Blowing the whistle on a key employment judgement

SEAN McAULEY, a specialist in fraud and whistleblowing at accountancy firm AAB, has a warning for employers about the consequences of a recent test case.

Back in 1998, the Public Information Disclosure Act was introduced to provide comprehensive protection for whistleblowers. If someone believed their employer to be guilty of wrongdoing – theft, for instance, or a failure to comply with legislation – the idea was that they should be able to come forward without fear of victimisation.

Although the statute was good in principle, it was widely felt to be ambiguous and there was a distinct lack of detailed guidance. This left a lot of room for interpretation.

Following the case of Parkins v Sodexho Ltd (2002), employees were able to bring ‘backdoor’ unfair dismissal claims, founded simply on the basis that a breach of their own employment contract could be subject to ‘protected disclosure’ under the 1998 whistleblowing act. In other words, if they had an individual dispute with their employer over the terms of their contract, they could claim it was an issue which was covered by the whistleblowing legislation.

The Enterprise and Regulatory Reform Act of 2013 helped to tighten the law as it stated that workers would be protected only if they had a ‘reasonable belief that the disclosure was in the public interest’. The first major test of this clause came in a case involving estate agency Chesterton Global Ltd and its employee Mr Nurmohamed, who claimed the company was relying on misleading accounts to reduce the bonus or commission that managers received. The practice not only affected Nurmohamed himself, but also around 100 other managers within the business.

Nurmohamed argued that with 100 people involved, the public interest test applied and that he had been unfairly dismissed for raising his concerns. An employment tribunal agreed, but Chesterton appealed.

In the appeal judgement, Nurmohamed prevailed again – a decision which sends a strong signal to employers that issues affecting only a relatively small group of individuals may satisfy the notion of ‘public interest’. Critically, the Employment Appeal Tribunal also stressed that it was the employee’s ‘reasonable belief’ that was important. Even if the person concerned had interpreted the situation incorrectly, the fact that their belief was objectively reasonable gave them protection in law.

So my advice to clients would be that the hurdle for establishing ‘reasonable belief’ does not appear to be very high. In the case of Chesterton, the fact that it was a private company and a relatively small number of people were impacted by the behaviour of the firm, did not form an adequate legal defence.

For more information contact Sean McAuley, Fraud Services Senior Manager, sean.mcauley@aab.co.uk