD recognises the need for an individual to draw the company's attention to illegality and malpractice without fear of reprisal and for the company to have an opportunity to put right these problems. Such action could potentially preserve life and limb, not to mention the future of the company. For these reasons we have historically supported the idea of whistleblower protection and we now support the approach in Mr Shepherd's Bill." Ruth Lea, Institute of Directors   "We warmly welcome this Bill. It will give employees the assurance to sound the alarm on abuse in care, fraud and other serious malpractice and it will provide employers an incentive to handle such concerns responsibly. As it will ensure that employees and employers are less likely to turn a blind eye to the wider public interest, it will improve both accountability and public confidence in the workplace." Michael Brindle QC, Public Concern at Work   "The TUC greatly welcomes this Bill as it will provide vital protection for workers who do find themselves genuinely impelled to 'blow the whistle' on dangerous and / or illegal practices occurring in the workplace. We are particularly pleased that the Bill applies to a wider group of workers than in traditional employment law." Sarah Veale, Trades Union Congress     How the Bill works in practice   3.1   Purpose The purpose of the Bill is to make it more likely that where there is malpractice which threatens the public interest, a worker will - rather than turn a blind eye - raise the concern and do so in a responsible way. The Bill seeks to achieve this by offering workers protection against victimisation if they raise their concern in the ways specified in the legislation. The Bill directs the worker toward raising the matter internally in the first instance and where an internal whistleblowing procedure exists, it seeks to encourage workers to use this. Where it is not reasonable to raise the matter internally or where the matter is not properly addressed internally, the Bill also protects the worker where he makes an external disclosure in a specified way. Under the Bill, external disclosures of malpractice to regulators which are expressly authorised for this purpose will be more likely to attract protection. If a worker chooses to disclose information in a way not covered by the Bill, he will lose its protection. As the worker will need to demonstrate his good faith to invoke the Bill's protection, its provisions will not encourage anonymous leaks.   3.2   Scope The people the Bill covers The Bill covers most individuals in the workplace. Described as 'workers', these are: employees, quasi-employees (those who are not genuinely self-employed e.g. construction workers on a building site), agency contract staff, prison officers, crown servants, mariners, homeworkers, trainees, and NHS doctors, dentists, opthalmists and pharmacists. The Bill does not apply to self-employed professionals (such as accountants, non-executive directors or those in business genuinely on their own account), voluntary workers, police officers and members of the armed forces. The information to which the Bill applies The Bill only applies where the worker discloses information about a malpractice, which involves a: - crime or breach of regulatory, administrative or common law; miscarriage of justice; danger to health and safety; damage to the environment. It also applies where attempts are made to cover-up such malpractice.   3.3   Raising the concern internally: general The worker would normally be expected to raise the matter internally unless there are sound reasons not to. Preconditions Where a worker has information about a specified malpractice, he is protected against victimisation where he raises it internally provided that he: reasonably believes the information tends to show a specified malpractice; and is acting in good faith.   3.4   Raising the concern internally: specifics With the employer He is protected if he raises the concern with his employer or in accordance with any procedure authorised by his employer (for example, an external reporting channel). Where the malpractice is caused by or is the legal responsibility of a third party, he is also protected if he raises the matter with that third party. This covers the instance where an agency nurse raises his concern with the home where he works rather than with the agency which actually employs him. Quangos Workers in quangos are also protected if they raise their concern directly with their sponsoring department. There is no requirement that their concern should be raised within the quango before it is raised with their sponsoring Department. This is in line with the recommendations of the Committee on Standards in Public Life to improve accountability in public bodies. Legal Advice Because of the confidential nature of the lawyer-client relationship, seeking legal advice is generally equated with raising the matter internally. However, in this case alone, the requirement of good faith does not apply.   