19 August 2016 - Post by:Charlie Bowden
The Russian doping scandal that threatened to overshadow the Rio Olympic Games brought whistleblowing, and the treatment of whistleblowers, into the international spotlight. The allegations of state-sponsored doping, described by the World Anti-Doping Agency as a “shocking and unprecedented attack on the integrity of sport”, were exposed in part by the revelations of the Russian athlete Yuliya Stepanova and her husband Vitaliy Stepanov. Since making the disclosures, Ms Stepanova has been forced into hiding in America. She has been labelled a “Judas”, had details of her whereabouts hacked and received death threats. Given her treatment, it has led many to question whether potential whistleblowers would be prepared to make similar disclosures in the future.
It is timely, therefore, that next month (7 September 2016) sees the implementation of new whistleblowing rules for certain financial services organisations. The purpose of the new regime is to actively encourage staff to blow the whistle on malpractice, to feel safe in doing so, and ultimately to change the culture of the workplace so that whistleblowers are perceived as assets rather than potential thorns-in-the-side of the employer. But there is evidence to suggest that support for this extension of the existing whistleblowing framework – where the focus is on fostering a culture of speaking-up – is gaining traction far beyond the confines of the Square Mile and the Wharf.
New rules in the financial services sector
In order to bring about this shift, the financial services regulators (the FCA and PRA) are requiring relevant firms to ramp-up whistleblowing arrangements so that they:
- Allow “reportable concerns” (wider than a protected disclosure, this also includes breaches of the firm’s policies, or any behaviour which harms or is likely to harm the reputation or financial well-being of the employer)
- Prepare and maintain records of reportable concerns and their outcomes
- Protect the whistleblower’s identity and confidentiality (if requested)
- Include measures to prevent retaliation
- Provide training for all UK-based employees
- Report annually to the board
- Ensure that settlement agreements explain a worker’s right to blow the whistle
- Inform UK-based employees of the FCA’s and PRA’s whistleblowing services.
Whilst only financial services institutions of a certain scale are required to implement these new rules, smaller firms are also encouraged to observe them in a bid to foster good practice. Some will undoubtedly baulk at the extra layers of administration that will arise from this extension of the existing regime. That a minor infraction of a company policy may ultimately have to be documented and reported to the board is likely to raise eyebrows. Perhaps of most concern will be the fact that, where staff were previously encouraged to first flag issues internally (allowing the matter to be dealt with expeditiously) they must now be informed that they can go directly to the regulators. The trade-off – the cultivation of an environment in which employees feel capable of speaking-up with impunity – could be of benefit to the employer, the whistleblower and to wider society.
That is certainly the view of the charity Public Concern at Work (PCAW), which recently published a five year review of its work entitled “Whistleblowing: Time for Change”. The charity has been a driving force behind PIDA, and subsequently has made recommendations for reforming the legislative framework so that more is done to encourage whistleblowing, and to ensure that those who speak out are adequately protected. In 2013, it established the Whistleblowing Commission to consider the effectiveness of the Public Interest Disclosure Act 1998 (PIDA). The Commission produced a Code of Practice in 2013 (the “Code”) which suggested that employers should modify their arrangements so that whistleblowers were viewed as an early detection system for malpractice or illegality – the implication being that at the moment employers may not always perceive whistleblowers as adding value.
Much of the Code, particularly its approach to challenging and monitoring the effectiveness of whistleblowing arrangements, has been adopted by the financial services sector. A similar approach was put forward by Sir Robert Francis in his review of whistleblowing practices in the NHS. It is noteworthy that the report called for employees to have the “freedom to speak-up”, suggesting that the first step to changing the culture is rooted in the language used when describing those who make disclosures. Again, the focus is on creating an environment where employees have sufficient faith in the system to readily raise concerns without fear of reprisal; it is a conscious attempt to build on the procedural approach currently required by PIDA.
Reforming the law
Increasingly, PIDA has been labelled outdated and unfit for purpose. A recent report by the pressure group “Blueprint for Free Speech” entitled “Protecting Whistleblowers in the UK: A new Blueprint” described it as “broken and no longer able to adequately protect whistleblowers”. The report measures PIDA unfavourably against international standards, and suggests that there are major flaws in the Act which expose whistleblowers to harassment, bullying and boycotting. It also suggests that those who bring claims in the Employment Tribunal are inadequately compensated for their “true losses”. Some of the reforms proposed by the report, such as establishing civil or criminal penalties for those who violate PIDA, or extending protections to intelligence and military workers, are unlikely to occur any time soon. However, it also suggests that medium and large companies should extend their whistleblower disclosure channels and framework – in much the same way as certain financial services firms will be doing on 7 September 2016.
Much of the criticism of PIDA stems from the fact that it protects those who have made a qualifying disclosure only after they have been dismissed or suffered a detriment – and not those who are about to make a disclosure, or are suspected of having done so. Without such antecedent protection, employers will struggle to create the environment advocated by reformers. Whilst it is perhaps extreme to suggest PIDA is “broken”, it is clear that the appetite for its modification goes beyond just the financial services sector. And whilst employers may be concerned that any reform will bring with it spurious claims and vexatious litigation, they would be wise to start thinking how such changes – when they come – will impact their organisation.