In an article written for Thomson Reuters, Managing Associate, Annabel Mackay, discusses two recent decisions on whistleblowing which have significant implications for employers. First, in Chesterton Global Limited v Nurmohamed (Chesterton), the Court of Appeal considered the public interest test for the first time. Second, in International Petroleum Limited and others v Osipov (Osipov), it was decided that two non-executive directors could be jointly and severally liable with an employer for dismissal–related detriments.

Chesterton: The public interest test

The whistleblowing regime is highly technical. Claimants must satisfy a number of tests to show that they have made a protected disclosure. One element of the test is the requirement that an individual reasonably believes that their disclosure is made in the public interest and tends to show specified categories of wrongdoing.

The public interest test was introduced with effect from 25 June 2013 in response to a concern that claims were being brought which related to their personal concerns. It was intended to restore the original meaning of the whistleblowing legislation which was to encourage disclosures to be made in the public interest. Chesterton concerned the meaning of the public interest test and the charity, Public Concern at Work, was given permission to intervene.

The claimant, Mr Nurmohamed, had raised concerns that monthly management accounts were being manipulated with the result that inaccurate profit and loss figures were being used to calculate commission and bonus payments. He told his employer that this affected over 100 senior managers and that the misstatement was between £2-£3million of costs and liabilities across the entire office and department network. The Court of Appeal was asked to consider whether this disclosure satisfied the public interest test.

Three alternative formulations of the public interest test were advanced. The employer argued that in order to qualify for protection, the significance of the disclosure had to extend outside of the workplace (i.e. it had to further the interests of persons other than the workers themselves). Public Concern at Work argued for a broader test whereby a disclosure would qualify if it served the interests of anyone else besides the person making the disclosure. The Court of Appeal favoured the approach put forward on behalf of Mr Nurmohamed.

The Court of Appeal found that where a disclosure relates to a breach of a worker's own contract or a personal interest, it is necessary to examine whether it is reasonable to regard that disclosure as being made in the public interest, as well as the worker's individual interest. In reaching the decision, all the circumstances of the case must be considered but four factors put forward on behalf of Mr Nurmohamed will be "a useful tool." The four-fold test will make it challenging for employers to run a technical argument that the public interest test is not satisfied.

• The first factor is the numbers in the group whose interests the disclosure served. A large employer will encounter greater difficulties in arguing that the significance of the disclosure is confined to the personal interests of an individual worker.
• The second factor is the nature of the affected interests and the extent to which they are affected by the wrongdoing. The disclosures that take place in a financial services sector context typically involve regulatory breaches, which would qualify as an important interest.
• The third factor is the nature of the wrongdoing disclosed with deliberate wrongdoing more likely to qualify than inadvertent wrongdoing affecting small numbers.
• Finally, and perhaps most significantly for financial services employers, the identity of the alleged wrongdoer is key. This factor had been foreshadowed in earlier decisions such as Smania v. Standard Chartered Bank, but the Court of Appeal agreed with the proposition that a disclosure is more likely to qualify where the employer is large or prominent (in terms of its staff, suppliers or clients).

Each factor must be weighed in the balance carefully but even disclosures which concern, say, bullying or breach of equal opportunities policies, may qualify where they involve a large employer with a public commitment to fostering diversity. The public interest test does not, therefore, represent a significant obstacle for claimants in the financial services sector.

Osipov: Joint and several liability

Osipov has perhaps even greater implications for employers. Although it has been possible to join co-workers to a whistleblowing complaint since the 2013 reforms, this has not been widely taken up when compared to discrimination complaints. This is likely to change following Osipov, with the result that employers may find themselves under greater pressure to settle such disputes.

Mr Osipov was dismissed after raising a series of concerns about his employer's operations. Prior to his dismissal he was excluded from business meetings and key aspects of his role were removed. He brought a claim against his employer and four individuals. Two of the individuals, Mr Timis and Mr Sage, were found to be workers. Although they were non-executive directors, Mr Timis held a majority shareholding in the employer and Mr Sage had managerial functions. Mr Timis gave Mr Sage the instruction to dismiss Mr Osipov and that instruction was implemented. The Tribunal found that he had been subjected to whistleblowing detriments and that his dismissal was automatically unfair.

Mr Timis and Mr Sage were found to be jointly and severally liable with the employer for dismissal-related detriment. This was significant because the employer was insolvent. On appeal, the individuals argued that claims for detriment amounting to dismissal could only be brought against the employer.

The EAT considered the scope and extent of the provisions governing individual liability for whistleblowing detriment and the award of compensation that could be made. It noted that, "the express purpose of the whistleblowing legislation is to protect individuals from victimisation" and that it was important to construe the legislative provisions "to provide protection, rather than to deny it." Having conducted a purposive analysis, the Employment Appeal Tribunal found that there was nothing to exclude an individual's liability for detriments which amounted to the termination of the employment relationship.

The EAT recognised that an instruction or a recommendation to terminate the employment contract could be the most serious type of detriment, causing the most substantial losses. This decision will therefore increase the likelihood of individuals being joined to such complaints, particularly as the threshold for proving detriment claims is lower (requiring the detriment to have a material impact rather than to be the reason or principal reason for dismissal).

Comment: cultural change through a purposive approach

These recent cases, along with others concerning the status of doctors in training, show that a purposive interpretation of the legislation will be applied to protect workers from victimisation. In that respect, it follows a similar approach to that taken in the FCA and PRA rules on whistleblowing which emphasise the importance of outlawing victimisation and providing training at all levels of the organisation to achieve that objective. These training initiatives, as well as other communication strategies and the role played by the whistleblowers' champion, will become even more important for employers in circumstances where individuals can be jointly and severally liable for dismissal-related detriment.

Employers should ensure that managers are aware of the reputational and financial consequences of decisions that they take in relation to workers who raise concerns about wrongdoing. Of course, the problem of distinguishing between a whistleblowing complaint and general grievances remains but from an FCA and PRA perspective, the definition of reportable concerns is extremely wide and there will often be an overlap. Just as the Courts adopted a purposive approach, employers need to ensure that they follow the spirit of both the legislation and the FCA and PRA rules which is to encourage concerns to be raised without fear of reprisals.

Chesterton Global Ltd v Nurmohamed

International Petroleum Limited and others v Osipov