3.5   Raising the matter externally : general The Bill recognises two broad types of disclosure. The first, dealt with above, covers cases where the concern is raised within a confidential or working relationship. The second, considered below, is where the information is disclosed to an outside body. Preconditions for all outside disclosures For an outside disclosure to be protected, the worker must reasonably believe the information tends to show a specified malpractice; be acting in good faith; not be motivated by personal gain; and reasonably believe that the information is substantially true. These preconditions, which are higher than those which apply for raising the matter internally, apply in all the following circumstances.   3.6   Raising the matter externally: authorised regulators While the Bill recognises two broad types of disclosure (internal and external) it does provide that there may be a half way house to which workers may properly be steered before they make a wider, public disclosure. This provision will allow disclosures to specified regulatory bodies (which handle such concerns under obligations of confidence) to be treated more favourably than other external disclosures. The Bill itself does not confer this status on any particular regulator. It allows the Secretary of State to prescribe a particular body for particular types of malpractice under this Bill. Prescribed persons Where the Secretary of State is satisfied that, say, workers in the City should report regulatory breaches to the Financial Services Authority (FSA) she can prescribe the FSA for this purpose. This would mean that if a worker went direct to the FSA he would not lose his protection even though he had not raised the matter internally first. However, he would have to satisfy all of the preconditions listed above in section 3.5. Before any statutory regulator or other body is prescribed under this provision, there will be prior notice. Any order prescribing such a regulator will be laid before Parliament and may be annulled following a resolution of either House.   3.7   Raising the matter externally: other disclosures First stage requirements At the risk of repetition, for any outside disclosure to be protected the worker must first meet the following preconditions: reasonably believe the information tends to show a specified malpractice; the good faith requirement; not motivated by personal gain; and reasonable belief that the information is substantially true. Second stage requirements The worker should have first raised the concern internally or, if there is one, with an authorised regulator. A wider disclosures can also be protected if it is not raised internally or with an authorised regulator (provided all the first and third stage requirements are met) where: the worker reasonably believed he would be victimised if he raised the matter internally or with the authorised regulator; or there is no authorised regulator and the worker reasonably believed that there would be a cover-up if he raised the matter internally. Third stage requirements The worker must also show that that particular disclosure was reasonable in all the circumstances. In determining whether the disclosure is reasonable, particular attention will be paid to: whether the person to whom the disclosure was made was appropriate; the seriousness of the malpractice; whether the danger or risk still existed; the response of the employer or authorised regulator where the concern had been raised with them; and whether the worker made use of any whistleblowing procedure authorised by his employer. Exceptionally serious malpractice Where the tribunal is satisfied that the concern is exceptionally serious (e.g. sexual abuse of a child) and the first stage requirements are met, the worker will be protected against victimisation even if he does not satisfy all the provisions in the second and third stage requirements listed above.   3.8   Protection Victimisation short of dismissal A worker, whether or not an employee, who is victimised but not dismissed will receive such compensation as is just and equitable in the light of his loss and the complaint. The award may be reduced where the worker (a) has not mitigated his loss or (b) was at fault. No minimum or maximum awards apply in these cases. These provisions adopt the compensation arrangements for victimisation short of dismissal which already apply, for example, to health and safety representatives and pension fund trustees in specified circumstances. Procedure on dismissal Interim relief If an employee brings an application for interim relief within 7 days of the dismissal and shows that he is likely to win his case, the tribunal will normally order that he is reinstated or re-engaged until the full hearing. If the employer refuses to comply, the employee is deemed to be employed until the full hearing. (This option is not available to workers who are not employees). Compensation on dismissal Under this Bill, compensation for dismissal will be determined by regulation. This is because the Government and Mr Shepherd have not been able to agree a common approach and have decided to seek the views of consultees. For your information we set out below the Government's preferred approach and that of Mr Shepherd.   