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With World Whistleblower Day on Wednesday 23 June 2021 and less than six months until the deadline for EU Member States to put the EU Whistleblowing Directive into national legislation, are EU Member States ready to comply with their legal obligations?

And how might this affect the UK?

The scope and effect of the EU Whistleblowing Directive

Directive (EU) 2019/1937 on the protection of persons who report breaches of Union law (the “EU Whistleblowing Directive”) entered into force on 16 December 2019.

It is broad in scope, including the range of organisations to which it applies, the individuals it protects, the policy areas to which is relates, the measures it requires, and the forms of retaliation that it protects against.

Perhaps the most substantial development for organisations caught by the Directive is the requirement to establish internal reporting channels and provide information about these to individuals within their organisations.  Organisations have an obligation to keep the whistleblower’s identity confidential, confirm receipt of a whistleblower’s report within seven days, and provide a response within a reasonable period which should generally not exceed three months.

The Directive sets out three levels of reports that can be made in relation to breaches of EU law.  The first is an internal report within the organisation; the second is an external report to a competent authority established by an EU Member State; and the third is a disclosure to the public directly.

Individuals are encouraged to report internally in the first instance before exploring other options, and protection will only be afforded to individuals who make a public disclosure where certain conditions have been satisfied.

Who does the Directive apply to and when must it be implemented by?

The Directive must be transposed into national legislation by all EU Member States by 17 December 2021.  It applies to:

• private legal entities with 50+ workers (as defined broadly within EU legislation);
• all public entities (however Member States have discretion to restrict the Directive’s reach to public organisations that have 50+ workers); and
• municipalities consisting of 10,000+ individuals.

The dates by which public and private entities must comply with the Directive vary depending on their size.  For those with 50 – 249 workers, the relevant date is 17 December 2023.  For those with 250+ workers, it is 17 December 2021.

Who does the Directive protect?

The Directive protects an extensive list of individuals all within a work-related context.  This includes: employees; workers; civil servants; the self-employed; shareholders; volunteers; paid or unpaid trainees; people working under the direction or supervision of contractors, subcontractors and suppliers; facilitators, colleagues or relatives of the whistleblower; and legal entities that the whistleblower owns, works for, or is otherwise connected with in a work-related context.

Importantly, the Directive protects individuals before work has commenced, during the work relationship and after it has ended.

What is required for protection to arise?

Individuals will be protected where

1. they have reasonable grounds to believe that the information they report is true at the time they report it and such information falls within the scope of the Directive; and
2. they report it either internally, externally, or by making a public disclosure.

Lastly, what are whistleblowers protected from?

Individuals are protected from ‘retaliation’.  This means any direct or indirect act or omission which occurs in a work-related context, is prompted by internal or external reporting or by public disclosure, and which causes or may cause unjustified detriment to the individual who made the report or disclosure.  This covers dismissal and detriments short of dismissal.

The application of the Directive to the UK

Following Brexit, the Directive has no legal effect in the UK.  That said, there are already calls in the UK for measures such as mandatory internal reporting channels and extending the categories of people who are protected by the legislation.  So the UK legislation might be amended to keep pace with the Directive.  Even if it is not, there are reasons UK companies might nevertheless choose to comply.

Where a UK company is part of a group of companies that has a presence in EU Member States, it may want to achieve consistency across its operations by complying with the EU requirements.  Another reason might be because the protections under the Directive are consistent with a company’s culture, ethos or environmental, social and governance initiatives.

Conclusion

The 27 EU Member States have taken a significant unifying step towards creating an environment where whistleblowers are empowered and protected.   It is not yet clear if the UK will follow suit or chart its own course.

If you want to find out more about whistleblowing, please contact Claire Dawson (ClaireDawson@bdbf.co.uk) or James Hockley (JamesHockley@bfbf.co.uk) on 020 3828 0350 or get in touch with your usual BDBF contact.

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Whistleblowers are protected under English law regardless of the sector in which they work.  However, there are special considerations and enhanced protections which apply to whistleblowers working in financial services.

When are whistleblowers normally protected?

Broadly speaking, workers are protected under the Public Interest Disclosure Act 1998 (‘PIDA’) if they are either subjected to poor treatment (which is known as being subjected to a ‘detriment’) or dismissed because they have blown the whistle.

What additional considerations apply in financial services?

FCA whistleblowing policies

The FCA has put a strong emphasis on encouraging individual and institutional accountability in recent years and its approach to whistleblowers is no exception.  As part of its broader regulatory reform, the FCA has introduced a number of policies to seek to ensure the protection of whistleblowers in financial services.

The FCA Handbook requires particular firms to observe a suite of whistleblowing rules which oblige firms to assess and escalate whistleblowing concerns, to inform staff of their rights as whistleblowers, to set up channels to facilitate whistleblowing and to appoint a ‘whistleblowing champion’ to oversee compliance with whistleblowing regulations within the firm.

Broader protection of whistleblowers under the FCA Handbook

The protection offered to whistleblowers under the FCA Handbook goes further than the ‘classic’ whistleblower protection under PIDA:

1. Who qualifies for protection – Under PIDA, only ‘workers’ can be protected as whistleblowers (meaning that the genuinely self-employed are not protected). In contrast, under the FCA Handbook, anyone can be protected as a whistleblower, regardless of their employment status.
2. The type of disclosure that is protected – To be protected under PIDA, a whistleblower must make a ‘qualifying protected disclosure’. A ‘qualifying protected disclosure’ is more limited than many people assume.  Whistleblowers must make a complaint that fits within one of six statutory categories of wrongdoing (most commonly, a breach of a legal obligation, a breach of health and safety or an attempt to cover up another category of wrongdoing).  Whistleblowers must also jump through a series of legal hoops before they are afforded protection, including showing that their protected disclosure is ‘in the public interest’.  By contrast, the definition of whistleblowing under the FCA Handbook is much broader.  A complaint about a breach of an internal policy or something that could financially harm the firm will qualify for protection, a much lower hurdle than under PIDA.

