The indications are that an increasing number of individuals are coming forward, particularly in the financial services sector, to call out wrongdoing. As recently reported in the Financial Times, the total number of whistleblowing tip-offs to the Financial Conduct Authority in 2019 was up 3.5 per cent overall from the previous year. Importantly, the biggest increase was in reports about breaches of standards of professional behaviour — which rose 35 per cent.
In my experience, having acted for individual whistle-blowers over many years, they are a group of brave, principled and determined individuals. The law on whistle blower protection is complex and employers typically fight such claims vigorously, taking as many technical legal points as they can, and seeking to take advantage of having “deeper pockets” to fund litigation.
It is the nature of whistle blowing that the wrong doing called out is often about matters which other colleagues are (or should be) aware. So, by highlighting breaches of standards, the whistle blower stands to set themselves apart from not just the actual wrongdoer(s) but also from colleagues (who were maybe work friends) who have been prepared to turn a blind eye to what was going on. Such colleagues may not like the implicit criticism that they might have done something. Loyalties and trust are typically tested in whistle blowing cases and the stress can often lead to mental health issues.
So it is heartening to see cases where employees have brought whistle blowing cases and won. If there is a trend, in my view, it is in favour of the employees, and the Tribunals and Courts are recognising the pressures which whistle blowers face.
- Rihan v Ernst and Young Global Ltd : In this case a partner working in Dubai, who for technical reasons could not rely on the UK statutory whistleblowing regime, succeeded in a negligence claim in the High Court that EY had breached a duty to take reasonable steps to prevent him from suffering financial loss by reason of its failure to perform an audit ethically and without professional misconduct. The facts dated back to 2013, when Mr Rihan conducted an assurance audit of a Dubai-based precious metals dealer. He found serious irregularities suggesting that it might be involved in money laundering and was subjected to pressure by the local regulator to cover this up. Mr Rihan resisted and escalated the issue at the highest levels within EY. Fearing for their safety, he and his family fled Dubai for the UK and Mr Rihan went on sick leave. Mr Rihan brought claims and was ultimately awarded almost $11 million in damages for past and future loss of earnings.
- Timis v Osipov : Mr Osipov was briefly the CEO of International Petroleum Ltd (IP Ltd). Shortly after commencing his role, Mr Osipov made a number of whistleblowing disclosures, including in relation to corporate governance and compliance with foreign law relevant to IP Ltd. The company was effectively controlled by two non-executive directors (Mr Timis and Mr Sage). Mr Osipov was dismissed at the direction of the NEDs and issued proceedings in the Employment Tribunal against not just IP Ltd but also the NEDs personally. The Tribunal upheld Mr Osipov’s claims and found that the NEDs were jointly and severally liable with IP Ltd to compensate Mr Osipov for the losses he had suffered as a result of his dismissal. The Tribunal awarded approximately £1,745,000 in compensation. The case went to the Court of Appeal which upheld the Tribunal’s decision. The personal liability of the NEDs was important in this case because, by the time of the proceedings, the Company was insolvent.
- Chesterton Global Ltd v Nurmohamed : In this case the Court of Appeal considered the meaning of "public interest". Since 2013, whistle blowing legislation has required there to be a “public interest” aspect for a disclosure to be protected. This test was aimed at closing a “loop hole” that employees could potentially get whistle blower protection simply by complaining of a breach of their own contract of employment. Mr Nurmohamed was employed as a senior manager at a branch of Chestertons, the estate agent. On several occasions he made complaints to two directors about manipulation of the company's accounts. He asserted that the company was deliberately supplying inaccurate figures to its accountant, overstating actual costs and liabilities, resulting in lower profit-based commission payments for around 100 senior managers (including himself). Mr Nurmohamed was dismissed, and brought various claims against Chestertons. He won. The tribunal concluded that it was Mr Nurmohamed's reasonable belief that the disclosures were in the interest of 100 senior managers, and that this was a sufficient section of the public to amount to being a matter in the public interest. This was the case even though Mr Nurmohamed was mostly motivated by concern about his own income. The case went up to the Court of Appeal which essentially agreed with this reasoning.
One of the reasons why employees do go to the trouble of bringing whistleblowing claims is that, unlike for “normal” unfair dismissal claims, where there is a cap of about £90k, there is no cap on the level of compensation that can be awarded by a Tribunal in a whistleblowing case. For higher earners, the cap can be a major issue.
A frequent battle ground in whistle blower cases relates to the “causal link” i.e. whether the alleged blowing of the whistle was really the reason for the dismissal or detrimental treatment. Employers often argue that, even if there was a protected disclosure, it was not the reason for the treatment, rather it was to do with, say, the employee’s poor performance or them committing some other act of misconduct.
In practice, most whistle blower cases do settle before they come to a full hearing. One of the reasons for this is that, if the allegations of wrongdoing have any basis in fact, it will be embarrassing (at the very least) for the company concerned and its management to fight the case. It may make business and PR sense for the company to make a payment rather than to “air its dirty laundry in public”.
In conclusion, I would make the point that whistleblowing is generally recognised to be a good thing, encouraging organisations to act ethically and within the law. As the world becomes more complex and enforcement authorities more stretched, we are all the more reliant on the insiders to expose wrongdoing.
If you would like any further information or advice regarding whistleblowing please contact Nick or any member of our employment team.
About the author
Nick is a highly experienced employment lawyer with an exceptionally strong reputation in the City of London and beyond.
Employment disputes can be very stressful for all concerned and Nick combines both empathy and toughness as necessary. He is a tenacious litigator and a tough negotiator with particular expertise in dealing with complex issues involving any combinations of employment rights, share or other ownership-related rights and the rights and obligations of directors, officers and/or partners/LLP members.
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