The Government's approach The Government's preferred approach is to adopt the whistleblowing provisions for the dismissal of health and safety representatives and pension fund trustees, which operate under existing legislation. In practice this would mean that: Compensation for employees An employee will get a special award of two years salary which cannot be less than £13,775 or more than £27,500. Accordingly employees who earn £13,750 a year or more will receive a special award of £27,500. This award is available wherever an employee asks to keep his job but a reemployment order is not made. The employee will also get a basic award based on length of service which cannot be less than £2,700 or more than £6,300. Both the special and basic awards can be reduced where the tribunal considers it just and equitable in the light of the employee's conduct before the dismissal. An employee will also receive his financial losses up to £11,300. Re-employment orders Where an order for re-instatement or re-engagement is made and is not complied with by the employer, the employee's special award is increased to three years' salary without limit. Compensation on termination of a worker's contract A slightly different regime applies to workers who are not employees, that is to say those who are not genuinely self-employed; agency staff; homeworkers; prison officers; trainees; doctors, dentists, opthalmists and pharmacists in the NHS. Where their contract is terminated, they cannot apply for interim relief or for a re-employment order. They will be awarded compensation on the same basis as for victimisation short of dismissal (see above) but subject to whatever maximum award they might have got had they been an employee. However, there are two distinctions. First, this group will not get the minimum awards. Secondly, because they cannot seek re-employment orders the maximum award they could receive at present is £33,800 (after twenty years service) and compensation of up to £11,300. This would have the effect of an absolute ceiling of £45,100 in all circumstances for workers who are not employees.   Mr Shepherd's approach At this stage Mr Shepherd believes that the approach which applies under this Bill for victimisation short of dismissal should also apply where the worker is dismissed. This provides for awards which are just and equitable having regard to the loss and the complaint. The award may be reduced to take account both of the employee's fault and his duty to mitigate his loss. Importantly this approach includes no minimum or maximum sums, nor any basic award which applies in other cases of unfair dismissal. This formula is very similar to that in the 1996 Public Interest Disclosure Bill, which was supported by all consultees. In section 4 of this Paper a note on the options is provided to assist consultees consider this issue. Related matters Clauses in employment and other contracts (including severance and settlement agreements) which seek to stop a worker from making a protected disclosure are made void.     Issues for consultation   4.1   General We would welcome any comments you have on the approach and detail of the Bill.   4.2   Compensation for dismissal In particular, we invite comments on the issue of compensation on dismissal. The power in the Bill to determine compensation awards on dismissal by regulation is a wide one. At this stage there appear to be four options - Applying the precedents in existing legislation for health and safety representatives and pension fund trustees. This is the approach favoured by the Government. Normal industrial tribunal awards which apply in most cases of unfair dismissal. Applying the same (loss-based) compensation regime to dismissals as the Bill provides for victimisation short of dismissal. This is the approach favoured by Mr Shepherd. A variation of one or more of the above. Appended to this Paper is a Note summarising and commenting on the first three options.     Appendix Note on the three options for compensation on dismissal Option 1 - precedent for particularly unjustified dismissals This option treats people sacked in contravention of this Bill in the same way as, for example, pension fund trustees and health and safety representatives who are dismissed for specified reasons. Summary of awards Along with the normal award for up to £11,300 which depends on the actual amount lost, the employee would receive a basic award of not less than £2,770 and not more than £6,300. Where he asks to return to his job but an order is not made, he also gets a special award of between £13,775 and £27,500. As this special award is based on two years' salary, the lower sum applies if they earn less than some £7,000 a year and the higher sum applies if they earn £13,750 more. These awards may be reduced or extinguished where the whistleblower's conduct prior to dismissal justifies it. Workers who are not employees will be subject to the same maximum (which totals £41,500) but will not receive these minimum awards. Where a reemployment order is made but not complied with, an employee (but not other worker) will receive a compensation award fixed at three years salary (without any maximum) plus a compensatory award of £11,300 and a basic award of £2,770. Commentary This is the Government's preferred approach. The rationale for this approach is that existing employment law recognises that some reasons for dismissal are particularly disgraceful. Therefore a higher level of compensation is provided for those who would like to return to their job. These include minimum (penalty) awards which signal the gravity of the