Regulatory implications for subjecting whistleblowers to a detriment

Whilst the general law already prevents individuals from subjecting whistleblowers to a detriment or dismissing them because they have made protected disclosures, the FCA Handbook goes one step further.  The Handbook states that evidence that an individual has subjected a whistleblower to a detriment could call into question both their individual fitness and propriety and that of the firm at which they work.  This, in turn, could have an impact on an individual’s status as a certified person or senior manager and, potentially, their future career.

Whilst individuals working in financial services who subject whistleblowers to detrimental treatment face potential regulatory sanctions, there is also scope under PIDA for whistleblowers to pursue claims against individuals who have subjected them to a detriment, or even given the instruction to dismiss them.

The practical implications of enhanced protections for whistleblowers

The combined effect of these rules is that, in some circumstances, there is more institutional caution around the treatment of whistleblowers than would be required under PIDA.  This can mean that individuals working in financial services are in a better position to try and ensure that their concerns are investigated and that they are protected even if, strictly speaking, they do not have legal protection as whistleblowers under PIDA.

On a practical level, these regulatory obligations can also place financial services firms in a difficult position when they are made aware of potentially reportable concerns or protected disclosures on a ‘without prejudice’ (i.e. ‘off the record’) basis.   Firms may feel that this places them in a tricky position where they are torn between complying with their regulatory duties and respecting privilege over the communications.

Nick Wilcox (NickWilcox@bdbf.co.uk) is a Partner and Rolleen McDonnell (RolleenMcDonnell@bdbf.co.uk) is a Senior Associate at specialist employment law firm, BDBF.  If you have any questions on whistleblowing in financial services, please get in touch.

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With World Whistleblowers Day on 23 June, Claire Dawson, BDBF Partner and Theo Nicou, BDBF Associate, provide some advice to prospective whistleblowers.

What is whistleblowing?

Whistleblowing is the act of a worker passing on information concerning malpractice or wrongdoing of some kind, usually witnessed in the course of their employment.  The UK legislation refers to the disclosure of such information as a “protected disclosure.”

What protections do you have as a whistleblower?

The Public Interest Disclosure Act 1998 (“the Act”) makes it unlawful for an employer to dismiss an employee if the reason or principal reason is that they have made a protected disclosure.  It is also unlawful to subject any worker to a detriment on the grounds that they have made a protected disclosure.

Protection from dismissal under the Act arises from day one of employment. This means that you do not need to have been working at your employer for any minimum length of time to be protected.

What are the requirements for a protected disclosure under UK law? 

• The disclosure must be of information that tends to show past, present or likely future wrongdoing falling into one or more of the following categories:
• • criminal offences
  • failure to comply with a legal obligation
  • miscarriages of justice
  • endangering someone’s health or safety
  • damage to the environment
  • concealing wrongdoing in the above categories
• You must reasonably believe that that the information tends to show one of the above failures and that the disclosure is in the public interest. Personal grievances are not usually covered by the Act.
• The Act encourages disclosure to your employer as the primary method of whistleblowing although there are some exceptions to this.
• A disclosure does not have to be made in good faith, but it may result in a reduction of up to 25% in any award of compensation if it is found not to be.

What steps should you take if you’re planning to make a disclosure? 

It is advisable to:

• make your protected disclosure in writing, clearly setting out your concerns. Otherwise it can be hard to evidence that it was made.
• think carefully about who to make the disclosure to e.g. is your line manager in the first instance the most appropriate person?
• review your employer’s whistleblowing policy (if they have one) before making the disclosure and follow the procedure it sets out.

What are some of the common pitfalls we see?

Often prospective whistleblowers fail to:

• clearly communicate information to their employer when they make their disclosure meaning that the disclosure may not be protected and may be open to challenge by the employer;
• put the disclosure in writing – making it harder to evidence;
• make clear that they are making a protected disclosure and that they are concerned about one of the listed categories of wrongdoing. While this is not strictly necessary, it is helpful to be as clear as possible to increase your chances of protection;
• follow their employer’s whistleblowing policy;
• act in a timely manner where they have suffered a detriment or even dismissal.

What detriments do we see whistleblowers suffer?

Whistleblowers can be subjected to side-lining, performance management and in more severe cases, disciplinary procedures or even dismissal.  Sometimes they are targeted and bullied by colleagues.

Establishing that the detrimental treatment you have received is due to the disclosure you have made is often the main challenge in whistleblowing cases.

Employers will often argue that an individual has been disciplined not because they blew the whistle, but because they have not been performing well, or have committed an act of misconduct. In short, they say it is for a reason other than your whistleblowing.

What time limits do you need to be aware of?

• Most claims will need to be brought in the Employment Tribunal within three months less one day of the dismissal or the treatment you are complaining about.

• Time limits are strict and apply even where an internal grievance process or investigation is ongoing.

• If you are thinking about making an employment tribunal claim, you will first need to notify details of your claim to ACAS within the time limit.

If you are thinking of whistleblowing, you may find it helpful to take specialist advice.

If you want to find out more about whistleblowing, please contact Claire Dawson (ClaireDawson@bdbf.co.uk) or Theo Nicou (TheoNicou@bdbf.co.uk) on 020 3828 0350 or get in touch with your usual BDBF contact.

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