employer's conduct. As the Government accepts that dismissal for raising a matter of public concern is particularly serious, its preferred approach is that the compensation regime should follow the precedents for health and safety representatives and pension funds trustees. These precedents were introduced by the last government and they have operated without problem for a number of years. While they are relevant in that they relate to whistleblowing, they differ in that this Bill will apply to the generality of the workforce and not just to designated individuals. Even though the minimum awards can be reduced where the whistleblower was at fault, it should be noted that they are made even where the employee has suffered no financial loss. This might lead to what some people would see as an unjust result, particularly if that award were to affect the viability of a small employer. The Government correctly points out that these awards can only be made where an employee has at each stage acted reasonably and in good faith and has been sacked for what are appalling reasons. Additionally, it believes that the deterrent effect of such awards - where someone has blown the whistle in good faith and reasonably, employers will have to be very careful before dismissing that person - is desirable. On the other side there are concerns that the employer may feel pressured to settle unmeritorious claims. The Government's view is that apart from the particular safeguards in this Bill against abuse, normal industrial tribunal procedures will dispose of unmeritorious claims and the existing provisions on which this option is based have not led to such claims. Separately there is a concern that the maximum award under this proposal of £45,100 will mean that a highly paid employee or one whose career is destroyed will have no prospect of recovering his actual losses. With such limits, the Bill may not offer sufficient assurance to such people to report serious malpractice. As to employees (but not other workers) the provision for interim relief in the Bill may be able to reduce any such injustice. This provides that if the sacked employee goes to a tribunal within 7 days and shows he is likely to win then the tribunal will make an interim order that he remains employed until the full hearing. If he does win at full hearing and the employer agrees to keep him on then these awards for dismissal are not paid. If the employer does not comply with a reemployment order then the sacked employee will receive a special award of three years' salary.   Option 2 - normal unfair dismissal awards Under this option, employees dismissed for whistleblowing are treated as the same way as most other employees who are unfairly dismissed. Summary of awards A sacked whistleblower would receive the normal basic award depending on his length of service and also the standard compensatory award for financial loss up to £11,300. Where a reemployment order is made but not complied with, an additional award of between £2,730 and £5,460 would be paid. Commentary Where a worker is dismissed because he has reported serious wrongdoing in good faith and responsibly, there has been a broad consensus among those we have consulted that normal industrial tribunal awards are not appropriate. This has been because there is a recognition that these limits have not in the past given workers sufficient protection to encourage them to report serious wrongdoing.   Option 3 - actual loss Under this option employees would receive awards equivalent to the actual loss they had suffered. Summary of awards Compensation for sacked whistleblowers (whether or not they are employees) would be based on their actual loss, without minimum or maximum, having regard to the nature of complaint. Any award would be reduced if the whistleblower had been at fault or had failed to mitigate his loss. Commentary This is Mr Shepherd's preferred approach and would extend the scheme in this Bill for lesser forms of victimisation to cases where the whistleblower is dismissed. It also closely follows the approach in the 1996 Bill which was endorsed by consultees then. It offers all workers the assurance that if they are sacked for making a public interest disclosure within this Bill, they will be compensated for their actual losses. It also avoids the anomalous situation in option 1 where a well paid whistleblower who was sacked could receive less compensation than where he was demoted to a lesser paid job (this is because no maximum awards will apply under this Bill for victimisation short of dismissal). The Government points out that the absence of limits on compensation will not mean that awards will be high, since they will cover only what the worker has lost as a result of the dismissal. It also points out that a sacked worker could receive less compensation than under either its preferred option or where employees are dismissed for other reasons. In this respect, it should be noted that following a decision of the European Court the maximum awards for dismissal on grounds of sex and race were removed several years ago. Since then the average tribunal award in sex and race cases has been well under £5,000, and this average includes the few high profile large awards to women against the MoD and other public bodies.   9 December 1997